Illicit Finance Flashcards
Silk Road
online drug market, payment in Bitcoin facilitated millions of dollars in drug transaction
419 Scam
originated in Nigeria; conducted via internet
EDD
enhanced due diligence
NPA
non-prosecution agreement; not found guilty; in reference to corporations
DPA
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.
OFAC
Office of Foreign Assets Control (U.S. Treasury), handles sanctions targeting and implementation.
FATCA
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
TIEAs
Tax Information Exchange Agreement (OECD) (involves sharing of information between tax authorities / governments)
Typically bilateral agreements based on the OECD template
Smurfing
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.
1977 FCPA
Foreign Corrupt Practices Act
Bank Secrecy Act of 1970
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
FinCEN
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.
AML
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
KYC
know-your-customer; emerged post 9/11
CCCA
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.
1970 RICO statutes
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
PEP
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
SARs
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
Ugland House
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
FATF
Financial Action Task Force on Money Laundering
has assisted in the internationalization of AML legislation since the 1990s (founded in 1989)
