Lecture 6 - Money Laundering; Techniques And Offshore Flashcards
What is FATF?
The Financial Action Task Force, they supply recommendations for the implementation of KYC, record keeping, and suspicious transaction reporting
What are the FATF recommendations, and how many are there?
40, +9
1-3 are legal systems
4-25 are safeguards and measures for financial institutions
26-34 are institutional safeguards
35-40 are for international cooperation
+9 are for countering terrorist financing
List some legal persons
Companies and corporations using things such as bearer shares
Partnerships (e.g. Duth Partnership)
Trusts
States/Territories
What are NCCTs?
Non-Cooperative Countries and Territories. From 2000-2006 there were 23 countries on the FATF list, however this list is mostly empty now due to politics
What is Egmont?
An informal international gathering of Financial Investigation Units. They collect information on suspicious/unusual activity
What is a TCSP?
Trust and corporate services provider. They provide services to form companies, partnerships, and trusts. They can be engaged online or by email/phone, and can offer introductory services to open bank accounts
What is an IBC?
An International Business corporation. Formed as a tax-free company that cannot engage in business in the jurisdiction it is incorporated, but is a legal foreign person
What are nominees used for?
- Act as director and receive instructions (usually via email)
- Acting as trustee under instructions
- Assistance in opening Bank Accounts
- Virtual office
○ Phone Answering Service
○ Mail/fax forwarding
○ Call centres (associated with HYIP (High Yield Investment Programs, cold call) scams)
Beware of tipping off provisions in some offshore laws
What is a shell bank?
A bank incorporated in a jurisdiction which it has no physical presence and unaffiliated with a regulated financial group
List the features of LLCs and Trusts
LLC - Characteristics of partnerships and companies, looking more professional. Used for syndicated transactions
Trusts - rules contained within establishing document. They are revocable (changed by settlor), the settlor can alter beneficiaries, trusts can manage company shares, and can have escape clauses e.g. to move jurisdiction if an inquiry occurs
Explain Money Laundering through Real Estate
- Criminal
○ Front guy who runs company within their own country
○ 2x nominees abroad in two different jurisdictions with their own companies - Cash deposited into bank in 1st jurisdiction (nominee 1 company)
- Transferred to bank in 2nd jurisdiction (nominee 2 company)
- Sent to 3rd jurisdiction as a loan to front man company
- Funds used to purchase and manage property for front man company
Rent from properties paid into front man company bank account
How do Loan Back schemes work?
- Cash is placed abroad in a bank account. Normally the account will be in the name of a legal entity or established in a tax/ML haven
- Monies transferred/wired to another account established in tax/ML haven
- Loan agreement made between a domestic entity and the offshore company. Monies transferred in and used to buy property/assets
Criminal uses nominees to front domestic company but is seen to be beneficiary of transactions
