money laundering Flashcards
(38 cards)
*what is money laundering
the process by which criminals may attempt to hide the origins of the proceeds of criminal activity. the aim is to transform dirty money into clean money which can be spent
what is criminal property
Criminal property includes money or any asset that arises from:
-tax evasion
-bribery and corruption
-income received through the operation of a criminal cartel
-benefits arising from a criminal failure to comply with a regulatory requirement.
what are the international methods for combatting money laundering
-The Financial Action Task Force (FATF) has set global standards
-Its “Forty Recommendations” serve as guidelines for over 200 jurisdictions.
what do FATF recommendations include
-scope of money laundering
-measures to be taken like CDD, record-keeping; and
reporting suspicious transactions FIU.
-transparency
-international co-operation
why is ethical guidance needed in money laundering?
-wide scope
-legal and regulatory consequences
-no clear definition of suspicion
-confidentiality issues
*three main categories of offense
- laundering (those whose funds are involved and those managing the ML activity)
- failure to report
(auditors, lawyers, bankers, accountants, advisors) - tipping off (alerting suspect, misleading)
*3 stages of a money laundering regime
placement: illegal funds are introduced into the financial system (eg. cash sales, abnormal deposit, underover invoicing)
layering: funds are passed through multiple transactions to hide real source. (eg. foreign transfer, purchase sale of properties, fake expense, salaries to ghost employees)
Integration: The laundered money mixed with legal amounts, such that they are not identifiable separately
is money from tax evasion criminal money?
yes. tax evasion is a crime.
The proceeds of tax evasion can be laundered in the same way as those from drug trafficking, terrorist activity, theft, etc.
Tax evasion offences”
under declaring of income; and
over claiming of expenses.
a financial institution suspects that funds are proceeds of a criminal activity
promptly report to FIU
define FIU
a national body which collect information on suspicious activity from companies
define STR and SAR
suspicious transaction report
suspicious activity report.
it means
information alerting law enforcement agencies that a client’s activity is in some way suspicious and may indicate money laundering or terrorist financing.
what would a money laundering report (sent to MLRO) include?
-name of suspect
-amount involved
-reason for suspicion
-whereabouts of laundered cash
report should be made asap as it is an offence not to report asap
or
A suspicion report might include the following information, where known:
the full name of the reporting business;
identification of each subject (e.g. name, address, date of birth, nationality, occupation and employer);
the role of each subject in the matter being reported (e.g. suspect, victim, unknown);
any identification or references seen or recorded including bank account and transaction details;
details of transactions or activities (amounts, dates, currencies, sources and estimates);
the location of any laundered property.
what is tipping off
the illegal act of informing a suspect that they are under investigation or that a suspicious activity report (SAR) has been filed against them. This can compromise the investigation and allow the suspect to hide or destroy evidence. tipping off can include questioning and withdrawing from the engagement, so legal counsel should be taken.
not doing what the client asks is also tipping off. so u shud file a STR then seek authority to act as per client’s wishes.
if audit senior has suspicions of money laundering, they should report suspicions to?
MLRO.MLRO stands for Money Laundering Reporting Officer. An MLRO is a designated person within an organization responsible receiving and evaluating reports of suspected money laundering, and for making any reports to external bodies.
penalties for money laundering offences
-imprisonment (min. 6 months)
-fines
-both
who is liable for penalties
-partners and directors when it comes to firms actions
-individuals for their own behavior
risks of not reporting ML suspicion
-penalty
-loss of reputation
-loss of license to conduct business
is filing str a breach of confidentiality
Professional accountants will not be in breach of any professional duty of confidence if they report, in good faith, any money laundering knowledge or suspicions to the appropriate authority.
-But it’s essential to have good reasons for suspecting these things. If an accountant reveals information without proper grounds for suspicion, they might face legal action for breaching confidentiality.
defenses for money laundering offenses
-lack of knowledge
-lack of intent
-legitimate business purpose
-entrapment by law enforcement
do accountants have legal privilege
For lawyers, legal privilege can protect them from being charged for not reporting suspicions of money laundering. This protection only works if:
- They receive the information in a privileged setting.
- They don’t use or share that information to help with any criminal activity.
However, this privilege doesn’t apply to accountants. They must report any suspicions of money laundering, regardless of how the information was obtained.
what is customer due dilligence and why is it important
CDD aka KYC procedures is needed as part of anti money laundering regulations
-all audit firms shud have in place when accepting new clients
it is imp because:
-dont unknowingly accept clients outside firm’s risk tolerance policy or don’t know enough about client business to identify money laundering when its occurring.
-establish trust
-manage risk
-ensure compliance with AML regulations
-helps prevent financial crime
-helps tailor services and build better customer relationship.
when should CDD be conducted
-new business relationship;
-occasional transaction;
-suspicion of money laundering or terrorist financing
-doubts concerning the accuracy and reliability of previous identification information.
what information should be gathered as part of KYC/CDD
-identification and verification using documents obtained from reliable source
-confirm IDs of all SH and their families who own 90% of companys sc. and 10% of SH who own the remaining 10%.
-identify any beneficial owners who are not the client, on whose behalf transactions r being done
-understadn purpose and nature of business relationshiop
for individuals:
-full legal name
-DOB
-Address
-nationality
-identification number
-photographic evidence eg. passport and copy
-contact information: # or email
–purpose of account/ expected activity
-Politically exposed person
for companies:
-certificate of incorporation to confirm legal status
-passport copies of all directors
-list of all directors and SH
-confirm registered address (by obtaining head paper)
-conduct a search on company, eg. by using companies house in UK
-source of funding, loans, assets on collateral,any PGs
-ongoing monitoring must be done to identify anything sus
-retain docs for 5 yrs
what are the basic elements to be included when designing a money laundering program
-dedicated resources, for eg. an MLRO to oversee compliance and a key partner
-written policies and procedures: clear documented SOPs for KYC procedures, and list of factors to identify risk of money laundering
-CDD/KYC-comprehensive coverage to ensure all necessary aspects are covered
-timely resolution
-management support, tone from the top, culture
-regularly educating staff and training
-regular audit/reviews to ensure effectiveness.
-record keeping system, including receipts to ensure auditor doesnt unintentionally start money laundering.
-monitor client activity
-suspision reporting procedures
