money laundering Flashcards
what is money laundering
the process by which criminals may attempt to hide the origins of the proceeds of criminal activity. the aim is to transform dirty money into clean money which can be spent
what is criminal property
Criminal property includes money or any asset that arises from:
-tax evasion
-bribery and corruption
-income received through the operation of a criminal cartel
-benefits arising from a criminal failure to comply with a regulatory requirement.
what is a benefit obtained through a bribe?
-bribe itself
-income from any contract obtained through bribe or the promise of a bribe. eg. let me skip line and i’ll give you 100 rs and you can be my kids tutor.
what are the international methods for combatting money laundering
-The Financial Action Task Force (FATF) sets global standards to combat money laundering and terrorist financing.
-Its “Forty Recommendations” serve as guidelines for over 200 jurisdictions.
what do FATF recommendations include
-the scope of money laundering
-measures to be taken by financial institutions and others to prevent money laundering and terrorist financing, including:
customer due diligence (CDD) and record-keeping; and
reporting suspicious transactions to an external financial intelligence unit (FIU);
-transparency
-international co-operation including mutual legal assistance and extradition.
why is ethical guidance needed in money laundering?
-wide scope of offenses: offenses can be complex and diverse so its imp to have guidance to navigate risks and dilemmas
-legal and regulatory consequences: failure to comply will have consequences
-framework to exercise professional judgement, as there is no clear definition of suspicion
-clash with client confidentiality. guidance helps to remain ethical
three main categories of offense
- laundering
- failure to report
- tipping off
3 stages of a money laundering regime
placement: Illicit, physical money is introduced into the financial system, all cash business is an ideal front for a money laundering regime. it is easier for criminals to disguise dirty money as clean, eg. by mixing it in cash receipts.
layering: The money is moved through a series of transactions to maximize the distance between placement and integration, such as transferring money abroad to make it complex and harder to trace.
Integration: The laundered money is reintroduced into the legitimate economy, so that criminals can use it to make purchases and investments.
is money from tax evasion criminal money?
yes. tax evasion is a crime.
The proceeds of tax evasion can be laundered in the same way as those from drug trafficking, terrorist activity, theft, etc.
Offences may relate to:
-direct tax (e.g. income tax or corporation tax)
-indirect tax (e.g. sales tax).
Tax evasion offences that fall within the definition of money laundering include:
under declaring of income; and
over claiming of expenses.
a financial institution suspects that funds are proceeds of a criminal activity
FATF recommends that a financial institution that suspects (or has reasonable grounds to suspect) that funds are the proceeds of a criminal activity (or related to terrorist financing) should be required, by law, to report promptly its suspicions to the FIU.
define FIU
FIU: A financial intelligence unit (FIU) is a national body or government agency which collect information on suspicious or unusual financial activity from the financial industry and other entities or professions required to report suspicious transactions, suspected of being money laundering or terrorism financing.
define STR and SAR
suspicious transaction report
suspicious activity report.
it means
information alerting law enforcement agencies that a client’s activity is in some way suspicious and may indicate money laundering or terrorist financing.
what would a money laundering report (sent to MLRO) include?
-name of suspect
-amount involved
-reason for suspicion
-whereabouts of laundered cash
report should be made asap as it is an offence not to report asap
or
A suspicion report might include the following information, where known:
the full name of the reporting business;
identification of each subject (e.g. name, address, date of birth, nationality, occupation and employer);
the role of each subject in the matter being reported (e.g. suspect, victim, unknown);
any identification or references seen or recorded including bank account and transaction details;
details of transactions or activities (amounts, dates, currencies, sources and estimates);
the location of any laundered property.
what is tipping off
the illegal act of informing a suspect that they are under investigation or that a suspicious activity report (SAR) has been filed against them. This can compromise the investigation and allow the suspect to hide or destroy evidence. tipping off can include questioning and withdrawing from the engagement, so legal counsel should be taken.
not doing what the client asks is also tipping off. so u shud file a STR then seek authority to act as per client’s wishes.
if audit senior has suspicions of money laundering, they should report suspicions to?
MLRO.MLRO stands for Money Laundering Reporting Officer. An MLRO is a designated person within an organization responsible receiving and evaluating reports of suspected money laundering, and for making any reports to external bodies.
