Money laundering
Encyclopedia
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. The methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount of money laundered, either worldwide or within their national economy. In 1996 the International Monetary Fund
estimated that two to five percent of the worldwide global economy involved laundered money. However, the FATF, an intergovernmental body set up to combat money laundering, admitted that "overall it is absolutely impossible to produce a reliable estimate of the amount of money laundered and therefore the FATF does not publish any figures in this regard." Academic commentators have likewise been unable to estimate the volume of money with any degree of assurance.
Regardless of the difficulty in measurement, the amount of money laundered each year is in the billions (US dollars) and poses a significant policy concern for governments. As a result, governments and international bodies have undertaken efforts to deter, prevent and apprehend money launderers. Financial institutions have likewise undertaken efforts to prevent and detect transactions involving dirty money, both as a result of government requirements and to avoid the reputational risk involved.
Money laundering takes several different forms although most methods can be categorized into one of a few types. These include "bank methods, smurfing [also known as structuring], currency exchanges, and double-invoicing."
An effective AML program requires a jurisdiction to have criminalized money laundering, given the relevant regulators and police the powers and tools to investigate; be able to share information with other countries as appropriate; and require financial institutions to identify their customers, establish risk-based controls, keep records, and report suspicious activities.
and Convention against Transnational Organized Crime
. It is knowingly engaging in a financial transaction with the proceeds of a crime for the purpose of concealing or disguising the illicit origin of the property.
Bank employees, such as tellers and customer account representatives, are trained in anti-money laundering and are instructed to report activities that they deem suspicious. Additionally, anti-money laundering software
filters customer data, classifies it according to level of suspicion, and inspects it for anomalies. Such anomalies would include any sudden and substantial increase in funds, a large withdrawal, or moving money to a bank secrecy jurisdiction. Smaller transactions that meet certain criteria may be also be flagged as suspicious. For example, structuring can lead to flagged transactions. The software will also flag names that have been placed on government "blacklists" and transactions involving countries that are thought to be hostile to the host nation. Once the software has mined data and flagged suspect transactions, it alerts bank management, who must then determine whether to file a report with the government.
newspaper has become increasingly vocal in its criticism of such regulation, particularly with reference to countering terrorist financing, referring to it as a "costly failure," although concedes that the rules to combat money laundering are more effective.
However, no precise measurement of the costs of regulation balanced against the harms associated with money laundering, and, given the evaluation problems involved in assessing such an issue, it is unlikely the effectiveness of terror finance and money laundering laws could be determined with any degree of accuracy. Government-linked economists have noted the significant negative effects of money laundering on economic development, including undermining domestic capital formation, depressing growth, and diverting capital away from development.
Data privacy has also been raised as a concern. A European Union working party, for example, has announced a list of 44 recommendations to better harmonize, and if necessary pare back, the money laundering laws of EU member states to comply with fundamental privacy rights. In the United States, groups such as the American Civil Liberties Union have expressed concern that money laundering rules require banks to report on their own customers, essentially conscripting private businesses "into agents of the surveillance state."
In any event, many countries are obligated by various international instruments and standards, such as the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances
, the Convention against Transnational Organized Crime
, and the United Nations Convention against Corruption
, and the recommendations of the Financial Action Task Force on Money Laundering
to enact and enforce money laundering laws in an effort to stop narcotics trafficking, international organized crime, and corruption. Other countries, such as Mexico, which are faced with significant crime problems believe that anti-money laundering controls could help curb the underlying crime issue.
(FATF) is an intergovernmental body whose purpose is to develop and promote an international response to combat money laundering. The FATF Secretariat is housed at the headquarters of the OECD in Paris. In October 2001, FATF expanded its mission to include combating the financing of terrorism. FATF is a policy-making body, which brings together legal, financial and law enforcement experts to achieve national legislation and regulatory AML and CFT reforms. Currently, its membership consists of 34 countries and territories and two regional organizations. In addition, FATF works in collaboration with a number of international bodies and organizations. These entities have observer status with FATF, which does not entitle them to vote, but permits full participation in plenary sessions and working groups.
FATF has developed 40 Recommendations on money laundering and 9 Special Recommendations regarding terrorist financing. FATF assesses each member country against these recommendations in published reports. Countries seen as not being sufficiently compliant with such recommendations are subjected to financial sanctions.
FATF’s three primary functions with regard to money laundering are:
The FATF currently comprises 34 member jurisdictions and 2 regional organisations, representing most major financial centres in all parts of the globe:
The United Nations Office on Drugs and Crime
maintains the International Money Laundering Information Network, a website that provides information and software for anti-money laundering data collection and analysis. The World Bank
has a website in which it provides policy advice and best practices to governments and the private sector on anti-money laundering issues.
http://fintraca.gov.af/
In order to meet its objectives, the FinTRACA collects and analyzes information from a variety of sources. These sources include entities with legal obligations to submit reports to the FinTRACA when a suspicious activity is detected, as well as reports of cash transactions above a threshold amount specified by regulation. Also, FinTRACA has access to all related Afghan government information and databases. When the analysis of this information supports the supposition of illegal use of the financial system, the FinTRACA works closely with law enforcement to investigate and prosecute the illegal activity. FinTRACA also cooperates internationally in support of its own analyses and investigations and to support the analyses and investigations of foreign counterparts, to the extent allowed by law. Other functions include training of those entities with legal obligations to report information, development of laws and regulations to support national-level AML objectives, and international and regional cooperation in the development of AML typologies and countermeasures.
To prevent these Illegal uses of money Bangladesh Govt. has introduced the Money Laundering Prevention Act. The Act was last amended in the year 2009 and all the Financial Institutes are following this act. Till today there are 26 Circulars issued by Bangladesh Bank under this act. To prevent Money laundering a banker must do the following:
Financial institutions in Canada are required to track large cash transactions (daily total greater than CAD$10,000.00 or equivalent value in other currencies) that can be used to finance terrorist activities in and beyond Canada's borders and report them to FINTRAC.
Section 12 (1) prescribes the obligations on banks, financial institutions and intermediaries (a) to maintain records detailing the nature and value of transactions which may be prescribed, whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other, and where such series of transactions take place within a month; (b) to furnish information of transactions referred to in clause (a) to the Director within such time as may be prescribed and t records of the identity of all its clients. Section 12 (2) prescribes that the records referred to in sub-section (1) as mentioned above, must be maintained for ten years after the transactions finished. It is handled by the Indian Income Tax Department.
The provisions of the Act are frequently reviewed and various amendments have been passed from time to time.
The recent activity in money laundering in India is through political parties, corporate companies and share market. It is investigated by the Indian Income Tax Department.
