Acams

Front 1

3 main points of ML definition

Back 1

 The conversion or transfer of property, knowing it is
derived from a criminal offense, for the purpose of
concealing or disguising its illicit origin
 The concealment or disguising of the true nature, of property knowing that it is derived from a criminal offense
 The acquisition knowing at the time of its receipt that it was derived from a criminal offense or from participation in a crime.

Front 2

willful blindness

Back 2

Courts define
it as the “deliberate avoidance of knowledge of the facts” or
“purposeful indifference.”

Front 3

October 2001 the FATF expanded _______

Back 3

its mandate to cover the financing of terrorism.Terrorist funds are sometimes not derived through illegal means.

Front 4

3 stages of Money Laundering Cycle

Back 4

Step One: Placement
Step Two: Layering
Step Three: Integration

Front 5

Step One: Placement

Back 5

During this initial phase, the money launderer
introduces his illegal proceeds into the financial
system. Often, this is accomplished by placing it into
circulation through financial institutions, casinos,
shops, bureaux de change and other businesses, both
domestic and international.

Front 6

Step Two: Layering

Back 6

q Wire transfers of deposited cash from one
account to another
q Converting deposited cash into monetary
instruments (e.g. traveler’s checks)
q Reselling high-value goods and monetary
instruments
q Investing in real estate and legitimate
businesses.
q Use of shell banks, which are typically
registered in offshore havens, and wire
transfers.

Front 7

Step Three: Integration

Back 7

Supplying apparent
legitimacy to illicit wealth by the re-entry into the
economy of what appear to be normal business funds.
The third and final stage in the money laundering
process, this stage entails placing laundered proceeds
back into the economy to create the perception of
legitimacy. By the integration stage, it is exceedingly
difficult to distinguish legal and illegal wealth. The
launderer might choose to invest the funds in real
estate, luxury assets or business ventures.

Front 9

Back 9

Front 10

Some of the effects of money laundering and terrorist financing
are:

Back 10

n Increased Crime and Corruption:
n Undermining the Legitimate Private Sector:
n Weakening Financial Institutions:

Front 11

Increased Crime and Corruption:

Back 11

Typically, havens for money laundering and
terrorist financing have:
 Limited number of predicate crimes for
money laundering,
 A restricted definition of institutions covered
by money laundering laws and regulations,
 Little enforcement of the laws, weak
penalties, provisions that make it difficult to
confiscate or freeze assets related to money
laundering.
If money laundering is prevalent, there

Front 12

Undermining the Legitimate Private Sector:

Back 12

front companies have a competitive advantage over legitimate firms that draw capital funds from financial markets. It also provides a vehicle for evading taxation, thus depriving the country of revenue.

Front 13

Weakening Financial Institutions:

Back 13

Financial institutions that rely on the proceeds of crime
have additional challenges in adequately managing
their assets, liabilities and operations. The adverse consequences of money laundering are generally
described as reputational, operational, legal and
concentration risks.

Front 14

consequences of money laundering are generally
described as reputational, operational, legal and
concentration risks.

Back 14

 Loss of profitable business;
 Liquidity problems through withdrawal of
funds;
 Termination of correspondent banking
facilities;
 Investigation costs and fines;
 Asset seizures;
 Loan losses;
 Reduced stock value of financial institutions.

Front 15

Reputational risk

Back 15

the potential that
adverse publicity regarding a bank’s
business practices and associations,
whether accurate or not, will cause a
loss of public confidence in the integrity
of the institution.

Front 16

Operational risk

Back 16

the potential for loss resulting from
inadequate or failed internal processes, people and systems or external events.

Front 17

Legal risk

Back 17

the potential for lawsuits, adverse
judgments, unenforceable contracts, fines and
penalties generating losses, increased expenses for
an institution, or even closure of such an institution.

