ML

Question 1

Define ML & how term differs between jurisdictions

Answer 1

Processing of criminal property (conceal, disguise or convert) in order to give appearance of having arisen from legitimate source when in fact proceeds of crime = requires benefit

• illegally moving cash through financial systems so appears legally acquired
• constitutes of ml differs between jurisdictions & depends on laws that create offences
• term ML misleading - not just money / can be physical assets

Question 2

Outline examples of crime involving proceeds of ML

Answer 2

Drug dealing

Organised crime

Embezzlement

Illegal arms trade

Insider dealings

People trafficking

Tax evasion

Theft & terrorist financing

*if successful criminals can benefit & control proceeds & avoid detection

Question 3

Outline the traditional model of ML

Answer 3

Placement

• place proceeds of crime into financial system / deposits into banking system
• identify funds as dirty money / reason for CDD at early stages

Layering

• use of complex web of transactions designed to hide source of ownership of funds
• lack of audit trail conceal true origin

Integration

• funds introduced into economy so appears originated from legitimate source
• funds integrated into banking system & now impossible to distinguish between dirty & clean money

*ML takes variety of forms ranging from simple & complex arrangements

Question 4

Outline the harmful effects of ML on country

Wide range of effects on society & macro economy

Answer 4

Damaging to victims & society

Undermines democracy / allow criminals rewarded / expand enterprise & become entrenched in society

Rewards corruption / effects on developing countries / quality of life & well being of citizens

Undermines private sector / organised access to funds / offer subsidiaries rates / competitive advantages

Increased difficulty for tax collection/ higher rates charged & less resourceful

Undermines integrity of banking system / no framework & ethical standards / negative perception to customers

Legitimate business won’t go to jurisdictions if perceive to be influenced by organised crime

Risk of banking system failing/ collapse if criminal funds detected &removed

Question 5

Outline harmful effects of ML on SP

Answer 5

Reputation damage to org, jurisdictions, regulator

Regulatory risk of sanctions / restrictions / revoke license to operate / AML reporting requirements

Org & individual prosecution

Principle / key person rules not F&P in regulator assessment / variety of imposed sanctions - public statement or prevent employment in FSB

greater financial risks / org exposed to risk of litigation / costs of remediation by regulator

Question 6

Define terrorist financing

Answer 6

Terrorism act 2000 - harmful threat to population

Action designed to influence gov or intimidate public / to advance political, religious or ideological views

Involves

• serious violence again public
• damage to property
• endangers others lives
• creates serious risk to health/ safety of public
• designed to seriously interfere electronic systems

9/11 placed on high international agenda

Question 7

How does ML & CFT differ & similar

Answer 7

Differs to ML as ultimate objective to cause intimidation to population / source of funds not illegal as not from criminal conduct necessarily

Similar

• conceal/ move funds / disguise ownership
• require fundamental protection & detection measures to stop

Question 8

Outline the UN Security Council resolution 1373

&

International financial sanctions

Answer 8

UN

• country requirement for those participating to combat terrorism
• measures to freeze funds of terrorists, prohibit funding, offences to punish, ensure no safe havens to hide them

Sanctions
UK implement UN measures / crown dependencies have similar orders

Question 9

Outline the Terrorism act 2000

Answer 9

Offences created to criminalise

• receipt of funds for terrorist purposes
• involvement in arrangement involving assets made available for it

Under this act, offence to disclose suspicion where reasonable grounds to know

Tipping off offence / disclose can prejudice investigations

Question 10

Outline the FATFs 9 special recommendations

Answer 10

Intentional standard for AML/ CFT to combat against it/ other bodies help facilitate global approach

1) ratify & implement UN international resolutions 1373
2) criminalise financing of terrorism
3) freeze & remove terrorist assets
4) report suspicious transactions relating
5) cooperate with other countries on standards (exchange info ensure no safe havens)
6) ensure alternative remittance systems licensed & registered to recommendations
7) ensure wire transfers include info about originator of funds
8) ensure non profit orgs not misused
9) ensure cash couriers & transfer instruments detected & closed