Bank accountant must record all the transactions whose amount will be more than Rs. 10 Lakhs. Bank accountant must maintain this records for 10 years. Banks will also make cash transaction report (CTR) and Suspicious transactions report whose amount is more than RS. 10 Lakhs with in 7 days of doubt. This report will be submitted to enforcement directorate and income tax department.
The Proceeds of Crime Act 2002
contains the primary UK anti-money laundering legislation, including provisions requiring businesses within the 'regulated sector' (banking, investment, money transmission, certain professions, etc.) to report to the authorities suspicions of money laundering by customers or others.
Money laundering is widely defined in the UK. In effect any handling or involvement with any proceeds of any crime (or monies or assets representing the proceeds of crime) can be a money laundering offence. An offender's possession of the proceeds of his own crime falls within the UK definition of money laundering. The definition also covers activities which would fall within the traditional definition of money laundering as a process by which proceeds of crime are concealed or disguised so that they may be made to appear to be of legitimate origin.
Unlike certain other jurisdictions (notably the USA and much of Europe), UK money laundering offences are not limited to the proceeds of serious crimes, nor are there any monetary limits, nor is there any necessity for there to be a money laundering design or purpose to an action for it to amount to a money laundering offence. A money laundering offence under UK legislation need not involve money, since the money laundering legislation covers assets of any description. In consequence any person who commits an acquisitive crime (i.e. one from which he obtains some benefit in the form of money or an asset of any description) in the UK will inevitably also commit a money laundering offence under UK legislation.
This applies also to a person who, by criminal conduct, evades a liability (such as a taxation liability) – referred to by lawyers as "obtaining a pecuniary advantage" – as he is deemed thereby to obtain a sum of money equal in value to the liability evaded.
The principal money laundering offences carry a maximum penalty of 14 years imprisonment.
Secondary regulation is provided by the Money Laundering Regulations 2003 which was replaced by the Money Laundering Regulations 2007. They are directly based on the EU directives 91/308/EEC, 2001/97/EC and 2005/60/EC.
One consequence of the Act is that solicitors, accountants, tax advisers and insolvency practitioners who suspect (as a consequence of information received in the course of their work) that their clients (or others) have engaged in tax evasion or other criminal conduct from which a benefit has been obtained, are now required to report their suspicions to the authorities (since these entail suspicions of money laundering). In most circumstances it would be an offence, 'tipping-off', for the reporter to inform the subject of his report that a report has been made. These provisions do not however require disclosure to the authorities of information received by certain professionals in privileged circumstances or where the information is subject to legal professional privilege. Others that are subject to these regulations include financial institutions, credit institutions, estate agents (which includes chartered surveyors), trust and company service providers, high value dealers (who accept cash equivalent to €15,000 (Euro) or more for goods sold), and casinos.
Professional guidance (which is submitted to and approved by the UK Treasury) is provided by industry groups including the Joint Money Laundering Steering Group, the Law Society. and the Consultative Committee of Accountancy Bodies' (CCAB).
However there is no obligation on banking institutions to routinely report monetary deposits or transfers above a specified value. Instead reports have to be made of all suspicious deposits or transfers, irrespective of their value.
The reporting obligations include reporting suspicions relating to gains from conduct carried out in other countries which would be criminal if it took place in the UK. Exceptions were later added to exempt certain activities which were legal in the location where they took place, such as bullfighting
in Spain.
There are more than 200,000 reports of suspected money laundering submitted annually to the authorities in the UK (there were 240,582 reports in the year ended 30 September 2010 – an increase from the 228,834 reports submitted in the previous year). Most of these reports are submitted by banks and similar financial institutions (there were 186,897 reports from the banking sector in the year ended 30 September 2010).
Although 5,108 different organisations submitted suspicious activity reports to the authorities in the year ended 30 September 2010 just four organisations submitted approximately half of all reports, and the top 20 reporting organisations accounted for three-quarters of all reports.
The offence of failing to report a suspicion of money laundering by another person carries a maximum penalty of 5 years imprisonment.
which issues a trading licence for each location. Bureaux de change and money transmitters, such as Western Union
outlets, in the UK fall within the 'regulated sector' and are required to comply with the Money Laundering Regulations 2007. Checks can be carried out by HMRC on all Money Service Businesses.
. These laws, contained in sections 5311 through 5332 of Title 31 of the United States Code, require financial institutions, which under the current definition include a broad array of entities, including banks, credit card companies, life insurers, money service businesses and broker-dealers in securities, to report certain transactions to the United States Treasury. Cash transactions in excess of $10,000 must be reported on a Currency Transaction Report
(CTR), identifying the individual making the transaction as well as the source of the cash. The US is one of the few countries in the world to require reporting of all cash transactions over a certain limit, although certain businesses can be exempt from the requirement. Additionally, financial institutions must report transaction on a Suspicious Activity Report
(SAR) that they deem “suspicious,” defined as a knowing or suspecting that the funds come from illegal activity or disguise funds from illegal activity, that it is structured to evade BSA requirements or appears to serve no known business or apparent lawful purpose; or that the institution is being used to facilitate criminal activity. Attempts by customers to circumvent the BSA, generally by structuring cash deposits to amounts lower than $10,000 by breaking them up and depositing them on different days or at different locations also violates the law.
The financial database created by these reports is administered by the U.S.’s Financial Intelligence Unit (FIU), called the Financial Crimes Enforcement Network
(FinCEN), which is located in Vienna, Virginia. These reports are made available to US criminal investigators, as well as other FIU’s around the globe, and FinCEN will conduct computer assisted analyses of these reports to determine trends and refer investigations.
The BSA requires financial institutions to engage in customer due diligence, which is sometimes known in the parlance as “know your customer.” This includes obtaining satisfactory identification to give assurance that the account is in the customer’s true name, and having an understanding of the expected nature and source of the money that will flow through the customer's accounts. Other classes of customers, such as those with private banking accounts and those of foreign government officials, are subjected to enhanced due diligence because the law deems that those types of accounts are a higher risk for money laundering. All accounts are subject to ongoing monitoring, in which internal bank software scrutinizes transactions and flags for manual inspection those that fall outside certain parameters. If a manual inspection reveals that the transaction is suspicious, the institution should file a Suspicious Activity Report
.
The regulators of the industries involved are responsible to ensure that the financial institutions comply with the BSA. For example, the Federal Reserve and the Office of the Comptroller of the Currency
regularly inspect banks, and may impose civil fines or refer matters for criminal prosecution for non-compliance. A number of banks have been fined and prosecuted for failure to comply with the BSA. Most famously, Riggs Bank
, in Washington D.C., was prosecuted and functionally driven out of business as a result of its failure to apply proper money laundering controls, particularly as it related to foreign political figures.
