Money Laundering - Lecture 5

Question 1

Money laundering is an example of…..

Answer 1

Fraud

Question 2

What is the process of money laundering?

Answer 2

.Taking criminally-derived funds (dirty) and converting it into other assets (clean) so that they can be introduced into legitimate commerce

Question 3

Which institutions can facilitate money laundering?

Answer 3

.Banks
.Financial services
.Multinational corporations
.Individuals

Question 4

Who is responsible for the prevention and detection of fraud?

Answer 4

Those charged with the governance of an entity and management

Question 5

Management are responsible for…..

Answer 5

.Evaluating and managing the entity’s business risks
.Implementing and monitoring internal controls

Question 6

The audit committee are responsible for….

Answer 6

.Supervises the work of internal auditors
.Cooperates with the external auditors

Question 7

Which form of fraud are auditors most concerned about?

Answer 7

.Fraud that causes material misstatements in the financial statements
.Fraudulent financial reporting
.Misappropriation of assets

Question 8

What did the association of certified fraud examiners (2014) find?

Answer 8

External audit was the least effective control in combating fraud

Question 9

What are the three stages in money laundering?

Answer 9

1. Placement
2. Layering
3. Integration

Question 10

What is Placement?

Answer 10

The movement of cash from its source, this is followed by placing it into circulation through financial institutions, casinos, shops

Question 11

What is currency smuggling (Placement)?

Answer 11

The physical illegal movement of currency and monetary instruments out of a country

Question 12

What is Bank Complicity (Placement)?

Answer 12

When a financial institution is owned or controlled people suspected of conniving with crime groups

Question 13

What are Currency Exchanges (Placement)?

Answer 13

Foreign exchange markets provide room for currency movements

Question 14

What are securities Brokers (Placement)?

Answer 14

Brokers can facilitate the process of money laundering through structuring large deposits of cash

Question 15

What is the blending of funds (Placement)?

Answer 15

The best place to hide cash is with a lot of other cash

Question 16

What is Asset purchase (Placement)?

Answer 16

The purchase of assets with cash is a classic money laundering method

Question 17

What is layering?

Answer 17

Criminal proceeds are moved through a series of financial transactions - Cash converted into Monetary instruments or material assets bought with cash then sold

Question 18

What is integration?

Answer 18

The movement of previously laundered money into the economy mainly through the banking system and thus such monies appear to be normal business earnings

Question 19

What is Property dealing (Integration)?

Answer 19

The sale of property to integrate money back into the economy is a common practice amongst criminals

Question 20

What are Front companies and False loans (Integration)?

Answer 20

Front companies that are incorporated in countries with corporate secrecy laws

Question 21

What is Foreign Bank complicity (Integration)?

Answer 21

Money laundering using known foreign banks

Question 22

What are False import/export invoices (Integration)?

Answer 22

Use of false invoices has proven to be very effective in integrating illicit proceeds back into the economy

Question 23

What do anti money laundering laws entail?

Answer 23

.Require banks and financial services to implement suitable internal control systems to identify suspicious transactions
.Examined by law enforcement agencies

Question 24

Fraud detection procedures can create legal hazards for auditors, Reffett (2011) found….

Answer 24

.More severe assessments when auditors investigated fraud
.Less severe when they did not investigate
.Monetary damages were higher when fraud was investigated
.Auditors more likely to be found negligent

Question 25

How are accountants and auditors vulnerable to money laundering activities?

Answer 25

.Complex industry
.Provide a wide range of services
.Professional secrecy
.Anti-money laundering obligations