Module 6: Money Laundering - Techniques & Off-Shore

Question 1

FATF principles

Answer 1

• Implement relevant int. conventions
• Criminalize ML
• Customer due diligence
• FIU
• Cooperate internationally

Question 1

FATF

Answer 1

The Financial Action Task Force

Question 2

What are the 9 special recommendations against terrorism financing

Answer 2

• Implement UN instruments
• Criminalize financing and associated ML
• Freeze/confiscate assets
• Report suspicious transactions
• Cooperate internationally
• 4MO

Question 3

What are the key factor of off-shore ML?

Answer 3

1. Use of legal persons (disguise ownership, hide people controlling). Companies, partnerships, trusts, “states”
2. Use of professionals (advice on technique, assistance)
3. Non-Cooperative Countries and Territories (NCCT): offshore and tax havens. FATF list mostly empty

Question 4

What is the Double Irish Dutch sandwich

Answer 4

Sending profits first through one Irish company, then to a Dutch company and finally to a second Irish company HQ in a tax haven.

Question 5

What is the Egmont Group of Financial Intelligence Units?

Answer 5

Collect information on suspicious or unusual financial activity from financial industry and other entities or professions

Question 6

What are AML measures?

Answer 6

KYC/CDD, record keeping, STRs/CTRs, FIU, international coop (MLAT assistance treaties)

Question 7

What is rule #1?

Answer 7

Construct a legal person, that can then open an account in a financial institution

Question 8

TCSP

Answer 8

Trust and Company Service Provider

Question 9

IBC

Answer 9

International Business Corporation

Question 10

LLC

Answer 10

Limited Liability Compan

Question 11

What does a TCSP do?

Answer 11

TCSP form companies, partnerships or trusts. Many based offshore. Cheap (€500) and by email/fax/ph
Provide full ‘corporate services’ and nominees

Question 12

What is an IBC?

Answer 12

Formed under the laws of some jurisdictions as a tax-free company which is not permitted to engage in business within the jurisdiction it is incorporated in.
A major corporate vehicle. A legal foreign person that the beneficiary owns. Usually exempt from tax, confidentiality of beneficial owners, some state allow bearer shares (Seychelles, Panama)

Question 13

What are Nominee Directors / Nominee Shareholders

Answer 13

Hire locals to act as directors or shareholders. True owner/beneficiary is not identifiable though this.

Question 14

What is a shell bank?

Answer 14

A bank incorporated in a jurisdiction in which it has no physical presence and which is unaffiliated with a regulated financial group. Online set up bank and operated as financial institution. But locally there won’t be an office. Correspondent banking with established banks

Question 15

What is a trust?

Answer 15

Based on set of rules. Document dictate what trust is doing. Without docs, you don’t know. Legal relationship.

Revocable trusts can be changed by the settlor.

Trust can manage the shares, escape clauses

Trust Arrangements: Use to add further layers. Possible to set up a trust in Cyprus (EU!). The beneficiary of the trust owns the true controlling share. Trust can have triggers and rules to allow it to come back to beneficial owner

Question 16

How to reduce transparency?

Answer 16

Funds through multiple tax havens

Question 17

Why LLC?

Answer 17

Look more professional to banks/ look like corp entity. Some LLCs have few ownership restriction —> beneficial ownership hard to determine. Syndicated transactions: co-mingle funds. Return places layered transactions to criminal

Question 18

Structure of ML scheme using trust

Answer 18

[scheme]

Question 19

Loan back scheme

Answer 19

[scheme]

Question 20

How to set up a legal person?

Answer 20

1. Contact TCSP
2. Buy IBC or shell company (ideally IBC with bearer shares)
3. Engane TCSP as nominee directors
4. Open bank account
5. Add further layers