In addition to the BSA, the U.S. imposes controls on the movement of currency across its borders, requiring individuals to report the transportation of cash in excess of $10,000 on a form called Report of International Transportation of Currency or Monetary Instruments (known as a CMIR). Likewise, businesses, such as automobile dealerships, that receive cash in excess of $10,000 must likewise file a Form 8300 with the Internal Revenue Service, identifying the source of the cash.
On 1 September 2010, the Financial Crimes Enforcement Network
issued an advisory on "informal value transfer system
s" referencing United States v. Banki
.
of 1986. That legislation, contained at section 1956 of Title 18 of the United States Code, prohibits individuals from engaging in a financial transaction with proceeds that were generated from certain specific crimes, known as “specified unlawful activities” (SUAs). Additionally, the law requires that an individual specifically intend in making the transaction to conceal the source, ownership or control of the funds. There is no minimum threshold of money, nor is there the requirement that the transaction succeed in actually disguising the money. Moreover, a “financial transaction” has been broadly defined, and need not involve a financial institution, or even a business. Merely passing money from one person to another, so long as it is done with the intent to disguise the source, ownership, location or control of the money, has been deemed a financial transaction under the law. However, the lone possession of money without either a financial transaction or an intent to conceal is not a crime in the United States.
In addition to money laundering, the law, contained in section 1957 of Title 18 of the United States Code, prohibits spending in excess of $10,000 derived from an SUA, regardless of whether the individual wishes to disguise it. This carries a lesser penalty than money laundering, and unlike the money laundering statute, requires that the money pass through a financial institution.
According to the records compiled by the United States Sentencing Commission, in 2009, the United States Department of Justice typically convicted a little over 81,000 people; of this, approximately 800 are convicted of money laundering as the primary or most serious charge.
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
estimated that two to five percent of the worldwide global economy involved laundered money. However, the FATF, an intergovernmental body set up to combat money laundering, admitted that "overall it is absolutely impossible to produce a reliable estimate of the amount of money laundered and therefore the FATF does not publish any figures in this regard." Academic commentators have likewise been unable to estimate the volume of money with any degree of assurance.
Regardless of the difficulty in measurement, the amount of money laundered each year is in the billions (US dollars) and poses a significant policy concern for governments. As a result, governments and international bodies have undertaken efforts to deter, prevent and apprehend money launderers. Financial institutions have likewise undertaken efforts to prevent and detect transactions involving dirty money, both as a result of government requirements and to avoid the reputational risk involved.
Methods
Money laundering often occurs in three steps: first, cash is introduced into the financial system by some means (“placement”), the second involves carrying out complex financial transactions in order to camouflage the illegal source (“layering”), and the final step entails acquiring wealth generated from the transactions of the illicit funds (“integration”). Some of these steps may be omitted, depending on the circumstances; for example, non-cash proceeds that are already in the financial system would have no need for placement.Money laundering takes several different forms although most methods can be categorized into one of a few types. These include "bank methods, smurfing [also known as structuring], currency exchanges, and double-invoicing."
- Structuring: Often known as "smurfing," it is a method of placement by which cash is broken into smaller deposits of money, used to defeat suspicion of money laundering and to avoid anti-money laundering reporting requirements. A sub-component of this is to use smaller amounts of cash to purchase bearer instruments, such as money orders, and then ultimately deposit those, again in small amounts.
- Bulk cash smuggling: Physically smuggling cash to another jurisdiction, where it will be deposited in a financial institution, such as an offshore bankOffshore bankAn offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages. These advantages typically include:...
, with greater bank secrecyBank secrecyBank secrecy is a legal principle in some jurisdictions under which banks are not allowed to provide to authorities personal and account information about their customers unless certain conditions apply...
or less rigorous money laundering enforcement.
- Cash-intensive businesses: A business typically involved in receiving cash will use its accounts to deposit both legitimate and criminally derived cash, claiming all of it as legitimate earnings. Often, the business will have no legitimate activity.
- Overpurchasing: This is where a launderer buys an item from a private seller, pays with an excess check, and is paid back the overflow. This remainder can be claimed as legal spending, and be used however the launderer likes. Ex.- "I would like to buy your product at $300. However, I would like to pay with a $2000 check, and for you to send me back the $1700"
- Trade-based laundering: Under- or over-valuing invoices in order to disguise the movement of money.
- Shell companies and trusts: Trusts and shell companies disguise the true owner of money. Trusts and corporate vehicles, depending on the jurisdiction, need not disclose their true, beneficial, owner.
- Bank capture: Money launderers or criminals buy a controlling interest in a bank, preferably in a jurisdiction with weak money laundering controls, and then move money through the bank without scrutiny.
- Casinos: An individual will walk in to a casino or a horse race track with cash and buy chips, play for a while and then cash in his chips, for which he will be issued a cheque. The money launderer will then be able to deposit the cheque into his bank account, and claim it as gambling winnings. If the casino is controlled by organized crime and the money launderer works for them, the launderer will lose the illegally obtained money on purpose in the casino and be paid with other funds by the criminal organization.
- Real estate: Real estate may be purchased with illegal proceeds, then sold. The proceeds from the sale appear to outsiders to be legitimate income. Alternatively, the price of the property is manipulated; the seller will agree to a contract that under-represents the value of the property, and will receive criminal proceeds to make up the difference.
- Black salaries: Companies might have unregistered employees without a written contract who are given cash salaries. Black cash might be used to pay them.
Enforcement
Anti-money laundering (AML) is a term mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent, detect and report money laundering activities. Anti-money laundering guidelines came into prominence globally as a result of the formation of the Financial Action Task Force (FATF) and the promulgation of an international framework of anti-money laundering standards. These standards began to have more relevance in 2000 and 2001 after FATF began a process to publicly identify countries that were deficient in their anti-money laundering laws and international cooperation, a process colloquially known as "name and shame."An effective AML program requires a jurisdiction to have criminalized money laundering, given the relevant regulators and police the powers and tools to investigate; be able to share information with other countries as appropriate; and require financial institutions to identify their customers, establish risk-based controls, keep records, and report suspicious activities.
Criminalizing money laundering
The elements of the crime of money laundering are set forth in the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic SubstancesUnited Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances
The United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988 is one of three major drug control treaties currently in force. It provides additional legal mechanisms for enforcing the 1961 Single Convention on Narcotic Drugs and the 1971 Convention on...
and Convention against Transnational Organized Crime
Convention against Transnational Organized Crime
The Convention against Transnational Organized Crime is a United Nations-sponsored multilateral treaty against transnational organized crime, adopted in 2000...