Front 18

Some indicators of money laundering using electronic transfers of
funds are:

Back 18

Any transfer/deposit made from high risk location that is not in line with customer pattern or any apparent reason

Front 19

Correspondent banking

Back 19

the provision of banking services by one
bank (the ‘correspondent bank’) to another bank (the ‘respondent
bank’). By establishing multiple correspondent relationships
globally, banks can undertake international financial transactions
for themselves and for their customers in jurisdictions where they
have no physical presence.

Front 20

Correspondent banking is vulnerable to money laundering for two
main reasons:

Back 20

1. financial institution carries out financial transactions on behalf of customers from another institution.
2. a correspondent relationship astronomical amounts of money can come from many directions.

Front 21

Additional risks incurred by the correspondent bank include:

Back 21

 While the correspondent bank may be able to learn
what laws govern the respondent bank, determining
the degree and effectiveness of the supervisory regime
to which the respondent is subject is much more
difficult.
 Some banks offering correspondent facilities may not
ask their respondents about the extent to which they
offer such facilities to other institutions (“Nesting”). This
adds another layer and means the correspondent bank

Front 22

payablethrough
accounts (PTAs).

Back 22

the foreign bank’s local
customers are permitted to conduct their own transactions
— including wire transfers, deposits withdrawals and maintain
checking accounts — through the foreign bank’s U.S.
correspondent account.

Front 23

Elements of a PTA relationship that can threaten the domestic
bank’s money laundering defenses include:

Back 23

 PTAs with foreign institutions licensed in offshore
financial services sectors with weak or absent bank
supervision and weak licensing laws,
 PTA arrangements where the domestic bank regards
the foreign bank as its sole customer and fails to apply
its Know Your Customer policies and procedures to the
customers of the foreign bank,
 PTA arrangements in which sub-account holders have
currency deposit and withdrawal privileges,
 PTAs used in conjunction with a subsidiary,
representative or other domestic office of the foreign
bank, which may enable the foreign bank to offer the
same services as a branch without being subject to
supervision.

Front 24

Concentration accounts

Back 24

internal accounts established to
facilitate the processing and settlement of multiple or individual
customer transactions within the bank, usually on the same
day. frequently used to facilitate
transactions for private banking, trust and custody accounts, funds
transfers and international affiliates.

Front 25

Money laundering risk can arise in concentration accounts ____

Back 25

if
the customer-identifying information, such as name, transaction
amount and account number, is separated from the financial
transaction. If separation occurs, the audit trail is lost, and accounts
may be misused or administered improperly. Banks that use
concentration accounts should implement adequate policies,
procedures and processes covering operation and recordkeeping
for these accounts.

Front 26

anti-money laundering practices for concentration accounts

Back 26

 Requiring dual signatures on general ledger tickets.
 NO customer access to concentration accounts.
 customer transactions in the customer’s account statements.
 Prohibiting customer’s knowledge of concentration
accounts
 appropriate transaction and customer identifying information.
 Frequent reconciling of the accounts by an individual
who is independent from the transactions.
 Establishing timely discrepancy resolution process.
 Identifying recurring customer names.

Front 27

These factors may contribute to private banking’s vulnerability to
money laundering:

Back 27

 Perceived high profitability and intense competition
 The high level of confidentiality associated with private
banking
 The close relationships of trust developed between
relationship managers and their clients.
 Commission-based compensation for relationship
managers

Front 28

Private Banking

Back 28

Private banking provides highly personalized and confidential
products and services to well-heeled clients at fees that are often
based on “assets under management.” Private banking often
operates semi-autonomously from other parts of a bank and caters
to wealthy customers who seek confidentiality and personalized
service. fiercely competitive

Front 29

Smurfing/Structuring

Back 29

Designing a transaction to evade triggering a reporting or
recordkeeping requirement. probably the most commonly known ML method.

Front 30

Back 30

Front 31

cuckoo smurfing

Back 31

criminal funds are transferred through
the accounts of unwitting persons who are expecting genuine
funds or payments from overseas.

Front 32

Back 32

some bank managers
in Pakistan sell to remittance system operators genuine personal electronic transfers to be performed on behalf of legitimate
customers.

