MONEY LAUNDERING Flashcards
Money laundering is
a process which aims to disguise the existence, nature, source, control, beneficial ownership, location, and disposition of property derived from criminal activity
The international body charged with dealing with money laundering is
he Financial Action Task Force (FAFT)
The Money Laundering Process
Placement
Placement of funds into a financial institution is the initial step in the process.
smurfing
The
process of breaking transactions up into smaller amounts to evade the reporting
requirements
If the placement of the initial funds goes undetected, financial transactions can be designed
in complex patterns in order to disguise the source of the money. This stage of the process is
referred to as
Layering
The final stage in the
laundering process is the ____ of the money back into the economy in such a way as
to make it appear to be a legitimate business transaction.
integration
Overstating revenues, also known as income statement laundering, occurs when
the money
launderer records more income on the books of a business than is actually generated by that business
Overstatement of Reported Expenses
to
offset its tax liability. The fictitious expenses also enable the perpetrator to siphon money
back out of the business in order to make payoffs, buy illegal goods, or invest in other
criminal ventures.
Balance Sheet Laundering
Depositing Cash and Writing Cheques in Excess of Reported Revenues and Expenses
In general terms, the businesses chosen for money laundering possess one or more of the
following characteristics:
• Revenue. A revenue base is difficult to measure because most revenue comes from cash
transactions with a highly variable amount per customer. This allows extra money to be
brought into the business and disguised as revenue.
• Expense. Expenses that are variable and difficult to measure can enable the launderer to
extract money from the front business without giving rise to undue suspicion.
• History. Historical ties are generally with the ethnic base of a particular criminal group, or
with industries that have traditionally served as a base for criminal activity.
Favourite Businesses for Hiding or Laundering Money
Bars, Restaurants, and Night Clubs Vending Machines Wholesale Distribution Real Estate Purchases ATMs
For individual deposit accounts, minimum identification standards should be established.
- Name
- Address
- Date of birth
- Government-issued ID number
- Current employer
- Business and residence telephone numbers
Minimum standards for new business accounts should include:
• Business name and address
• Telephone number
• Taxpayer identification number
• Documents establishing the formation of the business entity (articles of incorporation,
partnership agreement, etc.)
• Copies of all assumed name filings or DBAs (doing business as)
• A full description of the operations of the business
• Credit and banking references
• The identity of the officers, directors, or other principals.
New Loan AccountsMinimum standards regarding the information to be gathered should include:
• Reliable identifying information similar to that required for new deposit accounts
• Reliable financial information such as financial statements and copies of tax returns
• The purpose of the loan
• Credit history and prior banking references
• Verifiable, legitimate means of repayment
• Assurance that the loan amount is consistent with the purpose of the loan and the nature
of the business
Services for Non-Accountholders
Strict identification requirements
should be established for transactions with persons who are not regular bank customers. In
fact, regulations require that in some instances banks keep a record of the identity of persons
who are not established customers. Such regulations usually require at a minimum the
person’s name and address, driver’s licence number (or other number of identifying
document produced), and social insurance number or employer identification number.
