ONE Flashcards
What is money laundering?
Money laundering involves taking
criminal proceeds and disguising
their illegal sources in order to use the funds to
perform legal or illegal activities. Money
laundering is the process of making dirty money
look clean.
Give an example of the second stage of money
laundering.
Electronically moving funds from
one country to another and
dividing them into advanced financial options
and/or markets; moving funds from one financial
institution to another or within accounts at the
same institution; converting the cash placed into
the system into monetary instruments; reselling
high-value goods and prepaid access or stored
value products; investing in real estate and other
legitimate businesses; placing money in stocks,
bonds, or life insurance products; and using shell
companies to obscure the ultimate beneficial
owner and assets.
Give an example of the third stage of money
laundering.
Purchasing luxury assets such as
property, artwork, jewelry, or high-
end automobiles; and entering into financial
arrangements and other ventures in which
investments can be made in business
enterprises.
Give an example of the first stage of money
laundering.
Blending of funds, purchasing
significant stored value cards with
currency, foreign exchange, breaking up
amounts, currency smuggling, and loans.
What does the Yates Memo say?
The Yates memo reminds
prosecutors that criminal and civil
investigations into corporate misconduct should
also focus on individuals who perpetrated the
wrongdoing. It notes that the resolution of a
corporate case does not provide protection to
individuals from criminal or civil liability.
What are some indicators of money laundering
using electronic transfers of funds?
Funds transfers to or from a
financial secrecy haven or high-risk
geographic location without an apparent
business reason or when the activity is
inconsistent with the customer’s business or
history; large, incoming funds transfers on behalf
of a foreign client with little or no explanation or
apparent reason; checks and money orders used
to receive many small, incoming transfers of
funds or to make deposits; funds activity that is
unexplained, repetitive, or reveals unusual
patterns; payments or receipts that have no
apparent link to legitimate contracts,
goods, or services; and funds transfers
sent or received from the same person
to or from different accounts.
What are some of the money laundering risks
pertaining to the use of payable through
accounts (PTAs)?
PTAs with foreign institutions
licensed in offshore centers with
weak bank supervision and licensing laws; PTAs
arrangements in which the correspondent bank
fails to apply CDD to the respondent’s customers;
PTA arrangements in which subaccount holders
have currency deposit and withdrawal privileges;
and PTAs used in conjunction with a subsidiary,
representative, or other office of the respondent
bank.
What is a money laundering risk pertaining to
the use of concentration accounts?
Money laundering risks can arise in
concentration accounts when the
customer-identifying information is separated
from the financial transaction. When separation
occurs, the audit trail is lost, and accounts can be
misused or administered improperly.
What is remote deposit capture and what risk is
associated with it?
Remote deposit capture (RDC) is a
bank product that allows
customers to scan a check and transmit an
electronic image to the bank for deposit.
Because RDC minimizes human intervention, it
decreases the ability to identify potential fraud
indicators, such as an altered check and multiple
deposits of the same item.
Define a politically exposed person (PEP).
A PEP is a person who is or has
been entrusted with a prominent
public function domestically or by a foreign
country or international organization. Relatives
and close associates of PEPs are also considered
to be PEPs.
What is structuring?
Structuring is designing a
transaction to evade triggering a
reporting or recordkeeping requirement, e.g.,
breaking a large cash deposit into smaller
amounts to be deposited into separate banks,
separate accounts, or on separate days to avoid
currency transaction reports.
Which money laundering stage(s) are credit
cards most likely to be used, and what is an
example of money laundering through the use
of credit cards?
Credit cards are more likely to be
used in the second (layering) and
third (integration) stages of money laundering.
Examples include overpaying a credit card
balance and then asking for a refund and placing
illegal funds in accounts at offshore banks and
then accessing the funds using credit and debit
cards associated with the offshore account.
What are some of the risks posed by third-party
payment processors (TPPPs)?
Multiple financial organization
relationships, whereby the TPPP’s
suspicious activity cannot be seen in its entirety;
money laundering by sending funds directly to a
financial organization from a foreign jurisdiction
through an international ACH payment; and high
return rates from unauthorized transactions.
What are some ways money services
businesses (MSBs) can be used for money
laundering?
Money launderers can use money
remitters and currency exchanges
to make funds available to criminal organizations
at a destination country in the local currency. The
launderer or broker then sells the criminal dollars
to foreign businesspeople wishing to make
legitimate purchases of goods for export. The
cash-intensive and transactional nature of MSBs
can facilitate money laundering.
What are some of the aspects associated with
the securities industry that increase its
exposure to money laundering?
Its international nature; speed of
transactions; ability to conduct
free-of-payment transfers; ease of converting
holdings to cash without significant loss of
principal; routine use of wire transfers to, from,
and through multiple jurisdictions; competitive,
commission-driven environment; practice of
maintaining securities accounts as nominees or
trustees; and weak AML programs.
