Module 1 (Part 3) Flashcards
What are another vehicle for money laundering after trade based money laundering
letters of credit
what are letters of credit
a credit instrument issued by a bank that guarantees payments on behalf of its customer to a third party when certain conditions are met
why are letters of credit used
They are commonly used to finance export because exporters want assurance that the ultimate buyer of its goods will make payment, and this is given by the buyers purchase of a bank letter of credit
how is a letter of credit used
it is forwarded to a correspondent bank in the jurisdiction in which payment is to be made.
when is the letter of credit drawn on
when the goods are loaded for shipping, received at importation point, clear customs, and are delivered
how can letters of credit be used to facilitate ML
by transferring money from a country with lax exchange controls, thus assisting in creating the illusion that an import transaction is involved
what is a form of trade based money laundering
black market peso exchange
what is this process
money in the US derived from illegal activity is purchased by Colombian peso brokers and deposited in US bank accounts that the brokers have established
what do the brokers then do
sell checks and wire transfers drawn on those accounts to legitimate businesses
what do the legitimate businesses then do
use them to purchase goods and services in the US
what is the first step of the 6 step example
Columbian carte sells drugs to US market for US dollars
step 2
to launder the US dollars cartel contacts immediately call peso broker
3
Broker takes cartel’s US dollars in exchange for Columbian pesos
4
broker’s US employees place the dollars in the US banking system
5
Broker offers the US dollars to a Columbian importer in exchange for Columbian pesos
6
Importer uses the drug US dollars to buy US goods, which are shipped to Columbia
Jennifer wants to send a $5k money transfer, but knowing that in her country there is a threshold of $3k for the recording of funds transfers, she sends a $2,500 money transfer and asks her friend to send another $2,500 money transfer. What is this process known as
Structuring
True or False - In the “reverse flip” money laundering method, a criminal provides an associate with a specific amount of illegitimate money. The associate then provides a “mortgage” back to the trafficker for the same amount with all the necessary documentation. This creates an illusion that the trafficker’s funds are legitimate.
False - this is known as the loan back
True or false - the practice of issuing numerous invoices for the same shipment of goods, thus allowing the money launderer the opportunity to make numerous payments and justify them with the invoices is known as “Ghost Shipping”
False - this is multiple invoicing
What is topic 2
Risks associated with new payment products and services
Why are prepaid cards attractive to criminals
They are portable, valuable, exchangeable, and anonymous
How do prepaid cards work
they require the consumer to pay in advance for future purchases of goods and services. Each payment is subtracted from the balance of the card of product until the total amount is spent
What is the joint money laundering steering group’s guidance on E-money guidance’s definition of electronic money
a prepaid means of payment that can be used to make payments to multiple persons, where the persons are distinct legal or natural entities.
What are the 4 inherent risks of prepaid cards
- Non Face-to-face relationships and anonymity
- Geographical reach
- Access to cash
- Segmentation of Services
For prepaid cars when can anonymity occur
when the card is purchased, registered, loaded, reloaded or used
What type of cards are risky for geographical reach
open loop
what is risky
open loop prepaid cards usually permit payments at domestic and foreign points of sales through global payment networks
How is there access to cash
Use of ATM networks for prepaid cards that allow funding in one country and cash withdrawals in another
What is the deal with segmentation of services
prepaid cards usually require several parties to execute transactions including the program manager, issuer, acquirer, payment network, distributor and agents
What is virtual currency
a medium of exchange that operates in the digital space
what are the two things that can be done with virtual currency
converted to fiat
be a substitute for real currency
what is fiat
government-issued currency
There are three categories of participants within the VC eco system according to FinCEN, what are they?
User
Exchanger
Administrator
what is a user
a person that obtains VC to purchase goods and services
What is an exchanger
a person engaged as a business in the exchange of VC for real currency, funds, or other VC
What is an administrator
a person exchanged as a business in issuing VC, and who has the authority to redeem such VC
what should be noted about administrators or exchangers
they may be identified as MSBs engaging in money transmission