Front 33

According to the FATF, the following should be kept in mind when
dealing with possible cuckoo smurfing activity:

Back 33

 The existence of these deposits is not necessarily
grounds to reconsider the relationship with a customer;
 It could be the indicator of laundering, therefore should
be subject to suspicious activity reporting;
 Law enforcement will need information on the
depositor, so banks should seek to identify cash
deposits made by third parties and retain surveillance
footage.

Front 34

Version 1 credit unions

Back 34

only offers basic savings and loan products

Front 35

Version 2 credit unions

Back 35

broader range of financial services which pose a higher risk since they tend to contain a larger
clientele and offer potential criminals a larger range of possible
ways to conceal their illicit funds.

Front 36

Version 1 credit unions

Back 36

only offers basic savings and loan products

Front 37

Version 2 credit unions

Back 37

broader range of financial services which pose a higher risk since they tend to contain a larger
clientele and offer potential criminals a larger range of possible
ways to conceal their illicit funds.

Front 38

JMLSG

Back 38

United Kingdom’s Joint Money Laundering Steering Group

Front 39

JMLSG's 5 additional points for credit unions to have to combat ML risk

Back 39

1. paying close attention to clientele, products, and the
institution’s location.
2. outlines for managing and controlling the assessed
risks.
3. Methods for monitoring and improving internal
operations.
4. Documentation of steps taken to prevent risk and the
reasons behind those decisions.
5. Instructions on record-keeping procedures.

Front 40

The credit card industry includes:

Back 40

 Credit card associations, such as American Express,
MasterCard and VISA,
 Issuing banks, which solicit potential customers and
issue the credit cards;
 Acquiring banks, which process transactions for
merchants who accept credit cards;
 And third-party processors, which contract with issuing
or acquiring banks to provide transaction processing
and other credit card–related services for the banks.

Front 41

which stage of ML is more likely in credit card ML?

Back 41

Credit card accounts are not likely to be used in the initial
placement stage of money laundering, because the industry
generally restricts cash payments. They are more likely to be used
in the layering or integration stages.

Front 42

4 different operations of remittance services

Back 42

 Funds transfer companies possessing separate
networks (like Western Union and Money Gram);
 Money transfer systems connected with clandestine
banks (underground banking);
 Money transfers by way of the collection accounts of
foreign banks
 International money orders.

Front 43

2 ways remittance services can foster ML

Back 43

1. packages containing large cash sums and even drugs
anonymously.
2. Another technique commonly used by money remitters and
currency exchanges is for the broker to make the funds available
to the criminal organization at the destination country in the local
currency.

Front 44

what is an annuity?

Back 44

An annuity is an investment that provides a defined
series of payments in the future in exchange for an up-front sum
of money.

Front 45

Most significant laundering and terrorist financing risks in the
insurance industry are found in____

Back 45

life insurance and annuities
products.

Front 46

Vulnerabilities in the insurance sector include (4 points):

Back 46

 Lack of oversight/controls on intermediaries:
 Lack of training:
 Sales-driven objectives:
 Lack of knowledge:

Front 47

 Lack of oversight/controls on intermediaries:

Back 47

Insurance brokers have a great deal of control
and freedom regarding policies. They often
maintain pre-signed payment instructions for
policy withdrawals to enable clients to make
such withdrawals with a telephone call. Brokers
sometimes pay insurance premiums from their
own accounts; presumably they are reimbursed
by the client in cash.

Front 48

 Lack of training:

Back 48

Insurance brokers often have no or
little training in anti-money laundering issues and can
be used to place cash funds into various financial
institutions. Some insurance companies fail to identify
indicators of money laundering, such as payments for
insurance products by unrelated third parties or use of
consecutively numbered checks or money orders.

Front 49

 Sales-driven objectives:

Back 49

The focus of brokers is on
selling the insurance products, and thus they often
overlook signs of money laundering, such as presigned
forms, lack of explanation for wealth or unusual
methods for paying insurance premiums.

Front 50

 Lack of knowledge:

Back 50

In addition to a lack of knowledge
of the client and the source of his or her funds, insurers
often have little knowledge of the complex pyramid of
sub-brokers employed by their agents.

