Illicit Finance

Question 1

Silk Road

Answer 1

online drug market, payment in Bitcoin facilitated millions of dollars in drug transaction

Question 2

419 Scam

Answer 2

originated in Nigeria; conducted via internet

Question 3

EDD

Answer 3

enhanced due diligence

Question 4

NPA

Answer 4

non-prosecution agreement; not found guilty; in reference to corporations

Question 5

DPA

Answer 5

deferred prosecution agreement; found guilty; see recent Barclays, HSBC and JP Morgan cases. Banks opt to avoid prosecution in return for large fines and incorporating certain reforms.

Question 6

OFAC

Answer 6

Office of Foreign Assets Control (U.S. Treasury), handles sanctions targeting and implementation.

Question 7

FATCA

Answer 7

Foreign Account Tax Compliance Act (IRS)
foreign financial institutions must report American clients’ balances to IRS
other countries studying comparable laws (further example of US sphere of influence on financial legislation)
For Americans, tax is now based on “global income”, unlike other countries where only income generated within country is counted

Question 8

TIEAs

Answer 8

Tax Information Exchange Agreement (OECD) (involves sharing of information between tax authorities / governments)
Typically bilateral agreements based on the OECD template

Question 9

Smurfing

Answer 9

Colloquial term for a money launderer. Also refers to one who seeks to evade scrutiny from government agencies by breaking up a transaction involving a large amount of money into smaller transactions that are below the reporting threshold. The term is derived from the cartoon characters known as The Smurfs.

Question 10

1977 FCPA

Answer 10

Foreign Corrupt Practices Act

Question 11

Bank Secrecy Act of 1970

Answer 11

The Bank Secrecy Act of 1970 (or BSA, or otherwise known as the Currency and Foreign Transactions Reporting Act) requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering.
required to preserve financial paper trail and inform government agencies on suspicious transactions
Turning point in the “no questions” asked approach
Was not very effective for the early part of its history
instituted SARs

Question 12

FinCEN

Answer 12

The Financial Crimes Enforcement Network (FinCEN) is a bureau of the United States Department of the Treasury; financial intelligence gathering arm; where SARs are sent for analysis.

Question 13

AML

Answer 13

anti-money laundering (1986 - money laundering criminalized)

Pre 9/11 Republicans had wanted to dismantle AML; post 9/11 became center of anti-terrorist finance procedures

Question 14

KYC

Answer 14

know-your-customer; emerged post 9/11

Question 15

CCCA

Answer 15

Comprehensive Crime Control Act of 1984 - first large overhaul of the US criminal code. New rules about civil forfeiture, sentencing reform, expanding jurisdiction of secret service to include credit card fraud, etc.

Question 16

1970 RICO statutes

Answer 16

Racketeer Influenced and Corrupt Organizations Act, commonly referred to as the RICO Act or simply RICO, is a United States federal law that provides for extended criminal penalties and a civil cause of action for acts performed as part of an ongoing criminal organization.
Result of corrupt law enforcement, rise of La Cosa Nostra and organized crime around the U.S.
Controversial privileges including “secret special grand juries”, expanded subpoena and interrogation rights, “use-immunity” laws for confidential informants,
Prosecution of derivative/unrelated crimes: perjury, tax evasion, obstruction - often more consequential than underlying criminal charges

Question 17

PEP

Answer 17

Politically Exposed Person
individuals entrusted with prominent public functions, possibly liable to corruption
increasingly also friends and family of PEPs
Issue relating to corruption: How far along the line of family and friends can legislation span to find corrupt money? Are the perpetrators always one step ahead?
Huge growth of bank due diligence and compliance departments, as well as private risk management companies who track and investigate PEPs

Question 18

SARs

Answer 18

Suspicious Activity Report (sent to FinCen)
Requirement under 1970 Bank Secrecy Act for financial institutions to preserve paper trails and inform governments of large payments, cash deposits, shadowy ownership, etc.
Massive overload processed on a daily basis, government is overwhelmed with cases.
wasteful, anyone who handles money subject to it

Question 19

Ugland House

Answer 19

building located in Georgetown, Cayman Islands where there are tax havens. Also houses one of Cayman Island’s largest law firms, Maples & Calder which is one of the main “off-shore”, structured finance law firms.
10,000+ businesses housed here

Question 20

FATF

Answer 20

Financial Action Task Force on Money Laundering

has assisted in the internationalization of AML legislation since the 1990s (founded in 1989)