Chapter 1 (Part 2) Flashcards
what type of insurance is most attractive to money launderers
life insurance
what kind of life insurance is the most attractive
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
what else is attractive
annuities
why
they have cash value
what is the cash value
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
what can be an indicator of suspicious activity
when a potential policy holder is more interested in cancellation terms than the policy’s benefits
what are the 3 vulnerabilities of the insurance industry
- Lack of oversight/controls over intermediaries
- Decentralized oversight over aspects of the sales force
- Sales driven objectives
what is the difficultiy in dealing with laundering in the securities field
usually little currency is involved, thus it is generally after launderers have placed their cash in the financial system through other methods
what are other indicators of money laundering with securities
wash trades, which involves the entry of matching buys and sells in particular securities which creates the illusion of trading
what about wash trading through multiple accounts
generates offsetting profits and losses and transfers of positions between accounts that do not appear to be commonly controlled
what is a junket
a form of casino-based tourism
why is this a risk
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
what is the biggest mistake a casino can make
to allow play and accept the revenue without reasonably determining the source of gaming funds
what are two other types of transactions with DPMs that require attention
payments or returns to persons other than the owner
precious metal pool accounts
what is the deal with payments or returns to persons other than the owner
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
why
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
what are precious metal pool accounts
they receive and hold precious metal credits for a customer which can be drawn on by that customer
besides precious metal and diamonds, what is another valuble item used to launder money
art
why is this
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
how can travel agencies be used
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
what are 3 ways in which ML can occur in a travel agency
- purchasing an expensive airline ticket for another person who then asks for a refund
- structuring wire transfers in small amounts to avoid record keeping requirements, especially when the wires are from foreign countries.
- Establish tour operator networks with false bookings and documentation to justify significant payments from foreign travel groups
what are 3 ways laundering can occur through vehicle sellers
- structuring cash deposits below the reporting threshold or purchasing vehicles with sequentially numbered checks/money orders
- trading in vehicles and conducting successive transactions of buying and selling new and used vehicles to produce complex layers of transactions
- accepting third party payments, particularly from jurisdictons with ineffective money laundering controls
most money laundering cases dealing with vehicle dealers have one common element, what is it
the unreported use of currency to pay for the automobiles
what are some of the other reported cases with car dealerships
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.
what is a free trade zone
designated geographic areas with special regulatory and tax treatments for certain trade related goods and services
what are the weaknesses in free trade zones (4 of them)
- inadequate AML/CFT safeguards
- Minimal oversight by local authorities
- weak procedures to inspect goods and legal entities, including appropriate record keeping and information technology systems
- lack of cooperation between FTZs and local customs authorities
for trade based money laundering how can it be utilized to move money from one country to another
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
what may money launderers do to give their transactions an air of legitimacy
the partners may use a financial institution for trade financing, which often entails letters of credit and other documentation
how can letters of credit be used to facilitate money laundering
by transferring money from a country with lax exchange controls, thus assisting in creating the illusion that an import transaction is involved
what is a funnel account
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
how does a black market peso exchange scheme work
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.
