Module 1 (Part 4)

Question 1

What is this topic on

Answer 1

Corporate Vehicles used to facilitate illicit finance

Question 2

What are the two listed common corporate vehicles used to facilitate illicit finance?

Answer 2

LLCs

International Business Corporations (IBCs)

Question 3

Why is the LLC an attractive vehicle

Answer 3

virtually anyone can own or manage an LLC,

Question 4

including who?

Answer 4

including foreign persons and other business entities

Question 5

What is an International Business corporation

Answer 5

entities formed outside of a person or businesses’ country of residence, typically in offshore jurisdictions

Question 6

what are they used for

Answer 6

confidentiality or asset protection

Question 7

what do IBCs permit the person to do

Answer 7

reduce transparency between tits owner in his/her home country and that of the offshore entity where the company is registered

Question 8

Why are bearer bonds and bearer stock certificates or bearer shares prime money laundering vehicles

Answer 8

because on the surface they belong to the “bearer.”

Question 9

What happens when bearer securities are transferred

Answer 9

The transfer takes place by physically handing over the bonds or share certificates

Question 10

why does it occur this way

Answer 10

there is no registry of owners

Question 11

so what does this basically mean

Answer 11

the person who holds the bonds or shares gets to claim ownership.

Question 12

What are the two types of companies used to facilitate money laundering that is a well documented typology according to FATF

Answer 12

Shell company

Shelf company

Question 13

What is a shelf company

Answer 13

a corporation that has had no activity. It has been created and put on the shelf.

Question 14

What occurs then in the future with a shelf company

Answer 14

it is sold to someone who prefers a previously registered corporation over a new one

Question 15

What is a Shell company/corporation

Answer 15

a company that at the time of incorporation has no significant assets or operations

Question 16

What are trusts

Answer 16

Private fiduciary arrangements that allow a grantor (settlor) to place assets for future distribution to beneficiaries

Question 17

What are the two categories of trusts

Answer 17

Revocable

Irrevocable

Question 18

What does revocable mean

Answer 18

the grantor/settlor can terminate the trust

Question 19

what about irrevocable

Answer 19

the grantor cannot terminate the trust once created

Question 20

how are trusts seen

Answer 20

trusts are often seen as separate legal entities from the grantor

Question 21

as such, what are they often useful for

Answer 21

estate planning and asset protection purposes

Question 22

what do the instructions usually state

Answer 22

how the grantor/settlor would like the funds to be distributed and are limited only to a legal purpose

Question 23

how can trusts be misused

Answer 23

they may be formed to take advantage of strict secrecy rules in order to conceal the identity of the true owner or beneficiary of the trust property

Question 24

what are the other 3 ways they also used for

Answer 24

1. to hide assets from legitimate creditors
2. protect property from seizure under judicial action
3. to mask the various links in the money flows associated with money laundering or tax evasion schemes

Question 25

What is the most basic difference between terrorist financing and ML

Answer 25

the origin of funds

Question 26

What does terrorist financing use funds for

Answer 26

an illegal political purpose

Question 27

but what though

Answer 27

the money is not necessarily derived from illicit proceeds

Question 28

What does money laundering always involve

Answer 28

the proceeds of illegal activity

Question 29

what is the purpose of ML

Answer 29

to enable the money to be used legally

Question 30

What do alternative remittance systems or informal value transfer systems commonly involve

Answer 30

the international transfer of value outside the legitimate banking system

Question 31

what are they based on

Answer 31

trust

Question 32

what is the concept that is discussed here

Answer 32

Hawala

Question 33

When and where was Hawala created

Answer 33

centuries ago in india and china before Western financial systems were established to facilitate the secure and convenient movement of funds

Question 34

What is hawala

Answer 34

one of the many alternative remittance systems or informal value transfer systems that are often associate with ethnic groups from Africa, asia, and the middle east

Question 35

what does hawala mean

Answer 35

an Arabic word meaning change or transform

Question 36

what is the hindi word for it and what does it mean

Answer 36

hundi which means collect

Question 37

what is the term for the way the system operates

Answer 37

chiti banking

Question 38

what does china refer to it as

Answer 38

chop shop banking

Question 39

what does Thailand refer to it as

Answer 39

poey kuan

Question 40

how does hawala work

Answer 40

people in various parts of the world using their accounts to move money internationally for third parties

Question 41

so what happens

Answer 41

deposits and withdrawals are made through hawala bankers rather than traditional financial institutions

Question 42

what are the three reasons why hawala is still in use today

Answer 42

1. cheaper and faster money transmission 2. lack of banking access in the remittance receiving country 3. cultural preference and lack of trust in the formal banking system

Question 43

what is there usually with hawala

Answer 43

no physical movement of currency lack of formality with regard to verification and record-keeping

Question 44

how does the money transfer take place

Answer 44

by coded information that is passed through chits, couriers, letters, faxes, emails, text messages, or online chat system

Question 45

what is it followed by

Answer 45

some form of telecommunications confirmation

Question 46

what can be used by the receiver to pick up the values in the other country

Answer 46

almost any document that carries an identifiable number

Question 47

What are the 5 characteristics of charities or non profit organizations that make them vulnerable to misuse for terrorist financing

Answer 47

1. enjoying the public trust 2. having access to considerable sources of funds 3. Being cash intensive 4. frequently having a global presence, often in or next to areas exposed to terrorist activity 5. often being subject to little or no regulation and/or having few obstacles to their creation

Question 48

What does FATF recommend

Answer 48

that charities use formal bank accounts to store and transfer funds so that they are subject to the bank's regulations and controls

Question 49

what does this intern mean for banks where the accounts are stored

Answer 49

banks can treat non profits like other customers, apply their KYC rules and file SARs