. It is knowingly engaging in a financial transaction with the proceeds of a crime for the purpose of concealing or disguising the illicit origin of the property.
The role of financial institutions
Today, most financial institutions globally, and many non-financial institutions, are required to identify and report transactions of a suspicious nature to the financial intelligence unit in the respective country. For example, a bank must verify a customer's identity and, if necessary, monitor transactions for suspicious activity. This is often termed as KYC – "know your customer." This means, to begin with, knowing the identity of the customers, and further, understanding the kinds of transactions in which the customer is likely to engage. By knowing one's customers, financial institutions will often be able to identify unusual or suspicious behavior, termed anomalies, which may be an indication of money laundering.Bank employees, such as tellers and customer account representatives, are trained in anti-money laundering and are instructed to report activities that they deem suspicious. Additionally, anti-money laundering software
Anti-money laundering software
Anti-money laundering software is a term mainly used in the finance and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent or report money laundering activities. Anti money-laundering guidelines came into prominence globally...
filters customer data, classifies it according to level of suspicion, and inspects it for anomalies. Such anomalies would include any sudden and substantial increase in funds, a large withdrawal, or moving money to a bank secrecy jurisdiction. Smaller transactions that meet certain criteria may be also be flagged as suspicious. For example, structuring can lead to flagged transactions. The software will also flag names that have been placed on government "blacklists" and transactions involving countries that are thought to be hostile to the host nation. Once the software has mined data and flagged suspect transactions, it alerts bank management, who must then determine whether to file a report with the government.
Value of enforcement costs and associated privacy concerns
The financial services industry has become more vocal about the rising costs of anti-money laundering regulation, and the limited benefits that they claim it appears to bring. One commentator wrote that "[w]ithout facts, [anti-money laundering] legislation has been driven on rhetoric, driving by ill-guided activism responding to the need to be "seen to be doing something" rather than by an objective understanding of its impact on predicate crime. The social panic approach is justified by the language used – we talk of the battle against terrorism or the war on drugs..." The EconomistThe Economist
The Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...
newspaper has become increasingly vocal in its criticism of such regulation, particularly with reference to countering terrorist financing, referring to it as a "costly failure," although concedes that the rules to combat money laundering are more effective.
However, no precise measurement of the costs of regulation balanced against the harms associated with money laundering, and, given the evaluation problems involved in assessing such an issue, it is unlikely the effectiveness of terror finance and money laundering laws could be determined with any degree of accuracy. Government-linked economists have noted the significant negative effects of money laundering on economic development, including undermining domestic capital formation, depressing growth, and diverting capital away from development.
Data privacy has also been raised as a concern. A European Union working party, for example, has announced a list of 44 recommendations to better harmonize, and if necessary pare back, the money laundering laws of EU member states to comply with fundamental privacy rights. In the United States, groups such as the American Civil Liberties Union have expressed concern that money laundering rules require banks to report on their own customers, essentially conscripting private businesses "into agents of the surveillance state."
In any event, many countries are obligated by various international instruments and standards, such as the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances
United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances
The United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988 is one of three major drug control treaties currently in force. It provides additional legal mechanisms for enforcing the 1961 Single Convention on Narcotic Drugs and the 1971 Convention on...
, the Convention against Transnational Organized Crime
Convention against Transnational Organized Crime
The Convention against Transnational Organized Crime is a United Nations-sponsored multilateral treaty against transnational organized crime, adopted in 2000...
, and the United Nations Convention against Corruption
United Nations Convention against Corruption
The United Nations Convention against Corruption is the first legally binding international anti-corruption instrument. In its 8 Chapters and 71 Articles, the UNCAC obliges its States Parties to implement a wide and detailed range of anti-corruption measures affecting their laws, institutions and...
, and the recommendations of the Financial Action Task Force on Money Laundering
Financial Action Task Force on Money Laundering
The Financial Action Task Force , also known by its French name, Groupe d'action financière , is an intergovernmental organization founded in 1989 on the initiative of the G7. The purpose of the FATF is to develop policies to combat money laundering and terrorist financing...
to enact and enforce money laundering laws in an effort to stop narcotics trafficking, international organized crime, and corruption. Other countries, such as Mexico, which are faced with significant crime problems believe that anti-money laundering controls could help curb the underlying crime issue.
Organizations working against money laundering
Formed in 1989 by the G7 countries, the Financial Action Task Force on Money LaunderingFinancial Action Task Force on Money Laundering
The Financial Action Task Force , also known by its French name, Groupe d'action financière , is an intergovernmental organization founded in 1989 on the initiative of the G7. The purpose of the FATF is to develop policies to combat money laundering and terrorist financing...
(FATF) is an intergovernmental body whose purpose is to develop and promote an international response to combat money laundering. The FATF Secretariat is housed at the headquarters of the OECD in Paris. In October 2001, FATF expanded its mission to include combating the financing of terrorism. FATF is a policy-making body, which brings together legal, financial and law enforcement experts to achieve national legislation and regulatory AML and CFT reforms. Currently, its membership consists of 34 countries and territories and two regional organizations. In addition, FATF works in collaboration with a number of international bodies and organizations. These entities have observer status with FATF, which does not entitle them to vote, but permits full participation in plenary sessions and working groups.
FATF has developed 40 Recommendations on money laundering and 9 Special Recommendations regarding terrorist financing. FATF assesses each member country against these recommendations in published reports. Countries seen as not being sufficiently compliant with such recommendations are subjected to financial sanctions.
FATF’s three primary functions with regard to money laundering are:
- Monitoring members’ progress in implementing anti-money laundering measures.
- Reviewing and reporting on laundering trends, techniques and countermeasures.
- Promoting the adoption and implementation of FATF anti-money laundering standards globally.
The FATF currently comprises 34 member jurisdictions and 2 regional organisations, representing most major financial centres in all parts of the globe:
The United Nations Office on Drugs and Crime
United Nations Office on Drugs and Crime
The United Nations Office on Drugs and Crime is a United Nations agency that was established in 1997 as the Office for Drug Control and Crime Prevention by combining the United Nations International Drug Control Program and the Crime Prevention and Criminal Justice Division in the United Nations...
maintains the International Money Laundering Information Network, a website that provides information and software for anti-money laundering data collection and analysis. The World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
has a website in which it provides policy advice and best practices to governments and the private sector on anti-money laundering issues.
