Chapter 2

Question 1

FINANCIAL ACTION TASK FORCE (FATF) Objectives:

3

Answer 1

1. Spreading the AML message worldwide.
2. Monitoring implementation of the FATF Recommendations among FATF members.
3. Reviewing money laundering trends and countermeasures (“Typologies” exercise).

Question 2

FINANCIAL ACTION TASK FORCE (FATF) has focused its work on three main activities:
(3)

Answer 2

1. standard setting,
2. ensuring effective compliance with the standards,
3. identifying ML and TF threats.

Question 3

The 40 Recommendations provide a complete set of countermeasures against money laundering and terrorist financing, covering:
(5)

Answer 3

1. The identification of risks and development of appropriate policies.
2. The criminal justice system and law enforcement.
3. The financial system and its regulation.
4. The transparency of legal persons and arrangements
5. International cooperation.

Question 4

The most important changes made to the Recommendations were in 2003 and are?
(6)

Answer 4

1. Expanded coverage to include terrorist financing.
2. Widened the categories of businesses including real estate agents, precious metals dealers, accountants, lawyers and trust services providers.
3. Specified compliance procedures on Customer Identification, Due Diligence, and Enhanced Identification measures for higher-risk customers and transactions.
4. Adopted a clearer definition of money laundering predicate offenses.
5. Encouraged prohibition of so-called “shell banks,” typically set up in offshore secrecy havens and consisting of little more than nameplates and mailboxes, and urged improved transparency of legal persons and arrangements.
6. Stronger safeguards, regarding International Cooperation in, for example, terrorist financing investigations.

Question 5

In 2012, the Recommendations were revised again, incorporating the Nine Special Recommendations into the 40 Recommendations. The most important changes in this revision were:
(6)

Answer 5

1. Creating a Recommendation on assessing risks and applying a risk based approach.
2. Creating a Recommendation for targeted financial sanctions related to proliferation of weapons of mass destruction.
3. Focusing on domestic PEPs and those entrusted with a prominent function by an international organization
4. Requiring identification and assessment of risks of new products prior to the launch of the new product.
5. Adding a requirement that financial groups implement a group-wide AML/CFT program and have procedures for sharing information within the group.
6. Including tax crimes within the scope of designated categories of offenses for money laundering

Question 6

40 Recommendation Groups:

7

Answer 6

1-2 AML/CFT Policies and Coordination
3-4 Money Laundering and Confiscation
5-8 Terrorist Financing and Financing of Proliferation
9-23 Financial and Non-Financial Institution Preventative Measures
24-25 Transparency and Beneficial Ownership of Legal Persons and Arrangements
26-35 Powers and Responsibilities of Competent Authorities and Other Institutional Measures
36-40 International Cooperation

Question 7

FATF also designated specific thresholds that trigger AML scrutiny. For example, the threshold that financial institutions should monitor for:
(3)

Answer 7

1. Occasional customers is €15,000;
2. Casinos, including Internet casinos, it is €3,000; and
3. Dealers in precious metals, when engaged in any cash transaction, it is €15,000.

Question 8

The Basel Committee on Banking Supervision

Answer 8

The Basel Committee on Banking Supervision, established in 1974 by the central bank governors of the G-10 countries, promotes sound supervisory standards worldwide. The Committee’s secretariat is provided by the Bank for International Settlements (BIS) in Basel, Switzerland. The BIS is an international organization that fosters cooperation among central banks and other agencies in pursuit of monetary and financial stability. Its services are provided exclusively to central banks and international organizations.
Banking supervisors are not generally responsible for criminal prosecution of money laundering in their countries. But they have a role in ensuring that banks have procedures in place, including strict AML policies, to avoid involvement with drug traders and other criminals, as well as in the general promotion of high ethical and professional standards in the financial sector.

Question 9

In 1988, the Basel Committee issued a Statement of Principles called “Prevention of Criminal Use of the Banking System for the Purpose of Money Laundering” in recognition of the vulnerability of the financial sector to misuse by criminals. This was a step toward preventing the use of the banking sector for money laundering, and it set out principles with respect to:

Answer 9

1. Customer identification.
2. Compliance with laws.
3. Conformity with high ethical standards and local laws and regulations.
4. Full cooperation with national law enforcement to the extent permitted without breaching customer confidentiality.
5. Staff training.
6. Record keeping and audits.

