ANTI-MONEY LAUNDERING

INTRODUCTION
 I. What is Money
Laundering?
X. General and
II. What is Anti-
common examples
Money Laundering?
of red flags

IX. Detecting III. Why are Anti-

Suspicious Activity Money Laundering
– Red Flags Efforts Important?

TABLE OF
CONTENTS
VIII. Conducting an IV. Three Stages of
Investigation Money Laundering

VII.
V. Suspicious
Risk-Based
Activity
Compliance
VI. Transaction
Monitoring
I. WHAT IS MONEY LAUNDERING?

The process where funds derived

The criminal practice of processing ill
from criminal or illegal activities are
–gotten gains or “dirty” money
re-circulated through the financial Acts committed to conceal or
through a series of financial
system to obscure or hide disguise the criminal origin of funds
transactions so that the funds
connections to illegal activities, and from a specified unlawful activity.
appear to be proceeds from legal
make the funds appear as though
activities.
they came from legitimate sources.

Simply, money laundering is a

The process to make illegitimate
process to make dirty money appear
income appear legitimate.
clean.
 Fraud - Wrongful or criminal deception intended to result in financial or
personal gain.

OFFENCES Drug Trafficking - Practice of the cultivation, manufacturing, distribution and

sale of illegal drugs.
ASSOCIATED
Corruption - Use of public office for private gain or payment for services or
WITH MONEY material the recipient is not due under law.

LAUNDERING Human Smuggling - The facilitation, attempt, or act of transporting persons

across an international border without legal permission or documentation.

Human Trafficking - Illegal trade of human beings for illicit activities such as
prostitution or forced labor.
WHO LAUNDERS MONEY?

This can include:

• White Collar Criminals
Money launderers are anyone • Terrorists
attempting to disguise the existence, • Drug Traffickers
nature, source, ownership, location or • Members of Organized Crime (traditional and
disposition of property derived from non-traditional)
criminal activity. • Public Officials
• Tax Evaders
• Con Artists / Fraudsters
 Anti-Money Laundering (AML) is the effort to combat
money laundering and illicit financing through legal
requirements to prevent, detect and report money
laundering activities to federal authorities.
II. WHAT IS
ANTI-MONEY AML efforts are a combination of:
LAUNDERING?
• Laws- Written to criminalize money laundering;
• Regulations- Developed by regulatory agencies to implement the
laws; and
• Policies & Procedures- Designed by financial institutions to prevent,
detect and report according to the laws and regulations.
III. WHY ARE ANTI-MONEY LAUNDERING EFFORTS
IMPORTANT?

Increased
Undermining the
exposure to Increased drug and
legitimate private Loss of tax revenue
organized crime human trafficking
sector
and corruption

Dampening effect Economic Loss of control of Weakening

on foreign distortion and or mistakes in financial
investment and aid instability economic policy institutions
 PLACEMENT - Launderers attempt to insert
illegally obtained funds into the financial system.

IV. THREE
LAYERING - Launderers seek to execute complex
STAGES OF and/or multiple layers of financial transactions
MONEY to disguise trail of funds and to create or provide
anonymity.
LAUNDERING
INTEGRATION - Launderers then integrate illegal
funds back into the legitimate economy.
Integration provides launderers with an
apparently legitimate explanation for wealth.
 Corruption

Bribery

INCOME Fraud

SOURCES FOR Embezzlement

MONEY Drug Trafficking

LAUNDERERS Theft

Human Trafficking

Tax Crimes
 Goal: Deposit criminal proceeds into
financial system
Methods:

•Change of currency
PLACEMENT
•Change of denominations

•Cash deposits

•Transport of cash
 Goal: Conceal the criminal origin of proceeds

Methods:

•Wire transfers
LAYERING
•Cash withdrawals

•Cash deposits in other bank accounts

•Split funds and merge between bank

accounts
 Goal: Create an apparent legal origin for criminal proceeds

Methods:

•Creating fictitious loans, turnover / sales, capital gains, deeds,

contracts, financial statements
•Disguise asset ownership

INTEGRATION •Criminal funds used in third-party transactions

•Liquidity, or cash-at-hand

•High value asset purchases, e.g., real estate, vehicles, art, precious
metals, jewelry
•Other general consumption

•Investments
 A. Definitions of Suspicious Activity

• 1.Activity that is not normal or anticipated based on information

known about transacting parties, which may potentially indicate
a violation of laws or regulations.
• 2.Customer or account activity which is unusual and reaches an
V. SUSPICIOUS actionable level of suspicion relative to the magnitude and
frequency of the activity

ACTIVITY • 3.Activity consistent with a known money laundering typology or

appearing to be designed to evade BSA reporting.