Laws and enforcement by region
Many jurisdictions adopt a list of specific predicate crimes for money laundering prosecutions, while others criminalize the proceeds of any serious crime.Afghanistan
The Financial Transactions and Reports Analysis Center of Afghanistan (FinTRACA) was established as a Financial Intelligence Unit (FIU) under the Anti Money Laundering and Proceeds of Crime Law passed by decree late in 2004. The main purpose of this law is to protect the integrity of the Afghan financial system and to gain compliance with international treaties and conventions. The Financial Intelligence Unit is a semi-independent body that is administratively housed within the Central Bank of Afghanistan (Da Afghanistan Bank).The main objective of FinTRACA is to deny the use of the Afghan financial system to those who obtained funds as the result of illegal activity, and to those who would use it to support terrorist activities.http://fintraca.gov.af/
In order to meet its objectives, the FinTRACA collects and analyzes information from a variety of sources. These sources include entities with legal obligations to submit reports to the FinTRACA when a suspicious activity is detected, as well as reports of cash transactions above a threshold amount specified by regulation. Also, FinTRACA has access to all related Afghan government information and databases. When the analysis of this information supports the supposition of illegal use of the financial system, the FinTRACA works closely with law enforcement to investigate and prosecute the illegal activity. FinTRACA also cooperates internationally in support of its own analyses and investigations and to support the analyses and investigations of foreign counterparts, to the extent allowed by law. Other functions include training of those entities with legal obligations to report information, development of laws and regulations to support national-level AML objectives, and international and regional cooperation in the development of AML typologies and countermeasures.
Bangladesh
In Bangladesh, this issue has been dealt with by the Prevention of Money Laundering Act, 2002 (Act No. VII of 2002). In terms of section 2, "Money Laundering means (a) Properties acquired or earned directly or indirectly through illegal means; (b) Illegal transfer, conversion, concealment of location or assistance in the above act of the properties acquired or earned directly of indirectly through legal or illegal means." In this Act, “Properties means movable or immovable properties of any nature and description”.To prevent these Illegal uses of money Bangladesh Govt. has introduced the Money Laundering Prevention Act. The Act was last amended in the year 2009 and all the Financial Institutes are following this act. Till today there are 26 Circulars issued by Bangladesh Bank under this act. To prevent Money laundering a banker must do the following:
- While opening a new account, the account opening form should be duly filled up by all the information of the Customer.
- The KYC has to be properly filled up
- The TP (Transaction Profile) is mandatory for a client to understand his/her transactions. If needed, the TP has to be updated at the Client’s consent.
- All other necessary papers should be properly collected along with the Voter ID card.
- If there is any suspicious transaction is notified, the BAMLCO (Branch Anti Money Laundering Compliance Officer) has to be notified and accordingly the STR (Suspicious Transaction Report) reporting has to be done.
- The Cash department should be aware of the Transactions. It has to be noted if suddenly a big amount of money is deposited in any account. Proper documents will be required if any Client does this type of transaction.
- Structuring, over/ under Invoicing is another way to do Money Laundering. The Foreign Exchange Department should look into this matter cautiously.
- If in any account there is a transaction exceeding 7.00 lac in a single day that has to be reported as CTR (cash Transaction report)
- All the Bank Officials must go through all the 26 Circulars and must use in doing the Banking.
Canada
FINTRAC (Financial Transaction and Reports Analysis Centre of Canada) is responsible for investigation of money and terrorist financing cases that are originating or destined for Canada. The financial intelligence unit was created by the amendment of the Proceeds of Crime (Money Laundering) Act in December 2001 (via Bill C-25) and created the Proceeds of Crime (Money Laundering) and Terrorist Financing Act.Financial institutions in Canada are required to track large cash transactions (daily total greater than CAD$10,000.00 or equivalent value in other currencies) that can be used to finance terrorist activities in and beyond Canada's borders and report them to FINTRAC.
European Union
The EU directive 2005/60/EC "on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing" tries to prevent such crime by requiring banks, real estate agents and many more companies to investigate and report usage of cash in excess of €15,000. The earlier EU directives 91/308/EEC and 2001/97/EC also relate to money laundering.India
The Prevention of Money-Laundering Act, 2002 came into effect on 1 July 2005.Section 12 (1) prescribes the obligations on banks, financial institutions and intermediaries (a) to maintain records detailing the nature and value of transactions which may be prescribed, whether such transactions comprise of a single transaction or a series of transactions integrally connected to each other, and where such series of transactions take place within a month; (b) to furnish information of transactions referred to in clause (a) to the Director within such time as may be prescribed and t records of the identity of all its clients. Section 12 (2) prescribes that the records referred to in sub-section (1) as mentioned above, must be maintained for ten years after the transactions finished. It is handled by the Indian Income Tax Department.
The provisions of the Act are frequently reviewed and various amendments have been passed from time to time.
The recent activity in money laundering in India is through political parties, corporate companies and share market. It is investigated by the Indian Income Tax Department.
Bank accountant must record all the transactions whose amount will be more than Rs. 10 Lakhs. Bank accountant must maintain this records for 10 years. Banks will also make cash transaction report (CTR) and Suspicious transactions report whose amount is more than RS. 10 Lakhs with in 7 days of doubt. This report will be submitted to enforcement directorate and income tax department.
United Kingdom
Money laundering and terrorist funding legislation in the UK is governed by four Acts of primary legislation:-- Terrorism Act 2000Terrorism Act 2000The Terrorism Act 2000 is the first of a number of general Terrorism Acts passed by the Parliament of the United Kingdom. It superseded and repealed the Prevention of Terrorism Act 1989 and the Northern Ireland Act 1996...
- Anti-terrorism, Crime and Security Act 2001Anti-terrorism, Crime and Security Act 2001The Anti-Terrorism, Crime and Security Act 2001 was formally introduced into the Parliament of the United Kingdom on 19 November 2001, two months after the terrorist attacks on New York on 11 September. It received royal assent and came into force on 14 December 2001...
- Proceeds of Crime Act 2002Proceeds of Crime Act 2002The Proceeds of Crime Act 2002 is an Act of the Parliament of the United Kingdom which provides for the confiscation or civil recovery of the proceeds from crime and contains the principal money laundering legislation in the UK.-Background:...
- Serious Organised Crime and Police Act 2005Serious Organised Crime and Police Act 2005The Serious Organized Crime and Police Act 2005 is an Act of the Parliament of the United Kingdom aimed primarily at creating the Serious Organised Crime Agency, it also significantly extended and simplified the powers of arrest of a constable and introduced restrictions on protests in the...