Question 10

In 1997, the Basel Committee issued its “Core Principles for Effective Banking Supervision,” a basic reference for authorities worldwide, stating:

Answer 10

Banking supervisors must determine that banks have adequate policies, practices and procedures in place, including strict ‘know-your-customer’ rules, that promote high ethical and professional standards in the financial sector and prevent the bank being used, intentionally or unintentionally, by criminal elements.

Question 11

Customer Due Diligence for Banks (2001) paper by Basel Committee.

The essential elements presented in this paper are guidance as to minimum standards for worldwide implementation for all banks. These standards may need to be supplemented or strengthened with further measures tailored to the risks in particular institutions and in the banking system of individual countries.

The paper has five sections:

Answer 11

1. Introduction.
2. Importance of KYC standards for supervisors and banks.
3. Essential elements of KYC standards.
4. The role of supervisors.
5. Implementation of KYC standards in a cross-border context.

Question 12

Customer Due Diligence for Banks (2001) paper by Basel Committee.

The paper has identified seven specific customer identification issues:
(7)

Answer 12

1. Trust, nominee and fiduciary accounts.
2. Corporate vehicles, companies with nominee shareholders or entities with shares in bearer form.
3. Introduced businesses.
4. Client accounts opened by professional intermediaries, such as “pooled” accounts managed by professional intermediaries on behalf of entities such as mutual funds, pension funds and money funds.
5. Politically exposed persons.
6. Non-face-to-face customers, i.e., customers who do not present themselves for a personal interview.
7. Correspondent banking.

Question 13

The four key elements of KYC, according to the Basel Committee paper are:

Answer 13

1. Customer Identification;
2. Customer acceptance;
3. Risk Management;
4. Monitoring.

Question 14

Consolidated KYC Risk Management
In October 2004, the Committee released another important publication on KYC: “Consolidated KYC Risk Management.” The publication is a complement to the Basel Committee’s Customer Due Diligence for Banks issued in October 2001. It examines the critical elements for effective management of KYC risk throughout a banking group. The paper addresses the need for banks to adopt a global approach and to apply the elements necessary for a sound KYC program to both the parent bank or head office and all of its branches and subsidiaries. These elements consist of
(4)

Answer 14

1. risk management,
2. customer acceptance
3. customer identification,
4. ongoing monitoring of higher-risk accounts.

Question 15

FIRST DIRECTIVE

Answer 15

The first European Union Directive on Prevention of the Use of the Financial System for the Purpose of Money Laundering (Directive 91/308/EEC) was adopted by the Council of Europe in June 1991.
Like all Directives adopted by the Council, it required European Union member states to achieve (by amending national law, if necessary) specified results. The Directive required the members to enact legislation to prevent their domestic financial systems from being used for money laundering. The unique nature of the EU as a “Community of States” makes it fundamentally different from other international organizations. The EU can adopt measures that have the force of law even without the approval of the national Parliaments of the various member states. Plus, European law prevails over national law in the case of directives.
In this respect, EU Directives have far more weight than the voluntary standards issued by groups such as the Basel Committee or the Financial Action Task Force. Of course, the Directive applies only to EU member states and not to other countries.
The first directive of 1991 was confined to drug trafficking, as defined in the 1988 Vienna Convention. However, member states were encouraged to extend the predicate offenses to other crimes.

Question 16

SECOND DIRECTIVE

In December 2001, the EU agreed on a Second Directive (Directive 2001/97/EEC) that amended the prior one. The Second Directive required stricter money laundering controls across the continent.

