Chapter 1 (Part 3)

Question 1

what are the 7 risks of prepaid cards

Answer 1

1. anonymous cardholders
2. anonymous funding
3. anononymous access to funds
4. high value limits ad no limits n the number of cards individuals can acquire
5. global access to cash through ATMs
6. offshore card issuers that may not observe laws in all jurisdictions
7. substitute for bulk cash smuggling

Question 2

what are the 4 ways in which risk may be mitigated in new payment methods

Answer 2

1. Customer due diligence
2. Loading, value and geographical limits
3. source of funding
4. record keeping, transaction monitoring, and reporting

Question 3

what are the two types of virtual currencies

Answer 3

centralized

decentralized

Question 4

what is centralized vc

Answer 4

have a centralized repository and a single administrator

Question 5

what is decentralized

Answer 5

have no repositories or administrators but work as peer to peer media of exchange without any need for an intermediary

Question 6

what is bitcoin

Answer 6

decentralized

Question 7

what are two other distinguishing factors for VC

Answer 7

convertible and non convertable

Question 8

what are convertable

Answer 8

they have an equivalent value and can be exchanged in real currency such as bitcoin

Question 9

what about nonconvertable

Answer 9

intended to be specific to a particular domain, such as world of warcraft gold

Question 10

what does VC allow value to do

Answer 10

be transmitted anywhere in the world without the requirement of a centralized bank or institutional authority

Question 11

what does an international business corporation permit the person to do

Answer 11

reduce transparency between the owner in his or her home country and the offshore entity where the company is registered

Question 12

what are the inherent risks with IBCs

Answer 12

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

Question 13

what about private investment companies

Answer 13

they are established and used in a similar manner however they are typically limited to holding investment assets in tax neutral offshore financial jurisdictions

Question 14

why are bearer shares prime laundering vehicles

Answer 14

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

Question 15

what does FATF recommend in its 40 recommendations

Answer 15

suggests that employees of financial institutions ask questions about the identity of beneficial owners before issuing, accepting or creating bearer shares and trusts

Question 16

what should also be done

Answer 16

financial institutions should keep registries of this information

Question 17

what are four related reasons to establish or control a shell company for money laundering purposes

Answer 17

1. shell companies accomplish the objective of converting the cash proceeds of crime into alternative assets
2. 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.
3. once a shell company is established, a wide range of legitimate and/or bogus business transactions can be used to further the laundering process
4. shell companies can also be effective in concealing criminal ownership

Question 18

what are the 7 money laundering techniques that are used in conjunction with criminally controlled companies

Answer 18

1. using nominees as owners or directors to distance a company from its criminal connections
2. layering by connecting companies through complex hierarchy of ownership
3. loaning proceeds of crime between criminally controlled companies
4. fictitious business expenses/false invoicing
5. sale of the business to provide a legitimate source of capital
6. buying a company already owned by the criminal enterprise
7. paying out fictitious salaries

Question 19

what stages of money laundering can hawala be utilized

Answer 19

all 3

Question 20

for placement what can occur

Answer 20

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

Question 21

why is it effective for layering

Answer 21

there is little to know paper trail so it is difficult to follow the money