Front 51

Examples of how money can be laundered through the insurance
industry include:

Back 51

 The customer can over-fund the policy, moving funds into and out of the
policy for the cost of early withdrawal penalties.
 Purchase and redemption of single premium insurance
bonds are key laundering vehicles. The bonds can
be purchased from insurance companies and then
redeemed prior to their full term at a discount.
 Early redemption: One indicator of possible money
laundering is when a potential policyholder is more
interested in cancellation terms of a policy than the benefits of the policy.

Front 52

When a company assesses laundering and terrorist financing risks,
it must consider whether it permits customers to (3 points):

Back 52

 Use cash or cash equivalents to purchase insurance
products
 Purchase an insurance product with a single premium
or lump-sum payment
 Borrow money against an insurance product’s value.

Front 53

Back 53

Front 54

6 Aspects of the securities
field that increase its exposure to laundering
are:

Back 54

 Its international nature
 Fast-paced transactions, often at the click of a mouse
 The easy conversion of holdings to cash without
significant loss of principal
 The routine use of wire transfers from, to or through
multiple jurisdictions
 The competitive, commission-driven environment,
which, like private banking, provides ample incentive to
disregard the source of client funds
 The practice of brokerage firms maintaining securities
accounts as nominees or trustees, thus permitting
concealment of the identities of the true beneficiaries

Front 55

Money laundering through casinos occurs generally in the
placement stage, i.e. converting the funds to be laundered from
cash to checks. How?

Back 55

A launderer can buy chips with cash generated
by a crime and then request repayment by check drawn on the
casino’s account. Often, rather than requesting repayment by
check in the casino where the chips were purchased with cash, the
gambler says that he will be traveling to another country in which
the casino chain has an establishment, asks for his credit to be
made available there and withdraws it in the form of a check in the
other jurisdiction.

Front 56

more reliable ML technique connected with horse-racing and gaming

Back 56

when the person will
actually gamble the money to be laundered, but in such a way
as to be reasonably sure of ultimately more or less recovering
his stake in the form of checks issued by the gambling or betting
agency and corresponding to perfectly verifiable winnings from
gaming.

Front 57

The following transactions of High-Value Items
(Precious Metals, Jewelry, Art, etc.) are also vulnerable, and require
additional attention:

Back 57

 Payments or returns to persons other than the owner
 Precious metal pool accounts — These are maintained
by a small number of large and sophisticated precious
metal companies, and have world-wide scope. They
receive and hold precious metal credits for a customer,
and can be drawn on by that customer for return of
that precious metal, or for sale and return of monetary
proceeds, or for delivery of precious metal to another
person.

Front 58

Art and antiques dealers and auctioneers should follow these tips
to lessen their money laundering risks:

Back 58

 Require all art vendors to provide names and
addresses.
 Verify the identities and addresses of new vendors and
customers.
 If there is reason to believe an item might be stolen,
immediately contact the Art Loss Register (www.
artloss.com), the world’s largest private database of
stolen art.
 Look critically when a customer asks to pay in cash.
Avoid accepting cash payments unless there is a
strong and reputable reason to do so.
 Be aware of money laundering regulations.
 Appoint a senior staff member to whom employees can
report suspicious activities.

Front 59

4 Ways money laundering can occur in travel agencies include:

Back 59

 Purchasing an expensive airline ticket for another
person who then asks for a refund
 Structuring outgoing wire transfers in small amounts
to avoid recordkeeping requirements, especially those from foreign countries and unusually large amounts
 Sending a tour group to a country and making an
offsetting payment in a foreign entity’s U.S. or other
account while instructing the accountholder to cover
the cost of the group’s trip
 Arranging complex payment or invoicing for customers,
thereby structuring cash payments to avoid currency
reports.