The following were the key features of the Second Directive:
(6)

Answer 16

1. Extended the scope of the First Directive beyond drug-related crimes.
2. Definition of “criminal activity” was expanded to cover not just drug trafficking, but all serious crimes, including corruption and fraud.
3. Brought bureaux de change and money remittance offices under AML coverage.
4. Knowledge of criminal conduct can be inferred from objective factual circumstances.
5. Covered groups included: auditors, external accountants, tax advisers, real estate agents, notaries and legal professionals.
6. Provided a more precise definition of Money Laundering

Question 17

THIRD DIRECTIVE

A Third EU Directive on the Prevention of the Use of the Financial System for the Purpose of Money Laundering and Terrorist Financing, based on elements of the Financial Action Task Force’s revised 40 Recommendations, was adopted in 2005.

The Third EU Directive extended the scope of the directives by:
(7)

Answer 17

1. Defining “money laundering” and “terrorist financing” as separate crimes.
2. Cover not only the manipulation of money derived from crime, but also the collection of money or property for terrorist purposes.
3. Extending customer identification and suspicious activity reporting obligations to trusts and company service providers, life insurance intermediaries and dealers selling goods for cash payments of more than 15,000 Euros.
4. Detailing a risk-based approach to customer due diligence. The extent of due diligence that is performed on customers, whether simplified or enhanced, should be dependent on the risk of money laundering or terrorist financing they pose.
5. Protecting employees who report suspicions of money laundering or terrorist financing. This provision instructs member states to “do whatever is in their power to prevent employees from being threatened.”
6. Obligating member states to keep comprehensive statistics regarding the use of and results obtained from suspicious transaction reports such as: the number of suspicious transaction reports filed; the follow-up given to those reports; and the annual number of cases investigated, persons prosecuted and persons convicted.
7. Requiring all financial institutions to identify and verify the “beneficial owner” of all accounts held by legal entities or persons. “Beneficial owner” refers to the natural person who directly or indirectly controls more than 25 percent of a legal entity or person.

Question 18

THIRD DIRECTIVE

The Third Money Laundering Directive applies to:
8

Answer 18

1. Credit institutions
2. Financial institutions;
3. Auditors, external accountants and tax advisers;
4. Legal professionals;
5. Trust and company service providers;
6. Estate agents;
7. High value goods dealers who trade in cash over 15,000 Euro; and
8. Casinos.

Question 19

The scope of the Third Money Laundering Directive differs from the Second Money Laundering Directive in that:
(3)

Answer 19

1. It specifically includes the category of trust and company service providers.
2. It covers all dealers trading in goods who trade in cash over 15,000 Euros.
3. The definition of financial institution includes certain insurance intermediaries.

Question 20

There were three main points of contention with regard to the Third Directive:
(3)

Answer 20

1. the definition of politically exposed persons (PEPs);
2. the inclusion of lawyers among those who are required to report suspicious activity; and
3. the precise role of a “comitology committee.” The European Commission coined the term “comitology,” which means the EU system that oversees implementation of acts proposed by the European Commission.

Question 21

The Third Money Laundering Directive includes the following definition of a politically exposed person

Answer 21

“Politically exposed persons” means natural persons who are or have been entrusted with prominent public functions and the immediate family members, or individuals known to be close associates, of such persons.

Close associates must be identified only when their relationship with a PEP is publicly known or when the institution suspects there is a relationship.

Finally, the commission said persons should NOT be considered PEPs after at least one year of not being in a prominent position.

Question 22

EGMONT GROUP OF FINANCIAL INTELLIGENCE UNITS
In 1995, a number of national financial intelligence units (FIUs) began working together in an informal organization known as the Egmont Group (named for the location of the first meeting, the Egmont-Arenberg Palace in Brussels). The goal of the group is to:
(2)

Answer 22

1. Provide a forum for FIUs around the world to improve cooperation in the fight against money laundering and financing of terrorism and
2. To foster the implementation of domestic programs in this field.

Question 23

EGMONT GROUP OF FINANCIAL INTELLIGENCE UNITS
This support includes:
(5)

Answer 23

1. Expanding and systematizing cooperation in the reciprocal exchange of information.
2. Increasing the effectiveness of FIUs by offering training and promoting personnel exchanges to improve the expertise and capabilities of personnel employed by FIUs.
3. Fostering better and secure communication among FIUs through the application of technology, such as the Egmont Secure Web (ESW).
4. Promoting the operational autonomy of FIUs.
5. Promoting the establishment of FIUs in conjunction with jurisdictions with an AML/CFT program in place,or in areas with a program in the early stages of development.

