Money Laundering

     Money Laundering


How Money Laundering Works


Current: Money laundering happens in almost every country in the world, and a single scheme typically involves transferring money through several countries in order to obscure its origins. In this article, we'll learn exactly what money laundering is and why it's necessary, who launders money and how they do it and what steps the authorities are taking to try to foil money-laundering operations. (Read more...)


Financial Action Task Force - The 40 Recommendations


Current: The 40 Recommendations provide a complete set of counter-measures against money laundering (ML)covering the criminal justice system and law enforcement, the financial system and its regulation, and international co-operation.


They have been recognised, endorsed, or adopted by many international bodies. The Recommendations are neither complex nor difficult, nor do they compromise the freedom to engage in legitimate transactions or threaten economic development. They set out the principles for action and allow countries a measure of flexibility in implementing these principles according to their particular circumstances and constitutional frameworks. Though not a binding international convention, many countries in the world have made a political commitment to combat money laundering by implementing the 40 Recommendations. (Read more...)


How To Protect Against Smurfing


December 2007: The term "smurfing" refers to the small army of people hired by money launderers to make small denomination bank deposits.  Smurfing, and its more recent variation, micro-smurfing, has been one of the most common ways that money launderers, most often working on behalf of drug organizations, have laundered proceeds of criminal activity.  Micro-structuring (or micro-smurfing) tries to defeat transaction-monitoring systems by making the deposits so small they "fly under the radar" of the detection rules embedded in the software systems.  While micro-structuring is difficult to detect and prevent, banks can and should be able to meet this challenge. (Read more...) (3.3 MB)


Bank Secrecy Act Anti-Money Laundering Examination Manual


November 2007: The revised Bank Secrecy Act/Anti-Money Laundering (BSA/AML) Examination Manual is available at the Federal Financial Institutions Examination Council home page. The latest version updates guidance on risk-based policies, procedures and processes for banking organizations to comply with the BSA and safeguard operations from money laundering and terrorist financing. (Read more...)


No business is immune from money laundering


Current: Suspicion of money laundering can destroy personal and corporate reputations faster than almost any other critical threat businesses face today. The Canadian government passed new legislation in 2007 that calls upon an ever-increasing spectrum of participants to take an active role in the prevention of money laundering. (Read more...)


Guidance on the Risk-Based approach to combating Money Laundering and Terrorist Financing


The Guidance is primarily addressed to public authorities and financial institutions. However, many of the high level principles contained in this document will be equally applicable to designated non-financial businesses and professions. The overall document is structured into three interdependent sections. Section one sets out the key elements of the risk-based approach and provides the basis for which to interpret section two (Guidance for Public Authorities) and section three (Guidance for Financial Institutions). There is also Annex 1, which contains descriptions of additional sources of information.


The Guidance aims to set out the key elements of an effective risk-based approach and identifies the types of issues that both public authorities and financial institutions may wish to consider when applying a risk-based approach. (Read more...)


Anti-Money Laundering – Risk Management or Compliance?


September 2007: How can the industry and regulators more cooperatively achieve the ultimate goals of identifying, obstructing, and bringing to justice the actual criminals? (Read more...)


Money Laundering Indicators (Belgian)


April 2007: The Unit has drawn up a list of money laundering indicators to which reporting institutions and individuals must pay particular close attention. These are general indicators intended to help financial and non-financial professionals identify money laundering transactions, and are not specific indicators that correspond to laundering the proceeds of a specific predicate offence. (Read more...)


Suspicious Activity Reporting

Regulatory Change and the Role of Accountants


MARCH 2007 - Bank secrecy has functional and virtuous origins. From the late 18th century, the tradition of Swiss private banking evolved to facilitate early forms of international trade. But bank secrecy is no longer venerated. Far from it. Recent events—the wars on drugs and terrorism, and high-profile financial scandals—have led to increasing regulation, as governments at home and abroad seek to suppress money laundering and terrorist financing. Chief among the tools to deter and detect these ills is the Suspicious Activity Report (SAR), introduced by 1996 regulations pursuant to the Annunzio-Wylie Anti–Money Laundering Act of 1992. SARs describe suspicious financial transactions that may be relevant to a violation of the law. In some circumstances, only transactions above a certain dollar threshold trigger a SAR, but in other situations (such as insider information), no minimum dollar threshold applies. (Read more...)


Laundering the Proceeds of VAT Carousel Fraud


February 2007: VAT carousel fraud involves organised criminal groups attacking tax systems to generate substantial profit. Annex 1 gives a brief explanation of how the fraud functions. The overriding objective of this project is to increase understanding of this fraud, the money laundering associated with the crime and to raise global awareness of the methods used to launder the proceeds; the threat it poses as a vehicle to launder and raise funds for investment in other types of crime as well as the potential to fund terrorism. (Read more...)


The Proceeds of Crime


Problems of Investigation & Prosecution


FEBRUARY 2007: Criminals engage in money laundering to thwart investigation and make prosecution impossible. Their goal is to protect themselves and the proceeds of their criminal operations from the reach of courts and tax authorities. In this pursuit criminals have had the advantage. They have learned to manipulate and use financial systems and standard business practices to disguise the origin of capital. They have learned to use professional advisers and develop complex structures that make detection unlikely and the collection of evidence particularly onerous. They have learned to operate internationally to compound the difficulty of tracing proceeds of crime.


This paper reviews money laundering techniques and the problems of investigation and prosecution commonly encountered as criminal justice systems seek to take the profit out of crime. The paper makes a number of recommendations and concludes with observations on the role of the criminal law and other policy areas. (Read more...)


