Money Laundering Flashcards
The Bank Secrecy Act (BSA) of 1970 applies to:
- Banks
- Casinos
- ANY business that receives $10,000 in cash in one transaction or two or more related transactions in the same day
What is a Currency Transaction Report (CTR)?
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
At what dollar amount must a Currency Transaction Report (CTR) be completed?
$10,000 CASH only
no checks
What are the criteria for a Suspicious Activity Report (SAR)?
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
When filing a Suspicious Activity Report (SAR), is the employee allowed to notify anyone involved in the transaction?
No.
Who is the Suspicious Activity Report (SAR) filed with?
FinCen
Financial Crimes Enforcement Network
What does FinCen stand for?
Financial Crimes Enforcement Network
Suspicious activity reports are filed to them.
When is the International Transportation of Currency or Monetary Instruments (CMIR) form required to be filed?
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.
What is the Foreign Bank and Financial Accounts Report (FBAR)?
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
What is the USA Patriot Act of 2001?
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
What are the 3 steps to launder money?
- Placement
- Layering
- Integration
What is placement?
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
What is the riskiest part of money laundering?
Placement of funds into financial channels
What is layering?
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
What are examples of layering?
- shell companies
- wire transfers
- offshore bank accounts
- resale of previously purchased goods
What is integration?
Process of re-entering money into the economy looking legitimate
What are the 7 common methods of money laundering?
- Businesses with high cash operations or that are otherwise hard to audit
- Structuring
- EFT and other Cyberpayment
- Off-Shore Banks
- Complicit Banks
- Bribe and/or threaten bank employees
- Alternative Banks or Financing Systems
- Loan backs
What are examples of businesses with high cash operations? (hard to audit)
- Bars
- Laundromats
- Rent-to-own
- Pawnshops
- Wholesaler
- Jewelers
What is structuring, i.e. smurfing?
Breaking up large transactions into a set of smaller transactions that are each below the reporting threshold.
What are examples of EFT and other cyberpayment methods?
- Paypal
- Video Game Currency
- Bitcoin
- Gift cards
- Prepaid credit cards
Why are offshore bank accounts a common method for money laundering?
- 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
Alternative Banks or Financing Systems:
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
What are loan backs?
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
What are the symptoms/risk indicators of money laundering?
- 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.