Question 24

In 1996, based on the work of its Legal Working Group, Egmont approved a definition of an FIU. It was amended in 2004 to reflect the FIUs’ role in combating terrorism financing as follows:

Answer 24

A central, national agency responsible for receiving (and, as permitted, requesting), analyzing and disseminating to the competent authorities, disclosures of financial information:
Concerning suspected proceeds of crime and potential financing of terrorism.
Required by national legislation or regulation, in order to combat money laundering and terrorism financing.

Question 25

THE WOLFSBERG GROUP

Answer 25

1. Association of 11 global banks
2. Aims to develop financial services industry standards and related products for Know Your Customer, Anti-Money Laundering and Counter Terrorist Financing policies.
3. Hold no force of law and carry no penalties for those who do not abide by them.
4. Came together in 2000 at the Wolfsberg castle in Switzerland.

Question 26

The Wolfsberg Anti-Money Laundering Principles for Private Banking was published in October 2000 and was revised in May 2002.

The banks released the principles with Transparency International said that the principles would: (1)

These principles recommend: (5)

Answer 26

The banks released the principles with Transparency International said that the principles would:
“make it harder for corrupt people to deposit their ill-gotten gains in the world’s banking system.”

1. controls for private banking that range from the basic, such as customer identification, to enhanced due diligence, such as heightened scrutiny of individuals who “have or have had positions of public trust.”
2. “endeavor to accept only those clients whose source of wealth and funds can be reasonably established to be legitimate.”
3. identify the beneficial owner of funds “for all accounts” when that person is someone other than the client,
4. Urge private bankers to perform due diligence on “money managers and similar intermediaries” to determine that the middlemen have a “satisfactory” due diligence process for their clients or a regulatory obligation to conduct such due diligence.
5. “at least one person other than the private banker” should approve all new clients and accounts.

Question 27

In May 2002, the Wolfsberg Principles for Private Banking were revised. A section was added…

Answer 27

…prohibiting the use of internal non-client accounts (sometimes referred to as “concentration” accounts) to keep clients from being linked to the movement of funds on their behalf (i.e., banks should forbid the use of such internal accounts in a manner that would prevent officials from appropriately monitoring movements of client funds).

Question 28

THE WORLD BANK AND THE INTERNATIONAL MONETARY FUND

In an April 2000 joint policy paper called “Enhancing Contributions To Combating Money Laundering,” the two organizations detailed the steps that they would take to :

September 2001:

IMFC

comminique

Answer 28

strengthen the global assault on money laundering.

In September 2001, the IMF and the World Bank started to “fully integrate” the battle against money laundering and other financial crimes into its “surveillance exercises and programs.”

That month, the International Monetary and Financial Committee (IMFC), the advisers to the IMF’s board of governors, issued a communiqué that said it would:

“explore incorporating work on financial abuse, particularly with respect to international efforts to fight against money laundering, into its various activities, as relevant and appropriate.”

Question 29

USA Patriot Act

Answer 29

“Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism”

Question 30

SECTION 311

This section provides the U.S. Treasury Department with the authority to apply graduated, proportionate measures against a foreign jurisdiction, a foreign financial institution, a type of international transaction or a type of account that the Treasury Secretary determines to be a “primary money laundering concern.” By designating a country or a financial institution as a “primary money laundering concern,” the U.S. government can force U.S. banks to halt many of their financial dealings with the designee. Once identified, the Treasury Department can require U.S. financial institutions to follow any or all of the following five special measures:

Answer 30

Section 311: Special Measures for Primary Money Laundering Concerns (31 U.S.C. 5318A).

1. Keep records and/or file reports on certain financial transactions, including a description of the transactions, the identities and addresses of the participants in the transactions and the identities of the beneficial owners of the funds involved.
2. Obtain information on the beneficial ownership of any account opened or maintained in the U.S. by a foreign person or a foreign person’s representative.
3. Identify and obtain information about customers who are permitted to use, or whose transactions are routed through, a foreign bank’s “payable-through” account.
4. Identify and obtain information about customers permitted to use, or whose transactions are routed through, a foreign bank’s “correspondent” account.
5. Close certain payable-through or correspondent accounts.