Complex Money Laundering Techniques a Regional View


February 2007: Money Laundering (ML) and Terrorist Financing (TF) are transnational problems. Money launderers frequently and intentionally make use of illegal operations involving two or more countries and use international funds or value transfers as part of ML operations. Typologies studies conducted by GAFISUD and other international bodies have identified a number of ML schemes that operate in South America. This study builds on these previous studies and seeks to identify a number of current ML typologies – or methods used to launder money – using international channels for circulating funds or value.


The research project focused primarily on money remitters and mail service companies / couriers, the foreign exchange sector, and the physical cross-border transportation of currency / negotiable instruments. Thus it analyses international funds transfer mechanisms1 and the means and sectors involved. (Read more...)


Prepaid Cards: Vulnerable to Money Laundering?


February 2007: This paper discusses the potential money laundering threat that prepaid cards face as they enter the mainstream of consumer payments. Over the past year, several government agencies have issued reports describing the threat to the U.S. financial system, including the use of prepaid cards by money launderers. Also, this paper incorporates the presentations made at a workshop hosted by the Payment Cards Center at which Patrice Motz, executive vice president, Premier Compliance Solutions, and Paul Silverstein, executive vice president, Epoch Data Inc., led discussions. These two leading anti-money laundering strategists explained how money laundering occurs in financial payments and how firms can mitigate and detect money laundering activities. This paper provides an overview of money laundering, describes how prepaid cards could be abused, and outlines how both the government and the payment sectors have responded to mitigate risks. (Read more...)


Money Laundering and the CPA

Fighting Apathy and Nonchalance


AUGUST 2006 - In the ongoing battle to prevent money laundering, perhaps no professional has more at stake than the CPA. The reason is simple: Money laundering usually involves fraudulent financial transactions, and a major component of the CPA’s job is reporting on financial transactions. As a result, whenever money laundering is discovered, you can bet that both the public and the government will be taking a cold, hard look at the work of the CPAs involved. (Read more...)


Trade based Money Laundering


June 2006: There are three main methods by which criminal organisations and terrorist financiers move money for the purpose of disguising its origins and integrating it into the formal economy. The first is through the use of the financial system; the second involves the physical movement of money (e.g. through the use of cash couriers); and the third is through the physical movement of goods through the trade system. In recent years, the Financial Action Task Force has focused considerable attention on the first two of these methods. By comparison, the scope for abuse of the international trade system has received relatively little attention. (Read more...)


Anti-money laundering - A global financial services issue


The prospect of opening the business pages to find that their organisation has been linked to allegations of international financial crime ranks among the worst nightmares of financial institution CEOs.

However, instead of struggling to ensure compliance with an ever-growing mountain of international anti-money laundering (AML) legislation and regulations, financial services organisations worldwide have started to discover that compelling competitive advantages can be achieved by developing a comprehensive, strategic response to the threat of money laundering. This global paper identifies some of the issues facing senior management and the responses which are now being developed. (Read more...)


Banks count the cost of money laundering


MARCH 2005: Recent estimates suggest that US$500 billion to US$1 trillion is laundered worldwide annually by drug dealers, arms traffickers and other criminals. Banks act as the gatekeepers for the legitimate financial system and it is only through their vigilance that the system can be protected from providing organised criminals or terrorists with a mechanism for concealing the proceeds of illicit and corrupt activity. As such, they play a crucial role in the prevention, detection, and reporting of money laundering. (Read more...)


Accountant's Anti-Money-Laundering Responsibilities


DECEMBER 2003: Accountants' anti-money-laundering responsibilities are more important than ever. The terrorist attacks of September 11 led to a number of governmental actions aimed at preventing terrorism and related money-laundering activities. The recently enacted USA Patriot Act (USAPA) is the latest example of the government's determination to fight money laundering.


The USAPA authorizes the U.S. Department of the Treasury to create new anti-money-laundering rules as well as to extend some of the previously existing rules to a new set of professionals, including accountants. (Read more...)


Of watchdogs, bloodhounds and guide dogs


SEPTEMBER 2003: June 2003 was a very important month from the perspective of money laundering control. The main administrative money laundering control duties took effect on 30 June 2003, thereby changing many of the business practices that were part of the South African business landscape. In the same month, South Africa gained membership of the Financial Action Task Force (FATF) which is the main international standard-setting body in respect of money laundering control. At the meeting where South Africa’s membership was endorsed, the FATF also adopted a new and more stringent set of money laundering control standards that all countries will have to meet. As South Africa is implementing its money laundering control legislation, thought must therefore be given to amendments that may be required to comply with the new set of international standards. In this state of flux, accountants and auditors have a very important role to play. Not only do they have to comply with the legislation but they will also be required to provide guidance to those clients who are bewildered by the new requirements. Obviously auditors will also have to consider non-compliance with these laws when planning and carrying out an audit. (Read more...)


Money Laundering: Ring Around the White Collar


JUNE 2003: Money laundering is so widespread CPAs are likely to encounter it at some point in their work. It is an essential element of the “underground economy,” which, worldwide, amounts to trillions of dollars. An independent auditor’s responsibilities in the area of money laundering, because it is a criminal act, are governed by Statement on Auditing Standards no. 54, Illegal Acts by Clients, which requires CPAs to be familiar with the types of illegal behaviors that could have a direct and material impact on financial statements. The new fraud standard, SAS no. 99, Consideration of Fraud in Financial Statements, requires independent auditors to assess the risk that fraud could materially misstate the financials. (Read more...)