The Proceeds of Crime Act 2002
Proceeds of Crime Act 2002
The Proceeds of Crime Act 2002 is an Act of the Parliament of the United Kingdom which provides for the confiscation or civil recovery of the proceeds from crime and contains the principal money laundering legislation in the UK.-Background:...
contains the primary UK anti-money laundering legislation, including provisions requiring businesses within the 'regulated sector' (banking, investment, money transmission, certain professions, etc.) to report to the authorities suspicions of money laundering by customers or others.
Money laundering is widely defined in the UK. In effect any handling or involvement with any proceeds of any crime (or monies or assets representing the proceeds of crime) can be a money laundering offence. An offender's possession of the proceeds of his own crime falls within the UK definition of money laundering. The definition also covers activities which would fall within the traditional definition of money laundering as a process by which proceeds of crime are concealed or disguised so that they may be made to appear to be of legitimate origin.
Unlike certain other jurisdictions (notably the USA and much of Europe), UK money laundering offences are not limited to the proceeds of serious crimes, nor are there any monetary limits, nor is there any necessity for there to be a money laundering design or purpose to an action for it to amount to a money laundering offence. A money laundering offence under UK legislation need not involve money, since the money laundering legislation covers assets of any description. In consequence any person who commits an acquisitive crime (i.e. one from which he obtains some benefit in the form of money or an asset of any description) in the UK will inevitably also commit a money laundering offence under UK legislation.
This applies also to a person who, by criminal conduct, evades a liability (such as a taxation liability) – referred to by lawyers as "obtaining a pecuniary advantage" – as he is deemed thereby to obtain a sum of money equal in value to the liability evaded.
The principal money laundering offences carry a maximum penalty of 14 years imprisonment.
Secondary regulation is provided by the Money Laundering Regulations 2003 which was replaced by the Money Laundering Regulations 2007. They are directly based on the EU directives 91/308/EEC, 2001/97/EC and 2005/60/EC.
One consequence of the Act is that solicitors, accountants, tax advisers and insolvency practitioners who suspect (as a consequence of information received in the course of their work) that their clients (or others) have engaged in tax evasion or other criminal conduct from which a benefit has been obtained, are now required to report their suspicions to the authorities (since these entail suspicions of money laundering). In most circumstances it would be an offence, 'tipping-off', for the reporter to inform the subject of his report that a report has been made. These provisions do not however require disclosure to the authorities of information received by certain professionals in privileged circumstances or where the information is subject to legal professional privilege. Others that are subject to these regulations include financial institutions, credit institutions, estate agents (which includes chartered surveyors), trust and company service providers, high value dealers (who accept cash equivalent to €15,000 (Euro) or more for goods sold), and casinos.
Professional guidance (which is submitted to and approved by the UK Treasury) is provided by industry groups including the Joint Money Laundering Steering Group, the Law Society. and the Consultative Committee of Accountancy Bodies' (CCAB).
However there is no obligation on banking institutions to routinely report monetary deposits or transfers above a specified value. Instead reports have to be made of all suspicious deposits or transfers, irrespective of their value.
The reporting obligations include reporting suspicions relating to gains from conduct carried out in other countries which would be criminal if it took place in the UK. Exceptions were later added to exempt certain activities which were legal in the location where they took place, such as bullfighting
Bullfighting
Bullfighting is a traditional spectacle of Spain, Portugal, southern France and some Latin American countries , in which one or more bulls are baited in a bullring for sport and entertainment...
in Spain.
There are more than 200,000 reports of suspected money laundering submitted annually to the authorities in the UK (there were 240,582 reports in the year ended 30 September 2010 – an increase from the 228,834 reports submitted in the previous year). Most of these reports are submitted by banks and similar financial institutions (there were 186,897 reports from the banking sector in the year ended 30 September 2010).
Although 5,108 different organisations submitted suspicious activity reports to the authorities in the year ended 30 September 2010 just four organisations submitted approximately half of all reports, and the top 20 reporting organisations accounted for three-quarters of all reports.
The offence of failing to report a suspicion of money laundering by another person carries a maximum penalty of 5 years imprisonment.
Bureaux de change
All UK Bureaux de change are registered with Her Majesty's Revenue and CustomsHer Majesty's Revenue and Customs
Her Majesty's Revenue and Customs is a non-ministerial department of the UK Government responsible for the collection of taxes and the payment of some forms of state support....
which issues a trading licence for each location. Bureaux de change and money transmitters, such as Western Union
Western Union
The Western Union Company is a financial services and communications company based in the United States. Its North American headquarters is in Englewood, Colorado. Up until 2006, Western Union was the best-known U.S...
outlets, in the UK fall within the 'regulated sector' and are required to comply with the Money Laundering Regulations 2007. Checks can be carried out by HMRC on all Money Service Businesses.
United States
The approach in the United States to stopping money laundering is usefully broken into two areas: preventive (regulatory) measures and criminal measures.Preventive
In an attempt to prevent dirty money from entering the US financial system in the first place, the United States Congress passed a series of laws, starting in 1970, collectively known as the Bank Secrecy ActBank Secrecy Act
The Bank Secrecy Act of 1970 requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering...
. These laws, contained in sections 5311 through 5332 of Title 31 of the United States Code, require financial institutions, which under the current definition include a broad array of entities, including banks, credit card companies, life insurers, money service businesses and broker-dealers in securities, to report certain transactions to the United States Treasury. Cash transactions in excess of $10,000 must be reported on a Currency Transaction Report
Currency transaction report
A currency transaction report is a report that U.S. financial institutions are required to file for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency of more than $10,000...
(CTR), identifying the individual making the transaction as well as the source of the cash. The US is one of the few countries in the world to require reporting of all cash transactions over a certain limit, although certain businesses can be exempt from the requirement. Additionally, financial institutions must report transaction on a Suspicious Activity Report
Suspicious activity report
In United States financial regulation, a suspicious activity report is a report made by a financial institution to the Financial Crimes Enforcement Network , an agency of the United States Department of the Treasury, regarding suspicious or potentially suspicious activity.The purpose of a...
(SAR) that they deem “suspicious,” defined as a knowing or suspecting that the funds come from illegal activity or disguise funds from illegal activity, that it is structured to evade BSA requirements or appears to serve no known business or apparent lawful purpose; or that the institution is being used to facilitate criminal activity. Attempts by customers to circumvent the BSA, generally by structuring cash deposits to amounts lower than $10,000 by breaking them up and depositing them on different days or at different locations also violates the law.
The financial database created by these reports is administered by the U.S.’s Financial Intelligence Unit (FIU), called the Financial Crimes Enforcement Network
Financial Crimes Enforcement Network
The Financial Crimes Enforcement Network is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat money laundering, terrorist financiers, and other financial crimes.As reflected in its name, the Financial...