Question 31

SECTION 312:

Answer 31

Section 312: Correspondent and Private Banking Accounts (31 U.S.C. 5318(i)).

Requires due diligence and, in certain situations, “enhanced due diligence” for foreign correspondent (which includes virtually all account relationships that institutions can have with a foreign financial institution) and private banking accounts for non- U.S. persons.

Question 32

Private Banking definition

Answer 32

An account with a minimum aggregate deposit of $1 million for one or more non-U.S. persons and which is assigned to a bank employee acting as a liaison with the non-U.S. person.

Question 33

SECTION 313:

Answer 33

Section 313: Prohibition on correspondent accounts for foreign shell banks (31 U.S.C. 5318(j)).

Prohibits U.S. banks and securities brokers and dealers from maintaining correspondent accounts for foreign unregulated “shell” banks that have no physical presence anywhere. The term “physical presence” is defined as a place of business that is maintained by a foreign bank; is located at a fixed address (as opposed to solely an electronic address) where it is authorized to conduct banking activities; employs one or more individuals on a full-time basis at that location; maintains operating records at that location; and is subject to inspection by the banking authority which licensed it at that location. The term shell bank does not include a bank that is a regulated affiliate of a bank that maintains a physical presence.
The section also requires financial institutions to take reasonable steps to ensure that foreign banks with correspondent accounts do not themselves permit access to such accounts by foreign shell banks. Banks and securities brokers are permitted to use a certification form to comply with the rule. That process requires the foreign banks to certify at least once every three years that they are not themselves shell banks and that they do not permit shell banks access to the U.S. correspondent account through a nested correspondent relationship.

Question 34

Section 319(a)

Answer 34

Forfeiture from U.S. Correspondent Account (18 U.S.C. 981(k)). In situations where funds have been deposited with a foreign bank, this section permits the U.S. Government to seize funds in the same amount from a correspondent bank account in the U.S. that has been opened and maintained for the foreign bank. The U.S. Government is not required to trace the funds, as they are deemed to have been deposited into the correspondent account. However, the owner of the funds may contest the seizure order.

Question 35

Section 319(b)

Answer 35

Records relating to Correspondent Accounts
for Foreign Banks (31 U.S.C. 5318(k)). Allows the appropriate Federal banking agency to require a financial institution to produce within 120 hours (five days) records or information related to the institution’s AML compliance or related to a customer of the institution or any account opened, maintained, administered or managed in the U.S. by the financial institution.

Question 36

The Reach of the U.S. Criminal Money Laundering and Civil Forfeiture Laws

Answer 36

First enacted in 1986, the criminal money laundering law of the United States is a powerful legal weapon, but it may be used only if the property involved in the financial transaction at issue represents the proceeds of at least one designated underlying crime — a “specified unlawful activity” (SUA). However, SUAs include virtually every U.S. crime that produces economic advantage, including aircraft piracy, wire fraud, bank fraud, copyright infringement, embezzlement, export violations, illegal gambling, narcotics offenses, racketeering and even some environmental crimes.
(18 USC 1956 and 1957.)
This money laundering law also reaches foreign individuals and foreign financial institutions if the financial transaction occurs in whole or in part in the U.S. or if the foreign financial institution maintains a bank account at a U.S. financial institution.

Question 37

OFAC

Answer 37

In addition to these laws and regulations, financial institutions and businesses in other countries must recognize the extraterritorial reach of regulations enforced by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).
OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers and those engaged in activities related to the proliferation of weapons of mass destruction. OFAC acts under presidential wartime and national emergency powers, as well as authority granted by specific legislation, to impose controls on transactions and to freeze foreign assets under U.S. jurisdiction. Many of the sanctions are based on United Nations and other international mandates, are multilateral in scope, and involve close cooperation with allied governments.
OFAC rules prohibit transactions and require the blocking of assets of persons and organizations that appear on one of a series of lists that OFAC issues periodically. The agency has the power to impose significant penalties on those who are found to be in violation of the blocking orders.
All U.S. persons must comply with OFAC regulations, including all U.S. citizens and permanent resident aliens, regardless of where they are located; all persons and entities within the United States; and all U.S. incorporated entities and their foreign branches. In the cases of certain programs, such as those regarding Cuba and North Korea, all foreign subsidiaries owned or controlled by U.S. companies also must comply. Certain programs also require foreign persons in possession of U.S.-origin goods to comply.

