Chapter 1 (Part 2)

Question 1

what type of insurance is most attractive to money launderers

Answer 1

life insurance

Question 2

what kind of life insurance is the most attractive

Answer 2

life insurance that feature payments of cash surrender value and the opportunity to nominate beneficiaries from the first day of the policy are the most attractive

Question 3

what else is attractive

Answer 3

annuities

Question 4

why

Answer 4

they have cash value

Question 5

what is the cash value

Answer 5

may allow criminals to exchange illicit funds for an immediate or deferred income stream which usually arrives in the form of monthly payments starting on a specified date

Question 6

what can be an indicator of suspicious activity

Answer 6

when a potential policy holder is more interested in cancellation terms than the policy’s benefits

Question 7

what are the 3 vulnerabilities of the insurance industry

Answer 7

1. Lack of oversight/controls over intermediaries
2. Decentralized oversight over aspects of the sales force
3. Sales driven objectives

Question 8

what is the difficultiy in dealing with laundering in the securities field

Answer 8

usually little currency is involved, thus it is generally after launderers have placed their cash in the financial system through other methods

Question 9

what are other indicators of money laundering with securities

Answer 9

wash trades, which involves the entry of matching buys and sells in particular securities which creates the illusion of trading

Question 10

what about wash trading through multiple accounts

Answer 10

generates offsetting profits and losses and transfers of positions between accounts that do not appear to be commonly controlled

Question 11

what is a junket

Answer 11

a form of casino-based tourism

Question 12

why is this a risk

Answer 12

junket participants largely rely on third parties, junket operators, to move the funds across borders and through multiple casinos creating layers of obscurity around the source of funds and ownership of the money and identities of the players

Question 13

what is the biggest mistake a casino can make

Answer 13

to allow play and accept the revenue without reasonably determining the source of gaming funds

Question 14

what are two other types of transactions with DPMs that require attention

Answer 14

payments or returns to persons other than the owner

precious metal pool accounts

Question 15

what is the deal with payments or returns to persons other than the owner

Answer 15

if one person delivers precious metal for refining and asserts ownership of the metal and authority to sell it but directs payments to be made to another person, that transaction may be questionable

Question 16

why

Answer 16

the DPM is being used to transfer an asset not only from one form into aother (unrefined gold to refined gold or money within the international finance system) but also from one person to another

Question 17

what are precious metal pool accounts

Answer 17

they receive and hold precious metal credits for a customer which can be drawn on by that customer

Question 18

besides precious metal and diamonds, what is another valuble item used to launder money

Answer 18

art

Question 19

why is this

Answer 19

anonymous agents at art auction houses bid milions of dollars for priceless works. Payment is later wired to the auction house by the agents’ principals from accounts in offshore havens

Question 20

how can travel agencies be used

Answer 20

illegal funds can be mixed with clean money to make the illegal funds look legitimate, by providing a reason to purchase high-priced airline tickets, hotels and other vacation related expenses

Question 21

what are 3 ways in which ML can occur in a travel agency

Answer 21

1. purchasing an expensive airline ticket for another person who then asks for a refund
2. structuring wire transfers in small amounts to avoid record keeping requirements, especially when the wires are from foreign countries.
3. Establish tour operator networks with false bookings and documentation to justify significant payments from foreign travel groups

Question 22

what are 3 ways laundering can occur through vehicle sellers

Answer 22

1. structuring cash deposits below the reporting threshold or purchasing vehicles with sequentially numbered checks/money orders
2. trading in vehicles and conducting successive transactions of buying and selling new and used vehicles to produce complex layers of transactions
3. accepting third party payments, particularly from jurisdictons with ineffective money laundering controls

Question 23

most money laundering cases dealing with vehicle dealers have one common element, what is it

Answer 23

the unreported use of currency to pay for the automobiles

Question 24

what are some of the other reported cases with car dealerships

Answer 24

car dealer laundered money by allowing a drug dealer to trade in his cars for cheaper models and to be paid in checks, not cash, for the difference.

Question 25

what is a free trade zone

Answer 25

designated geographic areas with special regulatory and tax treatments for certain trade related goods and services

Question 26

what are the weaknesses in free trade zones (4 of them)

Answer 26

1. inadequate AML/CFT safeguards
2. Minimal oversight by local authorities
3. weak procedures to inspect goods and legal entities, including appropriate record keeping and information technology systems
4. lack of cooperation between FTZs and local customs authorities

Question 27

for trade based money laundering how can it be utilized to move money from one country to another

Answer 27

money launderers can move money out of one country by simply using their illicit funds to purchase high-value products and then exporting them at very low prices to a colluding foreign partner, who then sells them in the open market at their true value

Question 28

what may money launderers do to give their transactions an air of legitimacy

Answer 28

the partners may use a financial institution for trade financing, which often entails letters of credit and other documentation

Question 29

how can letters of credit be used to facilitate money laundering

Answer 29

by transferring money from a country with lax exchange controls, thus assisting in creating the illusion that an import transaction is involved

Question 30

what is a funnel account

Answer 30

an individual or business account in one geographic area that receives multiple cash deposits, often in amounts below the cash reporting threshold, and from which the funds are withdrawn in a different geographic area with little time elapsing between the deposits and withdrawals

Question 31

how does a black market peso exchange scheme work

Answer 31

A peso broker works with an individual engaged in illegal activity, such as a drug trafficker, who has U.S. currency in the United States that he needs to bring to Mexico and convert to pesos. The peso broker finds business owners in Mexico who buy goods from vendors in the United States, such as XYZ Inc., and need dollars to pay for those goods. The peso broker arranges for the illegally obtained dollars in the United States to be delivered to the U.S.-based vendors, such as XYZ Inc., where they are used to pay for the goods purchased by the Mexico based customers. Once the goods are shipped to Mexico and sold by the Mexico-based business owner for pesos, the pesos are turned over to the peso broker, who then pays the drug trafficker in Mexico.