Chapter 1 (Part 3) Flashcards
what are the 7 risks of prepaid cards
- anonymous cardholders
- anonymous funding
- anononymous access to funds
- high value limits ad no limits n the number of cards individuals can acquire
- global access to cash through ATMs
- offshore card issuers that may not observe laws in all jurisdictions
- substitute for bulk cash smuggling
what are the 4 ways in which risk may be mitigated in new payment methods
- Customer due diligence
- Loading, value and geographical limits
- source of funding
- record keeping, transaction monitoring, and reporting
what are the two types of virtual currencies
centralized
decentralized
what is centralized vc
have a centralized repository and a single administrator
what is decentralized
have no repositories or administrators but work as peer to peer media of exchange without any need for an intermediary
what is bitcoin
decentralized
what are two other distinguishing factors for VC
convertible and non convertable
what are convertable
they have an equivalent value and can be exchanged in real currency such as bitcoin
what about nonconvertable
intended to be specific to a particular domain, such as world of warcraft gold
what does VC allow value to do
be transmitted anywhere in the world without the requirement of a centralized bank or institutional authority
what does an international business corporation permit the person to do
reduce transparency between the owner in his or her home country and the offshore entity where the company is registered
what are the inherent risks with IBCs
they are usually created in a tax haven and they usually require incorporation with a local agent, who may further reduce the transparency of the IBC and facilitate opening accounts in the name of the IBC
what about private investment companies
they are established and used in a similar manner however they are typically limited to holding investment assets in tax neutral offshore financial jurisdictions
why are bearer shares prime laundering vehicles
they belong on the surface to the bearer. Additionally, there is no registration of owners so when they are transferred its physically handed to the new owner
what does FATF recommend in its 40 recommendations
suggests that employees of financial institutions ask questions about the identity of beneficial owners before issuing, accepting or creating bearer shares and trusts
what should also be done
financial institutions should keep registries of this information
what are four related reasons to establish or control a shell company for money laundering purposes
- shell companies accomplish the objective of converting the cash proceeds of crime into alternative assets
- through the use of shell companies, the launderer can create the perception that illicit funds have been generated from a legitimate source, which allows commercial accounts to be created at financial institutions.
- once a shell company is established, a wide range of legitimate and/or bogus business transactions can be used to further the laundering process
- shell companies can also be effective in concealing criminal ownership
what are the 7 money laundering techniques that are used in conjunction with criminally controlled companies
- using nominees as owners or directors to distance a company from its criminal connections
- layering by connecting companies through complex hierarchy of ownership
- loaning proceeds of crime between criminally controlled companies
- fictitious business expenses/false invoicing
- sale of the business to provide a legitimate source of capital
- buying a company already owned by the criminal enterprise
- paying out fictitious salaries
what stages of money laundering can hawala be utilized
all 3
for placement what can occur
money launder can receive a transfer and put it into a bank account justyfing these deposits to bank officials as the proceeds of a legitimate business
why is it effective for layering
there is little to know paper trail so it is difficult to follow the money