(FinCEN), which is located in Vienna, Virginia. These reports are made available to US criminal investigators, as well as other FIU’s around the globe, and FinCEN will conduct computer assisted analyses of these reports to determine trends and refer investigations.
The BSA requires financial institutions to engage in customer due diligence, which is sometimes known in the parlance as “know your customer.” This includes obtaining satisfactory identification to give assurance that the account is in the customer’s true name, and having an understanding of the expected nature and source of the money that will flow through the customer's accounts. Other classes of customers, such as those with private banking accounts and those of foreign government officials, are subjected to enhanced due diligence because the law deems that those types of accounts are a higher risk for money laundering. All accounts are subject to ongoing monitoring, in which internal bank software scrutinizes transactions and flags for manual inspection those that fall outside certain parameters. If a manual inspection reveals that the transaction is suspicious, the institution should file a Suspicious Activity Report
Suspicious activity report
In United States financial regulation, a suspicious activity report is a report made by a financial institution to the Financial Crimes Enforcement Network , an agency of the United States Department of the Treasury, regarding suspicious or potentially suspicious activity.The purpose of a...
.
The regulators of the industries involved are responsible to ensure that the financial institutions comply with the BSA. For example, the Federal Reserve and the Office of the Comptroller of the Currency
Office of the Comptroller of the Currency
The Office of the Comptroller of the Currency is a US federal agency established by the National Currency Act of 1863 and serves to charter, regulate, and supervise all national banks and the federal branches and agencies of foreign banks in the United States...
regularly inspect banks, and may impose civil fines or refer matters for criminal prosecution for non-compliance. A number of banks have been fined and prosecuted for failure to comply with the BSA. Most famously, Riggs Bank
Riggs Bank
Riggs Bank was a Washington, D.C.-based commercial bank with branches located in the surrounding metropolitan area and offices around the world. For most of its history, it was the largest bank in the nation's capital. Riggs had been controlled by the Albritton family since the 1980s, but they lost...
, in Washington D.C., was prosecuted and functionally driven out of business as a result of its failure to apply proper money laundering controls, particularly as it related to foreign political figures.
In addition to the BSA, the U.S. imposes controls on the movement of currency across its borders, requiring individuals to report the transportation of cash in excess of $10,000 on a form called Report of International Transportation of Currency or Monetary Instruments (known as a CMIR). Likewise, businesses, such as automobile dealerships, that receive cash in excess of $10,000 must likewise file a Form 8300 with the Internal Revenue Service, identifying the source of the cash.
On 1 September 2010, the Financial Crimes Enforcement Network
Financial Crimes Enforcement Network
The Financial Crimes Enforcement Network is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat money laundering, terrorist financiers, and other financial crimes.As reflected in its name, the Financial...
issued an advisory on "informal value transfer system
Informal value transfer system
An informal value transfer system refers to any system, mechanism, or network of people that receives money for the purpose of making the funds or an equivalent value payable to a third party in another geographic location, whether or not in the same form...
s" referencing United States v. Banki
United States v. Banki
On January 7, 2010, the U.S. Attorney for the Southern District of New York announced that naturalized U.S. citizen Mahmoud Reza Banki, born in Iran, had been arrested for criminal violations of the Iran Trade Embargo. On March 17, 2010, the US Attorney filed an indictment in United States...
.
Criminal sanctions
Money laundering has been criminalized in the United States since the Money Laundering Control ActMoney Laundering Control Act
The Money Laundering Control Act of 1986 is a United States Act of Congress that made money laundering a Federal crime. It was passed in 1986. It consists of two sections, and . It for the first time in the United States criminalized money laundering...
of 1986. That legislation, contained at section 1956 of Title 18 of the United States Code, prohibits individuals from engaging in a financial transaction with proceeds that were generated from certain specific crimes, known as “specified unlawful activities” (SUAs). Additionally, the law requires that an individual specifically intend in making the transaction to conceal the source, ownership or control of the funds. There is no minimum threshold of money, nor is there the requirement that the transaction succeed in actually disguising the money. Moreover, a “financial transaction” has been broadly defined, and need not involve a financial institution, or even a business. Merely passing money from one person to another, so long as it is done with the intent to disguise the source, ownership, location or control of the money, has been deemed a financial transaction under the law. However, the lone possession of money without either a financial transaction or an intent to conceal is not a crime in the United States.
In addition to money laundering, the law, contained in section 1957 of Title 18 of the United States Code, prohibits spending in excess of $10,000 derived from an SUA, regardless of whether the individual wishes to disguise it. This carries a lesser penalty than money laundering, and unlike the money laundering statute, requires that the money pass through a financial institution.
According to the records compiled by the United States Sentencing Commission, in 2009, the United States Department of Justice typically convicted a little over 81,000 people; of this, approximately 800 are convicted of money laundering as the primary or most serious charge.
Notable cases
- Bank of New YorkBank of New YorkThe Bank of New York was a global financial services company established in 1784 by the American Founding Father Alexander Hamilton. It existed until its merger with the Mellon Financial Corporation on July 2, 2007...
: $7 billion of Russian capital flightCapital flightCapital flight, in economics, occurs when assets and/or money rapidly flow out of a country, due to an economic event and that disturbs investors and causes them to lower their valuation of the assets in that country, or otherwise to lose confidence in its economic...
laundered through accounts controlled by bank executives, late 1990s
- NauruNauruNauru , officially the Republic of Nauru and formerly known as Pleasant Island, is an island country in Micronesia in the South Pacific. Its nearest neighbour is Banaba Island in Kiribati, to the east. Nauru is the world's smallest republic, covering just...
: $70 billion of Russian capital flight laundered through unregulated Nauru offshore shell banks, late 1990s
- Sani AbachaSani AbachaGeneral Sani Abacha was a Nigerian military leader and politician. A Kanuri from Borno by tribe, he was born and brought up in Kano, Nigeria. He was the de facto President of Nigeria from 1993 to 1998....
: $2–5 billion of government assets laundered through banks in the U.K.,Luxembourg, Jersey (Channel Islands), and Switzerland, by president of Nigeria.
- Bank of Credit and Commerce InternationalBank of Credit and Commerce InternationalThe Bank of Credit and Commerce International was a major international bank founded in 1972 by Agha Hasan Abedi, a Pakistani financier. The Bank was registered in Luxembourg with head offices in Karachi and London. Within a decade BCCI touched its peak...
: Unknown amount, estimated in billions, of criminal proceeds, including drug trafficking money, laundered during the mid-1980s.
Popular culture
- The Shawshank RedemptionThe Shawshank RedemptionThe Shawshank Redemption is a 1994 American drama film written and directed by Frank Darabont and starring Tim Robbins and Morgan Freeman....
