Money Laundering - Lecture 5 Flashcards
Money laundering is an example of…..
Fraud
What is the process of money laundering?
.Taking criminally-derived funds (dirty) and converting it into other assets (clean) so that they can be introduced into legitimate commerce
Which institutions can facilitate money laundering?
.Banks
.Financial services
.Multinational corporations
.Individuals
Who is responsible for the prevention and detection of fraud?
Those charged with the governance of an entity and management
Management are responsible for…..
.Evaluating and managing the entity’s business risks
.Implementing and monitoring internal controls
The audit committee are responsible for….
.Supervises the work of internal auditors
.Cooperates with the external auditors
Which form of fraud are auditors most concerned about?
.Fraud that causes material misstatements in the financial statements
.Fraudulent financial reporting
.Misappropriation of assets
What did the association of certified fraud examiners (2014) find?
External audit was the least effective control in combating fraud
What are the three stages in money laundering?
- Placement
- Layering
- Integration
What is Placement?
The movement of cash from its source, this is followed by placing it into circulation through financial institutions, casinos, shops
What is currency smuggling (Placement)?
The physical illegal movement of currency and monetary instruments out of a country
What is Bank Complicity (Placement)?
When a financial institution is owned or controlled people suspected of conniving with crime groups
What are Currency Exchanges (Placement)?
Foreign exchange markets provide room for currency movements
What are securities Brokers (Placement)?
Brokers can facilitate the process of money laundering through structuring large deposits of cash
What is the blending of funds (Placement)?
The best place to hide cash is with a lot of other cash
What is Asset purchase (Placement)?
The purchase of assets with cash is a classic money laundering method
What is layering?
Criminal proceeds are moved through a series of financial transactions - Cash converted into Monetary instruments or material assets bought with cash then sold
What is integration?
The movement of previously laundered money into the economy mainly through the banking system and thus such monies appear to be normal business earnings
What is Property dealing (Integration)?
The sale of property to integrate money back into the economy is a common practice amongst criminals
What are Front companies and False loans (Integration)?
Front companies that are incorporated in countries with corporate secrecy laws
What is Foreign Bank complicity (Integration)?
Money laundering using known foreign banks
What are False import/export invoices (Integration)?
Use of false invoices has proven to be very effective in integrating illicit proceeds back into the economy
What do anti money laundering laws entail?
.Require banks and financial services to implement suitable internal control systems to identify suspicious transactions
.Examined by law enforcement agencies
Fraud detection procedures can create legal hazards for auditors, Reffett (2011) found….
.More severe assessments when auditors investigated fraud
.Less severe when they did not investigate
.Monetary damages were higher when fraud was investigated
.Auditors more likely to be found negligent
