Lecture 4 - Introduction To Money Laundering

Question 1

Money Laundering means the following conduct when committed intentionally:

Answer 1

Conversion/transfer of property knowing it is from criminal activity, for the purpose of disguising that activity, or assiting a person involved in criminal activity

Concealment/disguise of true nature (such as ownership), knowning such property is linked to criminal activity

Acquisition/possession/use of property knowing at the time of recipt it was linked to criminal activity

Participating in/association or attempts to commit aiding/abetting/facilitating/conselling criminal activity

Question 2

What are the layers of money laundering?

Answer 2

Placement - introducting the cash to the financial system

Layering- transactions to obfuscate ownership

Integration - cleared monies returned to the criminal

Question 3

How do Money Service Businesses work?

Answer 3

Sender (payer) brings cash to sending agent

Agent sends transaction to MSB (Western Union, Moneygram, etc)

MSB issues Money Transfer Control Number (MTCN) to sending agent/sender

Receiver gets MTCN from sender and goes to receiving agent

Receiving agent sends MTCN to MSB, who confirms number and sends funds

Receiving agent gets funds and pays receiver

Question 4

Detail the two types of invoice fraud

Answer 4

Over-invoicing - supplier charges customer more for supplies than their worth so customer can send extra funds

Under-invoicing - supplier chrages customer less than the goods are worth. Supplier then sells goods at correct value and keeps the extra funds

Question 5

What is teeming and lading?

Answer 5

Teeming involves receiving payments from one source and using them to cover a previously misappropirated amount, delaying fraud detection

Lading creates a false sense of balance in accounts by loading accounts with incoming payments to mask the defecit created by fraud (fraudster ladens the accounts with new funds)

Question 6

What are the impacts of money laundering?

Answer 6

• Undermines legitimate business
• Increases crime and corruption
• Danger to financial institutions
• Loss of tax revenue
• State security and terrorist financing
• Social costs