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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)
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...)
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...)
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