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1

MONEY LAUNDERING
What is money laundering?

Money laundering is the taking of criminal proceeds and
disguising their illegal sources in order to use the funds to
perform legal or illegal acts.

2

THREE STAGES IN THE MONEY
LAUNDERING CYCLE
Give an example of the second stage
of money laundering.

Electronically moving funds from one country to another;
moving funds from one financial institution to another;
and converting the cash placed into the system into
monetary instruments.

3

THREE STAGES IN THE MONEY
LAUNDERING CYCLE
Give an example of the third stage of
money laundering.

Purchasing luxury assets like property, artwork,
jewelry or high-end automobiles; and investing in
business enterprises.

4

THREE STAGES IN THE MONEY
LAUNDERING CYCLE
Give an example of the first stage
of money laundering.

Co-mingling illegitimate funds with legitimate
ones; making foreign exchange transactions with
illegal funds; and depositing small amounts of cash
into various accounts.

5

INDIVIDUAL ACCOUNTABILITY
What does the Yates memo say?

The Yates memo, issued by then-Deputy Attorney
General Sally Yates of the Department of Justice, reminds
prosecutors that criminal and civil investigations into
corporate misconduct should also focus on individuals
who perpetrated the wrongdoing.

6

ELECTRONIC TRANSFERS
OF MONEY
What are some indicators of money
laundering using electronic transfers
of funds?

Funds transfers to or from a financial secrecy haven; large,
incoming fund transfers from a foreign client with little
or no explanation or apparent reason; and fund transfers
that have no apparent link to legitimate business.

7

REMOTE DEPOSIT CAPTURE
What is remote deposit capture and
what risk is associated with it?

Remote deposit capture is a product offered by
banks that allows customers to scan a check and
transmit an electronic image to the bank for deposit.
The risk associated with it is that it enables a money
launderer to deposit checks without having to visit the
bank and risk detection.

8

PAYABLE THROUGH ACCOUNTS
What are some of the money
laundering risks pertaining to the use
of payable through accounts (PTAs)?

PTAs with foreign institutions licensed in offshore centers
with each bank supervision; PTAs where the respondent
bank (the foreign bank) fails to conduct adequate
customer due diligence; and PTAs where the sub-account
holders have currency deposit and withdrawal privileges.

9

CONCENTRATION ACCOUNTS
What is a money laundering risk
pertaining to the use of
concentration accounts?

The primary money laundering risk pertaining to the use
of concentration accounts is the fact that the customer identifying
information may not be included, making the
audit trail difficult or impossible to follow.

10

PEPS
What is a PEP and what is the
primary risk in dealing with a PEP?

A PEP is a “politically exposed person,” meaning a
person who has or has had a prominent government or
quasi-public position in a country. The primary risk in
dealing with a PEP is that the source of funds from a PEP
may be from corruption.

11

STRUCTURING
What is structuring?

Structuring involves taking a large cash deposit and
breaking it into smaller amounts to be deposited into
separate banks, separate accounts or on separate days in
order to avoid currency transaction reports.

12

CREDIT CARDS
Which money laundering stage(s)
are credit cards most likely to be
used and what is an example of
money laundering through the use
of credit cards?

Credit cards are not likely to be used in the initial
placement of money laundering. They are more likely to
be used in the layering or integration stages of money
laundering. One example of using credit cards for money
laundering purposes is overpaying a credit card balance
and then asking for a refund. Receiving a check from the
reputable credit card company makes it look like the
funds received are legitimate.

13

THIRD-PARTY PAYMENT
PROCESSORS
What are some of the risks posed
by Third-Party Payment Processors
(TPPPs)?

Multiple financial institution relationships whereby
the TPPP’s suspicious activity cannot be seen in its
entirety by one institution; engaging in ACH transactions
from overseas whereby the suspicious transactions
get hidden by the large number of other transactions
the TPPP engages in; and the possibility of the return
rates stemming from unauthorized transactions are
higher than average.

14

MONEY SERVICES BUSINESSES
What are some ways Money Services
Businesses can be used for money
laundering?

Cashing checks without obtaining adequate proof of
identity; failing to file Currency Transaction Reports
when required; and transmitting funds overseas without
sufficient due diligence.

15

SECURITIES BROKER-DEALERS
What are some of the aspects
associated with securities brokerdealers
that increase the risk of money
laundering?

Its international nature; the speed of their transactions;
the ease of converting holdings into cash without
significant loss of principal; the large volume of wires
used; the competitive, commission-driven environment;
the practice of maintaining securities accounts in the
name of nominees or trusts; and weak AML programs.

16

CASINOS
What are some red flags associated
with casinos and gambling?

Paying off gambling debts in cash just under the
reporting requirements; purchasing chips, but engaging
in minimal gambling and then cashing the chips back
in; using the gambling house for banking-like financial
services, including wiring funds overseas; betting on both
“red” and “black” spaces in roulette; and purchasing
chips with cash just under the reporting requirements.

17

DEALERS IN HIGH-VALUE ITEMS
What were two of the key findings
by FATF in its report on “Money
Laundering/Terrorist Financing Risks
and Vulnerabilities Associated With
Gold,” issued in July, 2015?

