Chapter 2 (Part 1) Flashcards
What are the 11 immediate outcomes to measure for the FATF effectiveness assessment
- ML/TF risks are known and actions coordinated to combat or thwart the proliferation of ML/TF.
- International cooperation provides actionable information to use against criminals
- Supervisors regulate financial institutiosn and NBFIs and their risk based AML/CFT programs
- Financial institutions and NBFIs apply preventative measures and report suspicious transactions
- Legal persons are not misused for ML/TF and beneficial ownership information is available to authorities.
- Financial intelligence information is used by authorities in ML and CFT investigations.
- Money laundering offenses are investigated and criminally prosecuted, and sanctions are imposed
- proceeds of a crime are confiscated
- terrorist financing offenses are investigated and criminally prosecuted, and sanctions are imposed
- Terrorists and terrorist organizations are prevented from raising, moving, and using money that are not permitted to abuse non profit organizations
- Persons and organizations involved in the proliferation of weapons of mass destruction are prevented from raising, moving, and using money
What are the three intermediate outcomes of fatif
- policy, cooperation, and coordination to mitigate money laundering and terrorist financing.
- prevention of proceeds of crime entering into the financial system and reporting of such when they do
- Detection and disruption of ML/TF threats
what are the 3 main activities FATF has focused on since its creation
- Standard setting
- Ensuring effective compliance with the standards
- identifying money laundering and terrorist financing threats
What are the 5 areas the 40 recommendations covers
- the identification of risks and development of appropriate policies
- the criminal justice system and law enforcement
- The financial system and its regulation
- the transparency of legal persons and arrangements
- international cooperation
what did FATF introduce with the 2012 revision as the first recommendation in combating money laundering and CFT
the risk assessment
What are 6 of the most important changes from 2003 in the recommendations.
- expanded coverage to include CFT
- widened the categories of business that should be covered by national laws including real estate agents, precious metal dealers, accountants, lawyers and trust services providers
- specified compliance procedures on issues such as customer identification and due diligence including enhanced identification measures for higher risk customers and transactions
- adopted a clearer defintion of money laundering predicate offenses
- encouraged prohibition of shell banks
- included stronger safeguards notably regarding international cooperation in terrorist financing investigations
what are the 6 important changes in the 2012 revision
- creation of a recommendation on assessing risks and applying a risk-based approach to all AML/CFT efforts
- Creation of a recommendation for targeted financial sanctions related to the proliferation of WMDs
- more attention on domestic PEPs and those entrusted with a prominent function by an international organization
- new requirement for the identification and assessment of risks of new products prior to the launch of the new product
- new requirement for financial groups to implement group-wide AML/CFT programs and have procedures for sharing information within the group
- inclusion of tax crimes within the scope of designated categories of offenses for money laundering
what are the first 6 of 11 highiglights of the 2012 revision
- Risk-based approach
- designated categories of offenses
- terrorist financing and financing of proliferation
- knowledge and criminal liability
- customer due diligence measures
- Additional customer due diligence on specific customers and activities
What are 7-11
- Suspicious transaction and/or activity reporting
- expanded coverage of industries
- transparency and beneficial ownership of legal persons and arrangements
- powers and responsibilities of competent authorities
- international cooperation
what should countries do with regarding risk based approach
they should start by identifying, assessing and understanding the money laundering and terrorist financing risks they face
then they should take appropriate measures to mitigate the identified risks
what is the deal with designated categories of offenses
these serve as money laundering predicates (i.e. crimes that offenders attempt to conceal through financial subterfuge that should constitute precursory offenses to money laundering)
for additional customer due diligence on specific customers and activities what categories are listed (5 of them)
- PEPs
- Cross border Correspondent banking
- Money or value transfer services
- New Technologies
- Wire transfers
what does the basel committee on banking supervision promote
sound supervisory standards worldwide
what did the first EU directive require members to do
enact legislation to prevent their domestic financial systems from being used for ML
what did the first directive confine
predicate offenses of money laundering to drug trafficking, but member states were encouraged to extend the predicate offenses to other crimes
what did the second directive do
amend the first directive to require stricter money laundering controls across the continent
what are the five key features
- extended the scope of the first directive beyond drug related crimes
- explicitly brought bereaux de change and money remittance offices under AML coverage
- clarified that knowledge of criminal conduct can be inferred from objective factual circumstance
- provided a more precise definition of ML
- Widened the businesses and professions that are subject to the obligations of the directive
what are the 6 ways that the third directive expanded the scope of the first and second directive
- defining ML and TF as separate crimes
- extending CIP and suspicious activity reporting obligations to trusts and company service providers, life insurance intermediaries, and dealers selling goods for cash payments of more than 15,00 euros
- detailing a risk based approach to customer due diligence
- protecting employees who report suspicions of ML and TF
- obligating member states to keep comprehensive statistics regarding the use of and results obtained from suspicious transaction reports
- requiring all financial institutions to identify and verify the BO of all accounts held by legal entities or persons (25% level)
what are the 3 ways that the scope of the third directive differs from the second directive
- it specifically includes the category
- it covers all dealers trading in goods who trade in cash over 15k euros
- the definition of financial institution includes certain insurance intermediaries
what are some ways in which the fourth directive changed from the other directives
- threshold for reporting susp tran dropped from 15k to 10k euros
- the scope of obliged entities was enlarged from just casinos to all “providers of gambling services”
- CDD is to be applied for transfers of funds exceeding 1,000 euros
what is the Egmont group comprised of
a number of FIUs
what is the goal of the group
provide a forum for FIUs around the world to improve cooperation in the fight against money laundering and financing of terrorism and to foster the implementation of domestic programs in this field
what are the 5 areas of support for the Egmont group
- expanding and systematizing cooperation in the reciprocal exchange of information
- increasing the effectiveness of FIUs by offering training and promoting personal exchanges to improve the expertise and capabilities of personnel employed by FIUs
- fostering better and secure communication among FIUs through the application of technology, such as the Egmont secure web
- promoting the operational autonomy of FIUs
- 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
what are 6 of the most frequently observed indicators of ML as state in egmonts publishing of FIUs in action: 100 sanitized cases
- large scale cash transactions
- atypical or uneconomical fund transfers to or from a foreign jurisdiction
- unusual business activity or transactions
- large and/or rapid movements of funds
- unrealistic wealth compared to client profile
6 defensive stance to questioning