Front 60

4 Laundering risks and ways laundering can occur through vehicle
sellers include:

Back 60

 Structuring cash deposits below the reporting
threshold, or purchasing vehicles with structured
checks and money orders
 Trading in vehicles for other ones and conducting
successive transactions of buying and selling new and
used vehicles to produce complex transaction layers
 Arranging complex payment or invoicing for customers,
thereby structuring cash payments to avoid currency
reports
 Accepting third-party payments, particularly from
jurisdictions with lax laundering controls.

Front 61

5 functions provided by lawyers, notaries, accountants
and other professionals are the most useful to a potential money
launderer:

Back 61

 Creation of corporate vehicles or other complex legal
arrangements (trusts, for example). Such constructions
may serve to confuse the links between the proceeds
of a crime and the perpetrator.
 Buying or selling property.
 Performing financial transactions.
 Financial and tax advice.
 Gaining introductions to financial institutions.

Front 62

Commodity futures and options accounts are vehicles that could be
used to launder illicit funds. What are they?

Back 62

 Commodity:
 Commodity pool:
 Futures/futures contract:
 Omnibus account:
 Options/options contract:

Front 63

 Commodity:

Back 63

Goods such as food, grains and
metals that are usually traded in large amounts on
a commodities exchange, usually through futures
contracts.

Front 64

 Commodity pool:

Back 64

Combines funds from various
members and uses them to trade in futures or options
contracts.

Front 65

 Futures/futures contract:

Back 65

A contract to buy or sell a
quantity of a commodity at a future date at a set price.

Front 66

 Omnibus account:

Back 66

An account held by one futures
commission merchant (FCM) for another. Transactions of multiple account holders are combined and their
identities are unknown to the holding FCM.

Front 67

 Options/options contract:

Back 67

The right, but not the
obligation, to buy or sell a set amount of something,
such as a share or commodity, at a set price after a set
expiration date.

Front 68

 Commodity pool operator:

Back 68

Operator or solicitor of funds
for a commodity pool, which combines funds from
members and trades futures or options contracts.

Front 69

 Commodity trading adviser:

Back 69

Direct or indirect advisor
on buying and selling futures or commodity options.

Front 70

 Futures commission merchant (FCM):

Back 70

A firm or person
that solicits or accepts orders on futures contracts
or commodity options and accepts funds for their
execution.

Front 71

 Introducing broker-dealers in commodities (IB-Cs):

Back 71

A firm or person that solicits and accepts commodity
futures orders from customers but does not accept
funds. There are two types of IB-Cs, guaranteed and
independent.

Front 72

 Guaranteed introducing broker:

Back 72

An introducing brokerdealer
with an exclusive written agreement with a
futures commission merchant that obligates the FCM to assume responsibility for the introducing broker’s
performance.

Front 73

 Investment adviser:

Back 73

Persons who, for compensation,
provide advice on securities and investments and
manage client assets.

Front 74

6 ways commodities/trading is susceptible to money
laundering.

Back 74

 Withdrawal of assets through transfers to unrelated
accounts or to high-risk countries
 Frequent additions or withdrawals from accounts
 Checks drawn on, or wire transfers from, accounts of
third parties with no relation to the client
 Clients who require custodial arrangements that allow
them to remain anonymous
 Transfers of funds to the adviser for management
followed by transfers to accounts at other institutions in
a layering scheme
 Investing illegal proceeds for a client
 Movement of funds to disguise their originator.

Front 75

2 Ways to launder money in Real Estate

Back 75

1. by way of chain
transactions in real estate to cloak the illicit source of funds (the
layering phase),
2. by investment in, for example, tourist or holiday
complexes that lend an appearance of legality (the integration
phase).

Front 76

“reverse flip”

Back 76

A money launderer
might find a cooperative property seller who agrees to a reported
purchase price well below the actual value and then accepts the
difference “under the table.”

Front 77

“loan back” money laundering method,

Back 77

a criminal provides
an associate with a specific amount of illegitimate money. The
associate then provides a “loan or mortgage” back to the trafficker
for the same amount with all the necessary “loan and/or mortgage”
documentation. This creates an illusion that the trafficker’s funds
are legitimate. The scheme is reinforced through “legitimately”
scheduled payments made on the loan by the traffickers.