– Andy Dufresne laundered kickbackPolitical corruptionPolitical corruption is the use of legislated powers by government officials for illegitimate private gain. Misuse of government power for other purposes, such as repression of political opponents and general police brutality, is not considered political corruption. Neither are illegal acts by...
money for Prison Warden Samuel Norton, then obtained it from a few Portland, ME banks after his escape. - Office SpaceOffice SpaceOffice Space is a 1999 American comedy film satirizing work life in a typical 1990s software company. Written and directed by Mike Judge, it focuses on a handful of individuals fed up with their jobs portrayed by Ron Livingston, Jennifer Aniston, Gary Cole, David Herman, Ajay Naidu, and Diedrich...
– Peter and his co-workers attempt to gradually steal money from the company they work for with a computer virusComputer virusA computer virus is a computer program that can replicate itself and spread from one computer to another. The term "virus" is also commonly but erroneously used to refer to other types of malware, including but not limited to adware and spyware programs that do not have the reproductive ability...
, but when the virus goes wrong, they believe money laundering to be the only solution. - Mickey Blue EyesMickey Blue EyesMickey Blue Eyes is a 1999 film directed by Kelly Makin. Hugh Grant stars as Michael Felgate, an English auctioneer living in New York City who becomes entangled in his soon-to-be father in-law's mafia connections...
– Michael is given paintings to sell by a crime family which was later revealed to be money laundering by the FBI when they spoke to him. - Wall Street: Money Never Sleeps – Jake is asked by Gordon Gekko, his future father-in-law, to help him obtain his daughter Winnie's signature in order to transport over $100 million which Jake stated was laundering.
- Breaking BadBreaking BadBreaking Bad is an American television drama series created and produced by Vince Gilligan. Set and produced in Albuquerque, New Mexico, Breaking Bad is the story of Walter White , a struggling high school chemistry teacher who is diagnosed with advanced lung cancer at the beginning of the series...
– Skyler White helps her husband, Walter, launder his meth money, doing research using this very pageSelf-referenceSelf-reference occurs in natural or formal languages when a sentence or formula refers to itself. The reference may be expressed either directly—through some intermediate sentence or formula—or by means of some encoding...
.
Money laundering in its literal sense
At Westin St. Francis' Hotel in San Francisco all coins are cleaned since 1938 in a special machine. This practice was introduced in order to avoid dirt on white gloves of the ladies.See also
- Bank Secrecy ActBank Secrecy ActThe Bank Secrecy Act of 1970 requires financial institutions in the United States to assist U.S. government agencies to detect and prevent money laundering...
- Customer Identification ProgramCustomer Identification ProgramAccording to provisions of the USA Patriot Act, all financial institutions must verify the identity of individuals wishing to conduct financial transactions. The law was implemented by regulations in 2003 which require financial institutions to develop a Customer Identification Program ...
- ConfiscationConfiscationConfiscation, from the Latin confiscatio 'joining to the fiscus, i.e. transfer to the treasury' is a legal seizure without compensation by a government or other public authority...
- Currency Transaction ReportCurrency transaction reportA currency transaction report is a report that U.S. financial institutions are required to file for each deposit, withdrawal, exchange of currency, or other payment or transfer, by, through, or to the financial institution which involves a transaction in currency of more than $10,000...
- EmbezzlementEmbezzlementEmbezzlement is the act of dishonestly appropriating or secreting assets by one or more individuals to whom such assets have been entrusted....
- Financial Action Task Force on Money LaunderingFinancial Action Task Force on Money LaunderingThe Financial Action Task Force , also known by its French name, Groupe d'action financière , is an intergovernmental organization founded in 1989 on the initiative of the G7. The purpose of the FATF is to develop policies to combat money laundering and terrorist financing...
- Financial Crimes Enforcement NetworkFinancial Crimes Enforcement NetworkThe Financial Crimes Enforcement Network is a bureau of the United States Department of the Treasury that collects and analyzes information about financial transactions in order to combat money laundering, terrorist financiers, and other financial crimes.As reflected in its name, the Financial...
- HawalaHawalaHawala is an informal value transfer system based on the performance and honor of a huge network of money brokers, which are primarily located in the Middle East, North Africa, the Horn of Africa, and South Asia...
- Money Laundering Control ActMoney Laundering Control ActThe Money Laundering Control Act of 1986 is a United States Act of Congress that made money laundering a Federal crime. It was passed in 1986. It consists of two sections, and . It for the first time in the United States criminalized money laundering...
- Office of Foreign Assets ControlOffice of Foreign Assets ControlThe Office of Foreign Assets Control is an agency of the United States Department of the Treasury under the auspices of the Under Secretary of the Treasury for Terrorism and Financial Intelligence. OFAC administers and enforces economic and trade sanctions based on U.S...
- Offshore banking
- Organized CrimeOrganized crimeOrganized crime or criminal organizations are transnational, national, or local groupings of highly centralized enterprises run by criminals for the purpose of engaging in illegal activity, most commonly for monetary profit. Some criminal organizations, such as terrorist organizations, are...
- Politically exposed personPolitically exposed personPEP is an abbreviation for Politically Exposed Person, a term that describes a person who has been entrusted with a prominent public function, or an individual who is closely related to such a person. The terms PEP, Politically Exposed Person and Senior Foreign Political Figure are often used...
- Shell (corporation)Shell (corporation)A shell corporation is a company which serves as a vehicle for business transactions without itself having any significant assets or operations. Shell corporations are not in themselves illegal and have legitimate business purposes. However, they are a main component of the underground economy,...
- Smurfing (crime)Smurfing (crime)Structuring, also known as smurfing in banking industry jargon, is the practice of executing financial transactions in a specific pattern calculated to avoid the creation of certain records and reports required by law, such as the United States's Bank Secrecy Act and Internal Revenue Code...
- Terrorist financingTerrorist FinancingTerrorist financing came into limelight after the events of terrorism on 9/11. The US passed the USA PATRIOT Act to, among other reasons, attempt thwarting the financing of terrorism and anti-money laundering making sure these were given some sort of adequate focus by US financial institutions...
- USA Patriot ActUSA PATRIOT ActThe USA PATRIOT Act is an Act of the U.S. Congress that was signed into law by President George W. Bush on October 26, 2001...
External links
- UNODC – United Nations Office on Drugs and Crime – on money-laundering and countering the financing of terrorism
- Financial Market Integrity Unit, The World Bank
- US Department of State International Narcotics Control Strategy Report (INCSR), annual report issued in March every year. Essential reading for all compliance officers for evaluating country money laundering risk