The fact that gold is an extremely attractive vehicle
for laundering money due to the fact that it is
relatively compact and easy to transport; and the fact
that the gold market is a target for criminal activity
because it is lucrative and holds its value regardless of
the form it takes.

18

TRAVEL AGENCIES
List ways in which a travel agency
could be used to launder money.

Purchasing an expensive airline ticket and then asking
for a refund; paying for travel tours with multiple wires
just under the reporting threshold; and creating false
bookings through tour operator networks to justify
significant payments from foreign travel groups.

19

GATEKEEPERS
Name various ways that a gatekeeper
- an attorney, notary, accountant or
auditor - could assist in a money
laundering scheme.

Creating and managing corporate vehicles or other
complex legal arrangements; buying or selling property
as a cover for transfers of illegal funds; performing
financial transactions, including making deposits,
withdrawing funds, engaging in foreign exchange
operations, buying or selling stock and sending
international wires; and setting up or managing a charity.

20

GATEKEEPERS
What is the primary concern with
regard to the use of gatekeepers?

The primary concern with regard to the use of
gatekeepers – attorneys, notaries, accountants and
auditors – is the fact that they can be used to enhance
secrecy and to keep hidden the beneficial owner of an
account or transaction.

21

REAL ESTATE
List reasons why real estate can be an
attractive method of money laundering,
according to the 2015 report by the
Australian Transaction Reports and
Analysis Centre (AUSTRAC).

It can be purchased with cash; the ultimate beneficial
owner can be disguised; it is a relatively stable and
reliable investment; and the value can be increased
through renovations and improvements.

22

TRADE-BASED MONEY
LAUNDERING
What are two of the most common
money laundering techniques involved
with trade-based money laundering?

Over and under invoicing.

23

BLACK MARKET PESO EXCHANGE
In summary form, how does the black
market peso exchange (BMPE) work in
laundering money?

As an example, the drug trafficker sells drugs for US
dollars in the US and - in order to avoid smuggling the US
dollars back to Mexico – the trafficker gives the proceeds
to a “peso broker.” The broker finds businesses in Mexico
that want to buy goods in the US. Then the broker buys
the US goods with US dollars and has the goods shipped
to Mexico. The business in Mexico pays the broker in
Mexico in pesos and the broker then gives the pesos –
minus a fee – to the drug traffickers.

24

NEW PRODUCTS AND SERVICES
What are some of the money
laundering risks pertaining to the
use of pre-paid bank cards or
reasons why they are attractive
to money launderers?

Some of the risks of pre-paid bank cards include:
anonymous card holders; anonymous funding; high value
limits; global access to cash through ATMs; lax offshore
jurisdictions issuing the cards; and the cards being a
substitute for bulk-cash smuggling.

25

NEW PRODUCTS AND SERVICES
What are some of the risks listed by
FATF in its 2010 report titled “Guidance
For A Risk-Based Approach Prepaid
Cards, Mobile Payments And Internet-
Based Payment Services”?

Some of the risks on new products and services,
according to FATF, include anonymity; geographic reach;
alternative to physical cross-border transportation; easy
access to cash; and the fact that several entities are
required to issue prepaid cards – the program manager,
issuer, acquirer, payment network, distributor and agents
– that may be hard to all supervise or monitor.

26

VIRTUAL CURRENCY
What is one of the primary
concerns with regard to the use
of virtual currencies?

One of the primary concerns with regard to the use of
virtual currencies is the fact that beneficial ownership
information may be difficult to obtain.

27

TERRORIST FINANCING
What are some emerging risk for
Terrorist Financing?

Self-funding by foreign terrorist fighters; terrorists
raising funds through the use of social media; new
payment products and services; and exploitation of
natural resources;

28

MONEY LAUNDERING
What is the concept of
willful blindness?

The concept of willful blindness is the “deliberate
avoidance of knowledge of the facts” or “purposeful
indifference,” and is the equivalent of actual knowledge.

29

CORRESPONDENT BANKING
What are the two main reasons
correspondent banking is vulnerable
to money laundering?

• By their nature, correspondent banking relationships
create a situation in which a financial institution carries
out financial transactions on behalf of customers of
another institution. This indirect relationship means
that the correspondent bank provides services for
individuals or entities for which it has neither verified
the identities nor obtained any first-hand knowledge,
and
• The amount of money that flows through
correspondent accounts can pose a significant threat
to financial institutions, as they process large volumes
of transactions for their customers’ customers.
This makes it more difficult to identify the suspect
transactions, as the financial institution generally
does not have the information on the actual
parties conducting the transaction to know
whether they are unusual.

30

CONCENTRATION ACCOUNTS
What is a concentration account?

Concentration accounts are internal accounts established
to facilitate the processing and settlement of multiple
or individual customer transactions within the bank,
usually on the same day. These accounts are also known
as special-use, omnibus, settlement, suspense, intraday,
sweep or collection accounts. Concentration accounts
are frequently used to facilitate transactions for private
banking, trust and custody accounts, funds transfers and
international affiliates.