Front 78

Black Market Peso Exchange (BMPE)

Back 78

is a process by which
money in the U.S. derived from illegal activity is purchased by Colombian “peso brokers” from criminals in other
countries and deposited in U.S. bank accounts that the brokers
have established.

Front 79

ML in inporting/exporting

Back 79

can move
money out of one country by simply
using their illicit funds to purchase
high-valued products, and then
exporting them at very low prices to a
colluding foreign partner, who then
sells them in the open market at their
true value.

Front 80

ML in inporting/exporting

Back 80

can move
money out of one country by simply
using their illicit funds to purchase
high-valued products, and then
exporting them at very low prices to a
colluding foreign partner, who then
sells them in the open market at their
true value.

Front 81

ML risks with online banking

Back 81

 The nature of online banking itself, with an elimination
of face-to-face contact between customer and
employee, will necessarily make it more difficult to
know who is actually controlling the account
 The ease of access through the Internet
 The rapidity of electronic transactions.

Front 82

To combat cyberlaundering, the FATF suggests these 4 points:

Back 82

 Internet service providers establish log files with
traffic data that produces Internet-protocol numbers of
subscribers and telephone numbers used for server
connections
 Information collected through the servers be shared
with law enforcement agencies
 Information collected be maintained for up to a year
 Internet service providers keep records, including
identification information, on those who transit through
their servers.

Front 83

How online banking aids ML in PLACEMENT

Back 83

cyberspace banks have the
potential to offer highly secure, uncommonly private
“placement” vehicles for money launderers.

Front 84

How online banking aids ML in LAYERING

Back 84

Electronic mail messages, aided by
encryption and cyberspace banking transfers, will
enable launderers to transfer assets around the world
many times a day.

Front 85

How online banking aids ML in INTEGRATION

Back 85

If cyberbanking permits person-to-person cash-like
transfers, with no actual cash involvement, existing
currency reporting regulations may not apply. Using
“super smart-card” technologies, cash could be moved
around the world through ATM transactions. These
smart cards promise easy retrieval of the “account”
balance by using an ATM card.

Front 86

ML risks for ONLINE GAMBLING

Back 86

For example, transactions are primarily
performed through credit cards, and the offshore location of
many Internet gambling sites makes locating and prosecuting
relevant parties difficult if not impossible. Furthermore, gambling
transactions — the records of which might be needed as evidence
— are conducted at the gambling site and are software-based;
this may add to the difficulty of collecting and presenting such
evidence.

Front 87

6 ML risks for Prepaid cards

Back 87

 Anonymous card holders
 Anonymous funding and anonymous access to funds
 High value limits and no limits on the number of cards
individuals can acquire
 Global access to cash through ATMs
 Offshore card issuers may not observe laws in all
jurisdictions
 Substitute for bulk-cash smuggling

Front 88

5 Measures that might limit the vulnerability to money laundering of
new payment technologies are:

Back 88

 Limiting the functions and capacity of smart cards
(including maximum value and turnover limits, as well
as number of smart cards per customer);
 Linking new payment technology to financial
institutions and bank accounts;
 Requiring standard record keeping procedures for
these systems to enable the examination,
 Documentation, and seizure of relevant records by
investigating authorities; and
 Establishing international standards for these
measures.

Front 89

Shelf company:

Back 89

A corporation that has had no activity. It has been
created and put on the “shelf”. This corporation is then later usually
sold to someone who would prefer to have an existing corporation
than a new one.

Front 90

Shell company/corporation:

Back 90

A company that is incorporated that
at the time has no significant assets or operations.

Front 91

7 laundering
techniques used in conjunction with criminal controlled companies:

Back 91

 Using Nominees as Owners or Directors
 Layering
 Loans
 Fictitious business expenses/False invoicing
 Sale of the business
 Buying a company already owned by the criminal
enterprise
 Paying out fictitious salaries

Front 92

 Using Nominees as Owners or Directors

Back 92

To
distance a company from its criminal connections,
nominees will be used as company owners, officers
and directors. Nominees will often, but not necessarily,
have no criminal record. Often, companies established
by lawyers will be registered in their name.