B. What happens when a financial institution

identifies actual suspicious activity?
• The financial institution files a Suspicious Activity
Report(SAR) with the Financial Crimes Enforcement
Network(FinCEN),a unit of the United States Department of the
Treasury.
 Financial institution deploys automated transaction
monitoring system that applies “rules” or “detection
scenarios” to identify potentially suspicious activity from a
given set of parameters.

VI. Financial institution investigates resulting alerts generated by

the rules.

TRANSACTION
MONITORING Financial institution searches its customer base and
transaction activity for connections to the news and
investigates any results.

After investigation the institution decides whether or not to

file a Suspicious Activity Report(SAR). The decision to file a
SAR is often subjective but is rooted in established indicators
of financial crime risk and money laundering typologies.
 • The Financial Action Task Force(FATF) Guidance on Anti-Money Laundering
and Terrorist Financing Measures and Financial Inclusion (February2013)
urges financial institutions to implement a “risk-based approach” to
compliance with anti-money laundering(“AML”) and counter terrorism
financing regulations. A risk-based approach is a process that allows reporting
entities, such as financial institutions, to:
➢ A. Identify and measure potentially higher risks for money laundering and

VII. RISK-BASED terrorist financing;

➢ B. Focus resources in areas that are deemed to be higher risk;

COMPLIANCE ➢ C. Develop and apply policies and procedures to:

• 1.Mitigate the identified risks of a money laundering or terrorist financing
offence;
• 2.Take reasonable measures to keep client identification information and
beneficial owner information up to date; and
• 3.Take reasonable measures to conduct ongoing monitoring to detect
suspicious transactions.
 Review the alert and relevant transactions, the reason the alert
generated, any prior alerts and SARs, historical transaction and
account activity, and any internal information available on the
subject(s) of the alert.

Conduct research in external systems to identify and understand

VIII. the subject(s) of the alert, any related parties, lines of business
and relevant media.
CONDUCTING
AN Concurrently document the investigation and investigative steps
taken.
INVESTIGATION
Weigh aggravating and mitigating factors from account and
transaction review and relevant research in determining whether
to file a SAR. Support decision making with compelling, clear and
concise reasoning in case closure narratives and SAR filings.
 A “red flag” is a sign of potentially suspicious
activity.

IX. DETECTING
If a red flag is observed, additional due diligence
SUSPICIOUS is necessary to determine whether the activity
ACTIVITY – RED or transaction actually constitutes suspicious
activity.
FLAGS
By itself, the presence of a red flag is not a clear
indication of money laundering or any other
illegal activity.
 Provi s ion of insufficient, Atypi ca l funds tra nsfers or
Efforts to a void reporting or Unus ual or excessive
i nconsistent or s uspicious other tra nsactions when
recordkeeping requirements, a utomated cl earing house
pers onal/business compa red to prior history a nd
or perceived requirements; tra ns actions;
i nformation; bus iness profile;

X. GENERAL Lending a ctivities that i nvolve

Lending, tra ding or i nvestment
a cti vi ties a re lacking business
A cus tomer’s professional
ba ckground differs from that
whi ch would be expected on
A pers on customarily uses a n
ATM to ma ke several deposits
unrelated third parties;
purpose or economic s ense. bel ow a s pecified threshold

& COMMON
the ba sis of his or her
bus iness activities.

EXAMPLES OF RED Funds tra nsfer a ctivity i s

unexplained, repetitive, or
La rge number of unauthorized
s ma ll dollar tra nsactions
Mul ti ple vi rtual currency
tra ns fers
Cus tomer maintaining multiple
a ccounts or accounts in the
na mes of family members or
corpora te entities
s hows unusual patterns.

FLAGS wi th no apparent business

purpose.

Hi s tory of questionable Cus tomer’s tra ding patterns Pa yments to third-party

Tra des that have no a pparent
a cti vi ties i dentified s uggest that he or she may wi thout a pparent connection
economic relevance
through negative media. ha ve i nside information. to cus tomer.
THANK YOU
& ALL THE BEST