Week 6 - AML & Offshore Flashcards
Summarize the FATF Recommendations (Original)
There were 40 recommendations
* Implement international conventions
* criminalize ML enable POC (Proceeds of Crime) confiscations
* implement customer due diligence (KYC - Know Your Customer)
* STR - Suspicious transaction reports
* establish FIUs (EGMONT)
Summarize the FATF Recommendations (against Terror)
- implementation of UN instruments
- criminalizing the financing of Terrorism & assoc. ML
- freezing/ confiscating terrorist assets
- reporting suspicious transactions (STR)
- international cooperation
- non-profit organizations
- cash couriers
What is EGMONT?
- Group of Financial Investigation Units
- inforamal international gathering
- cooperation and intelligence sharing
- against money laundering and terrorist financing
Key issues that FATF recognized (legal persons)
- disguise ownership
- hide people controlling using offshore companies and coorperations
- Use of legal persons (legal entity not a person!)
To disguise ownership & to hide the people controlling the entity - Use of Professionals
For advice & assistance on ML - NCCT (Non Cooperative Countries & Territories)
Offshore & Tax Havens. Places that won’t cooporate with AML.
What legal persons exist in ML?
- Offshore Companies and cooperations (e.g. Bearer shares)
- Partnerships (e.g. Dutch Partnership)
- Trusts (e.g. Cook Island Trust)
- States / Territories (e.g. narco states)
What are NCCTs?
Non-Cooperative Countries and Terretories
What is a narco-state?
Countries where all legitimate institutions become penetrated by the power and wealth of the illegal drug trade
What is a Trust?
- Legal arrangement where one person or entity (trustee) holds and manages property or assets for the benefit of someone else (beneficiary)
- The rules of the trust are contained in the documents under which it is established
What are the benefits of a trust?
- revocable trust - settlor can change them
- increase difficulty for investigators
- settlor can alter the beneficiaries
- can manage company shares
- can have escape clauses to move jurisdiction if …
Summarize AML Measures
- KYC / Customer Due diligence CDD
- Record keeping
- Extension of reporting requirements to various professions such as dealers in high value items jewellers etc, real estate, law firms
- STRs (suspicious transaction report)
- CTRs (cash transaction records)
- international cooperations (e.g. EGMONT)
What lists of countries with high risk of ML exist?
- FATF NCCT black list (almost empty - political reasons)
- EU NCCT list for tax purposes (tax ‘havens’)
What are TCSPs?
- Trust & Company Service Providers
- creation, administration, and management of trusts and companies
- often based in offshore locations (to evade ML laws)
- full corporate services to run your company (e.g a phone answering service)
- communicate digitally
- act as nominees (e.g shareholders, director or trustee)
- have law enforcement traps - warning the beneficial owners
What is an IBC?
- International Business Corporation
- legal entity that operates only internationally
- Often exempt from tax
- Confidentiality of beneficial ownership
- Some Countries allow bearer shares
What is an FCS?
Financial Corporate Services e.g. TCSPs
What is a shell bank?
- bank incorporated in a jurisdiction in which it has no physical presence & is unaffiliated with a regulated financial group
- EU AML Directive prohibits financial institutions from directly or indirectly interacting with shell banks
- easy to set up online