Front 93

 Layering

Back 93

In some cases, a number of companies
were established, many of them connected through a
complex hierarchy of ownership. This helps to conceal
criminal ownership and facilitates the transfer of illicit
funds between companies, muddying any paper trail.

Front 94

 Loans

Back 94

Proceeds of crime can be laundered
by lending money between criminally-controlled
companies. In one case, the Canadian report says a
Toronto drug trafficker had $500,000 in a bank account
in the name of a shell company. These funds were
re-invested in restaurants operated by the criminal
enterprise and costing $1 million. A down payment of
$50,000 in legitimate money was made and properly
declared. A $450,000 mortgage was then negotiated
from a bank. The remaining $500,000 was “borrowed”
from the bank account of the criminal enterprise’s shell
company. The $500,000 was repaid with interest to
avoid suspicion.

Front 95

 Fictitious business expenses/False invoicing

Back 95

The report says that once a criminal enterprise
controls corporate entities in different jurisdictions, it
can employ a laundering technique known as “double
invoicing.” An offshore corporation orders goods from its subsidiary in Canada, and the payment is sent in
full to the bank account of the Canadian subsidiary.
Both companies are owned by the criminal enterprise
and the “payment” for goods is actually a repatriation
of illicit money previously spirited out of the country.
Moreover, if the Canadian company has been charged
a high price for the goods, the books of the Canadian
company show a low level of profit, which means that
company will also pay less in taxes.

Front 96

 Sale of the business

Back 96

When the criminal sells the
business, he has a legitimate source or capital. The
added benefit of selling a business through which
illicit money circulates is that it will ostensibly exhibit
significant cash flow and, as such, will be an attractive
investment and realize a high selling price.

Front 97

 Buying a company already owned by the criminal
enterprise

Back 97

An effective laundering technique is to
“purchase” a company already owned by the criminal
enterprise. This laundering method is most frequently
used to repatriate illicit money that was previously
secreted in foreign tax havens. Criminal proceeds from
offshore are used to buy a company that is already
owned by the criminal enterprise. In this way, the
launderer successfully returns a large sum of money
to Canada. Often, the business will be purchased at
an artificially inflated price. The difference between the
artificial and the real market value is deposited in the
bank account of a foreign subsidiary company in a tax
haven country. A reverse situation may occur where a
Canadian company is sold at an artificially low price.

Front 98

 Paying out fictitious salaries

Back 98

In addition to
claiming the proceeds of crime as legitimate business revenue, criminally-controlled companies also help
legitimate certain participants in a criminal conspiracy
by providing them with salaries. In some cases, salary
checks were signed back to the company by the
“employee” as part of the laundering operation.

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The significance of a trust account — whether onshore or offshore
— in the context of money laundering cannot be understated because:

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It
can be used as part of the first step in converting the dirty cash into
less suspicious assets, it can help hide criminal ownership of funds
or other assets, and it is often an essential link between different
money laundering vehicles and techniques, such as real estate,
shell and active companies, nominees and the deposit and transfer
of criminal proceeds.

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“bearer shares,”

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Bearer bonds and bearer stock certificates, or “bearer shares,”
are prime money laundering vehicles because they belong, on the
surface, to the “bearer.”

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most BASIC difference b/n ML and terrorist financing

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Terrorist
financing uses funds for an illegal political purpose, but the money
itself is not necessarily derived illegally.