Question 38

Joint activity of IMF and World Bank in combating ML by:

4

Answer 38

1. Concentrating on ML over other forms of financial abuse;
2. Helping to strengthen financial supervision and regulation in countries;
3. Interacting with the Organization for Economic Co-operation and Development (OECD) and the Basel Committee on Banking Supervision; and
4. Insisting on international AML standards in countries that ask for financial assistance.

Question 39

What are the elements to be considered when conducting due diligence as per Wolfsburg guidelines?

Answer 39

Due diligence should be risk based and on an ongoing basis, depending on the location, type of business, ownership, customer base, regulatory status and AML controls of the correspondent banking client or business. It is recommended that the following elements be considered when conducting due diligence:

1. Geographic risk
2. Branches, subsidiaries and affiliates of correspondent banking clients and of the institution
3. Ownership and management structures of the correspondent banking client
4. Client’s customer base and business
5. Client’s products and services
6. Client’s regulatory status and history
7. Client’s anti-money laundering controls
8. Client’s dealings with shell banks
9. Visits to the client’s business
10. Enhanced due diligence regarding the involvement of PEPs with the correspondent banking client and downstream correspondent (nested) relationships the correspondent provides
11. The principles should be part of a financial institution’s larger AML program including anti- bribery and corruption, fraud and evasion of sanctions

Question 40

Which of the following are correct as per the Wolfsburg guidelines on ‘the Suppression of the Financing of Terrorism’, outlining the roles of financial institutions in the fight against money laundering and terrorism financing?

Answer 40

1. providing official lists of suspected terrorists globally
2. including adequate information in the lists to help institutions search customer databases
3. providing prompt feedback to institutions
4. providing information on the manner means methods used by terrorist
5. developing government guideline for business sectors and activities identified as HR
6. Developing uniform global formats for frunds transfer
7. Protecting financial institutions with safe harbor immunity
8. Performing EDD for business relationships with remittance business, exchange houses, casa de cambio

Question 41

Wolfsberg Anti-Money Laundering Principles for Private Banking list several situations that require enhanced due diligence, including activities that involve:
(3)

Answer 41

1. PEPs
2. Persons residing in and/or having funds from high risk countries
3. Persons involved in types of economic, business activities, or sectors susceptible to money laundering

Question 42

Wolfsberg Anti-Money Laundering Principles for Private Banking list several situations that require enhanced due diligence, including clients that may require greater scrutiny as a result of:
(4)

Answer 42

1. Information gained from monitoring their activities
2. External inquiries
3. Derogatory information such as negative news reporting
4. Other factors that may expose the bank to reputational risk

Question 43

What are the frequently observed indicators of money laundering by Egmont Group in their “FIUs in Action: 100 Sanitized Cases?”
(6)

Answer 43

1. Large-scale cash transactions.
2. Atypical or uneconomical fund transfers to or from a foreign jurisdiction.
3. Unusual business activity or transactions.
4. Large and/or rapid movements of funds.
5. Unrealistic wealth compared to client profile.
6. Defensive stance to questioning.

Question 44

Which of the following are correct regarding Egmont Group of FIUs?
(7)

Answer 44

Goals:

1. Provide a forum for FIUs around the world to improve cooperation in the fight against money laundering and terrorist financing and
2. Foster the implementation of domestic programs in this field.

