Money Laundering

Question 1

The Bank Secrecy Act (BSA) of 1970 applies to:

Answer 1

• Banks
• Casinos
• ANY business that receives $10,000 in cash in one transaction or two or more related transactions in the same day

Question 2

What is a Currency Transaction Report (CTR)?

Answer 2

A report that is completed every time a transaction involves CURRENCY (not checks) of more than $10,000

• Deposits
• Withdrawals
• Currency Exchanges
• Multiple transactions on the same day are treated as single transactions
• Transaction requires an ID

Question 3

At what dollar amount must a Currency Transaction Report (CTR) be completed?

Answer 3

$10,000 CASH only

no checks

Question 4

What are the criteria for a Suspicious Activity Report (SAR)?

Answer 4

1 or more of these is present:

• At least $2,000
• Belief that the source of funds is from illegal activity
• Attempting to evade the Bank Secrecy Act (BSA)
• “Structuring” transactions: break transactions into segments to evade the provisions of the BSA
• Offers no apparent business or lawful purpose; not what the patron normally makes

Question 5

When filing a Suspicious Activity Report (SAR), is the employee allowed to notify anyone involved in the transaction?

Answer 5

No.

Question 6

Who is the Suspicious Activity Report (SAR) filed with?

Answer 6

FinCen

Financial Crimes Enforcement Network

Question 7

What does FinCen stand for?

Answer 7

Financial Crimes Enforcement Network

Suspicious activity reports are filed to them.

Question 8

When is the International Transportation of Currency or Monetary Instruments (CMIR) form required to be filed?

Answer 8

Whenever $10,000 in currency or monetary instruments (checks, money orders, traveler’s checks, etc.) is sent into or out of the U.S.

Physically Transports, Mails, or Shipped/Received.

Question 9

What is the Foreign Bank and Financial Accounts Report (FBAR)?

Answer 9

Interest in, signature, or other authority over financial accounts in a foreign country if the aggregate exceeds $10,000 at any time in the year

Question 10

What is the USA Patriot Act of 2001?

Answer 10

Act that requires financial institutions to have anti-money laundering programs.

They require specific identification for financial institution customers.
Must obtain AND verify:
- Name
- Date of birth (for an individual)
- Address (Physical. PO Box will not suffice)
- ID (SSN, EIN. Other numbers for aliens)
- Must compare with a list of terrorists

Question 11

What are the 3 steps to launder money?

Answer 11

1. Placement
2. Layering
3. Integration

Question 12

What is placement?

Answer 12

Dirty money inserted into legitimate financial channels

• bank accounts
• business receipts
• purchasing goods for cash (under the $10,000 limit)

This is the riskiest part of money laundering

Question 13

What is the riskiest part of money laundering?

Answer 13

Placement of funds into financial channels

Question 14

What is layering?

Answer 14

Sending money through various additional channels to change its form and make it difficult to trace the money back to its original source

• shell companies
• wire transfers
• offshore bank accounts
• resale of previously purchased goods

Question 15

What are examples of layering?

Answer 15

• shell companies
• wire transfers
• offshore bank accounts
• resale of previously purchased goods

Question 16

What is integration?

Answer 16

Process of re-entering money into the economy looking legitimate

Question 17

What are the 7 common methods of money laundering?

Answer 17

1. Businesses with high cash operations or that are otherwise hard to audit
2. Structuring
3. EFT and other Cyberpayment
4. Off-Shore Banks
5. Complicit Banks
   
   • Bribe and/or threaten bank employees
6. Alternative Banks or Financing Systems
7. Loan backs

Question 18

What are examples of businesses with high cash operations? (hard to audit)

Answer 18

• Bars
• Laundromats
• Rent-to-own
• Pawnshops
• Wholesaler
• Jewelers

Question 19

What is structuring, i.e. smurfing?

Answer 19

Breaking up large transactions into a set of smaller transactions that are each below the reporting threshold.

Question 20

What are examples of EFT and other cyberpayment methods?

Answer 20

• Paypal
• Video Game Currency
• Bitcoin
• Gift cards
• Prepaid credit cards

Question 21

Why are offshore bank accounts a common method for money laundering?

Answer 21

• Many countries have highly secretive banking regulations
• There are countries that are not a part of the FATF (Financial Action Task Force on Money Laundering)

** FATF criminalizes money laundering, keeps customer records, and reports suspicious transactions

Question 22

Alternative Banks or Financing Systems:

Answer 22

Example: Hawala (sometimes called Hundi) System

• Extensively used in the Middle East and South Asia
• -Not illegal if the source of money and intent of transaction is legitimate
• Highly reliant on trust and family connections
• Negotiable instruments are not used (paper trail)
• Lower fees, easier & quicker to move money

Question 23

What are loan backs?

Answer 23

Arranging to borrow your funds from a front or an individual - never repay the loans or repay them and create another means of placing more funds

Question 24

What are the symptoms/risk indicators of money laundering?

Answer 24

• Income beyond reasonable business expectations
• Transaction serves no apparent business purpose based on the nature of the business (See earlier slide on business types)
• High business traffic with non-FATF countries
• Changes in customer behavior/financial transactions
• Unexplained lifestyles
• Customer unable/unwilling to provide business information, proper identification, etc.

Question 25

What are the legal remedies for money laundering?

Answer 25

• Anti-Money Laundering Legislation
  
  • Money laundering itself is a crime
• Income Tax Evasion
• Forfeiture of Assets