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Back 102

Front 103

9/11 Account Profiles:

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 Accounts were opened with cash/cash equivalents in
the average amount of $3,000 to $5,000
 Identification used to open the accounts were visas
issued through foreign governments
 Accounts were opened within 30 days after entry into
the U.S.
 All accounts were normal checking accounts with debit
cards
 The hijackers tended to open accounts in groups of
three or four individuals

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additional 9/11 profiles

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 Some of the accounts were joint accounts
 Addresses used usually were not permanent (i.e., mail
boxes) and changed frequently
 The hijackers often used the same address/telephone
numbers on the accounts
 No savings accounts or safe deposit boxes were
opened
 The hijackers opened their accounts at branches of
large, well-known banks
 Twelve hijackers opened accounts at the same bank

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9/11 Transaction profiles:

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 Some accounts directly received/sent wire transfers of
small amounts from/to foreign countries such as United
Arab Emirates (UAE), Saudi Arabia, and Germany
 Hijackers made numerous attempts of cash
withdrawals that often exceeded the limit of the debit
card
 High percentage of withdrawals was from debit cards
 Low percentage of checks was written
 Numerous balance inquiries were made
 After a deposit was made, withdrawals occurred
immediately
 There was no discernible pattern of timing of deposits/
Disbursements

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Additional 9/11 transactional activity:

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 Account transactions did not reflect normal living
expenses for rent, utilities, auto payments, insurance,
etc.
 Funding for daily expenditures was not evident from
transactions
 Overall transactions were below reporting
requirements
 Funding of the accounts was by cash and overseas
wire transfers
 ATM transactions occurred with more than one hijacker
present (uninterrupted series of transactions involving
several hijackers at the same ATM)
 Debit cards were used by hijackers who did not own
the accounts

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9/11 International activity:

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 Three of the hijackers supplemented their financing
by opening foreign checking accounts and credit card
accounts at banks located in the UAE
 While in the U.S., two of the hijackers had deposits
made on their behalf by unknown individuals
 Hijackers on all four flights purchased traveler’s checks
overseas and brought them into the U.S. These
traveler’s checks were partially deposited into their
U.S. checking accounts
 Three of the hijackers (pilots/leaders) continued to
maintain bank accounts in Germany after moving to
the U.S.

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Additional 9/11 International Activity:

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 Two of the hijackers (pilots/leaders) had credit cards
issued by German banks and maintained those cards
after moving to the U.S.
 One of the hijackers (pilot/leader) received substantial
funding through wire transfers into his German bank
account in 1998 and 1999 from one individual
 In 1999, this same hijacker opened an account in UAE,
giving power of attorney over the account to the same
individual who had been wiring money to his German
account
 More than $100,000 was wired from the UAE account
of the hijacker to the German account of the same
hijacker in a 15‑month period

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To
avoid becoming conduits for terrorist financing, institutions are told
they can look at these examples and others that it provides:

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 Use of an account as a front for a person with
suspected terrorist links revealed by a previous
suspicious transaction report
 Appearance of an accountholder’s name on a list of
suspected terrorists, such as that issued by the UN
Security Council Committee on Afghanistan
 Companies that were subject to previous suspicious
transaction reports and through which many funds
transfers pass in a short time
 Frequent large cash deposits in accounts of non-profit
organizations
 High account turnover in relation to accountholder’s
salary
 Lack of clear relationship between banking activity and
nature of accountholder’s business.

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Hawala, hundi or so-called “underground banking”

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are alternative
remittance systems or informal value transfer systems that are
often associated with ethnic groups from Africa or Asia, and
commonly involve the international transfer of value outside the
legitimate banking system. They are based on trust.

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Hawalas are attractive to terrorist financiers because_____

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they, unlike
formal financial institutions, are not subject to potential government
oversight and do not keep detailed records in standard form.
Although hawaladars do keep ledgers, their records are often
written in idiosyncratic shorthand and maintained only briefly.

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Charities or non-profit organizations have characteristics that are
particularly vulnerable to misuse for terrorist financing. They (5 points):

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 Enjoy the public trust
 Have access to considerable sources of funds
 Are often cash-intensive.
 Often have a global presence, often exactly in or next to those areas that are most exposed to terrorist
activity.
 Often are subject to little or no regulation or have few
obstacles to their creation

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The FATF recommends that non-profit organizations to combat terrorist financing:

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 Maintain and be able to present full program budgets
that account for all expenses
 Conduct independent internal audits and external field
audits, the latter to ensure funds are being used for
intended purposes