Support includes:

1. Expanding and systematizing cooperation in the reciprocal exchange of information
2. Increasing the effectiveness of FIUs by offering training and promoting personnel exchanges to improve the expertise and capabilities of personnel employed by FIUs
3. Fostering better and secure communication among FIUs through the application of technology, such as the Egmont Secure Web (ESW)
4. Promoting the operational autonomy of FIUs
5. Promoting the establishment of FIUs in conjunction with jurisdictions with an AML/CFT program in place or in areas with a program in the early stages of development

Question 45

What are the recommendations in Kingston Ministerial Declarations, endorsed and affirmed by the member governments of CFATF during the Jamaica Ministerial Meeting held in Kingston on November 1992?
(5)

Answer 45

1. Defining money laundering based on the model laws issued by the Organization of American States.
2. Concerning the seizure and forfeiture of drug proceeds and linked assets enable the identification, tracing and evaluation of property subject to seizure, and freezing orders.
3. Allowing judicial challenges to seizure orders by an administrative body.
4. Permitting forfeiture in all cases following conviction.
5. Permitting courts to decide that “all property obtained during a prescribed period of time by a person convicted of drug trafficking has been derived from such criminal activity.”

Question 46

What are the objectives of the Asia/Pacific Group on Money Laundering Body (APG)?
(5)

Answer 46

1. Provides a focus for cooperative AML/CFT efforts in the Asia/Pacific region.
2. Provides a forum in which
   i. regional issues discussed,
   ii. experiences shared, and
   iii. operational co-operation among member jurisdictions (Mj) encouraged.
3. Adoption & implementation by Mj of internationally accepted AMLCFT measures
4. Enables regional and jurisdictional factors taken into account in implementation of international AML/CFT measures.
5. Coordinates and provides practical support to member and observer jurisdictions in the region.

Question 47

What are the high-level principles that apply to both FATF and FSRBs? (4)

Answer 47

1. Role: FSRBs play an essential role in identifying and addressing AML/CFT technical assistance needs for their individual members.
   1a. In those FSRBs that carry out this coordination work, technical assistance necessarily complements mutual evaluation and follow-up processes by helping jurisdictions to implement FATF standards.
2. Autonomy: FATF and FSRBs are free-standing organizations that share the common goals of combating money laundering and the financing of terrorism and proliferation and of fostering effective AML/CFT systems.
3. Reciprocity: FATF and FSRBs operate on the basis of (mutual or joint or common) recognition of their work, which implies that FSRBs and FATF put in place similar mechanisms for effective participation and involvement in each other’s activities.
4. Because FATF and FSRBs are part of a larger whole and the success or failure of one organization can have an effect on all organizations, protection of the FATF brand is in the common interest of both FATF and FSRBs.

Question 48

Fourth Directive (EU) 2015/849

Answer 48

1. The threshold for entities obliged to report suspicious transactions (i.e., persons trading in goods or carrying out transactions) decreased from 15,000 euros to 10,000 euros.
2. The scope of obliged entities was enlarged from just casinos to all “providers of gambling services.”
3. CDD applied for transfers of funds exceeding EUR 1,000

Question 49

Second Directive Definition of Money Laundering:

4

Answer 49

1. the conversion or transfer of property with knowledge that is derived from criminal activity
2. Concealing the nature, source, location, movement of property that came from illegal activity
3. Acquisition of property knowing it came from illegal activity
4. Participation or assisting in any of the aforementioned

Question 50

Fourth Directive

Answer 50

1. Threshold for entities obliged to report SARs decreased from EUR 15K to 10K
2. Scope enlarged to all providers of gambling services
3. CDD for transfers exceeding EUR 1,000
4. New definitions for Correspondent relationships, PEPs and senior management
5. Tax Crimes relating to direct/indirect taxes included.
6. Explanation of financial activity on an occasional or very limited basis
7. European commission submit report every 2 years on risk assessment of ML / TF
8. EU Exec. in charge of high-risk countries
9. Special attention to PEPs
10. For groups, sets criteria for adequate compliance to 3rd parties and CDD
11. New requirements regarding BO info
12. Effectiveness to combat ML/TF enlarged to include size & cross-border requests
13. Obliged entities to implement group wide polices/procedures (for groups)
14. Penalties for breach range from “name and shame” to withdrawal of authorization
15. Rules for cooperation b/w FIU, European Supervisory Authorities & EU Commission.
16. Legislative act gives discretion to member states on application of provisions.
17. National level - member states conduct ML/TF risk assessment and Designate a responsible authority.