DescriptionEvery criminal act anywhere that involves obtaining money illegally produces funds which need to be laundered. The IMF estimates that 2-5% of global GDP ($590bn and $1.5 trillion) is laundered every year - $590bn is the equivalent of Spain's yearly output. Globally, regulations have come in which affect certain businesses, especially banks and other financial institutions. These businesses have been required to put in place specific arrangements to prevent and detect money laundering and the criminal activity that underlies it. As money launderers have resorted to more sophisticated ways of disguising the source of their funds, so employees have to be ever more aware of what they are dealing with, and how to deal with it.
- At present books on money laundering deterrence tend to focus on the detailed regulations and therefore do not provide much in the form of practical advice and guidance. The books also tend to look at money laundering regulation from a single perspective - say that of the UK.
- Legislation requires firms to provide all relevant employees with adequate training on that legislation, and to recognise and deal appropriately with transactions where money laundering is suspected.
- This book will look at a series of types of money laundering, explain how they are used and what controls, if any, could be used by an institution to protect itself.
- What should make a banker suspicious, how would suspicion appear to a court or regulator, and what will the impact be on controls and reputational risk.
1 WHAT IS MONEY LAUNDERING?
The initial concerns.
What is money laundering?
The process of money laundering.
The primary offences.
The evasion of taxation.
Suspicion and reporting.
The local service provider.
The process of money laundering.
2 INTERNATIONAL MONEY LAUNDERING REGULATION – THE ROLE OF THE FINANCIAL ACTION TASK FORCE.
Who are the Financial Action Task Force?
History of FATF.
The 40 FATF Recommendations.
The 9 Special Recommendations.
3 EUROPE – THE THIRD MONEY LAUNDERING DIRECTIVE.
Background to the Directive.
Aims of the Directive.
The UK implementation of the Directive.
Key provisions of the Directive.
Overview of the Directive.
4 THE UK REGULATORY FRAMEWORK.
The Financial Services and Markets Act 2000.
Fit and Proper Person Rules.
FSA Regulation and Money Laundering Deterrence.
The Proceeds of Crime Act 2002.
The Terrorism Act 2000 and the Anti-Terrorism Crime and Security Act 2001.
The Money Laundering Regulations 2007.
5 HOW RULES ARE APPLIED IN THE UK – THE JOINT MONEY LAUNDERING STEERING GROUP.
The risk-based approach.
The regulatory framework.
6 THE WOLFSBERG PRINCIPLES.
The Wolfsberg Group.
What is the real signifi cance of the Principles?
The Wolfsberg Principles, Statements and Guidelines.
The Statement against Corruption.
The Statement on Private Banking (May 2002).
Principles on correspondent banking.
7 THE US REGULATORY FRAMEWORK.
The US Patriot Act.
The other key US regulations.
Key issues in the US Patriot Act.
The Bank Secrecy Act 1970.
8 FINANCIAL SANCTIONS.
What are financial sanctions?
Failing to comply.
Compliance with financial sanctions.
Financial sanctions as part of normal money laundering deterrence procedures.
Difficulties faced by firms when monitoring financial sanctions.
9 THE ROLE OF THE MONEY LAUNDERING REPORTING OFFICER.
What is a Money Laundering Reporting Officer?
Who can be appointed as an MLRO?
The role of the MLRO.
The safe harbour and its limitations.
What is an MLRO's internal reporting procedure?
What is contained in the MLRO's Annual Report?
10 MONEY LAUNDERING TRAINING.
The importance of staff awareness and training.
The core obligations of training.
Legal and regulatory obligations.
Internal training procedures.
Training methods and assessment.
11 KNOW YOUR CUSTOMER.
What is Know Your Customer?
Why should firms carry out KYC requirements?
What does KYC involve?
What are the general issues?
Reliance on third parties.
The Third EC Directive – KYC requirements.
The UK KYC requirements.
12 RETAIL CUSTOMER IDENTIFICATION.
Who are retail customers?
Basic retail identification evidence.
Source of funds.
13 CORPORATE CUSTOMER IDENTIFICATION.
Who is a corporate customer?
Risks associated with corporate customers.
Standard evidence for corporate entities.
Private and unlisted companies.
Enhanced due diligence.
Charities and trusts.
14 POLITICALLY EXPOSED PERSONS.
What is a politically exposed person?
The definition of a politically exposed person (PEP).
At what level is someone a PEP?
Prominent public functions.
The immediate family rules.
The associate rules.
What is the risk-based approach?
The risk-based approach to determining PEPs.
15 NON FACE-TO-FACE CUSTOMERS.
Who are non face-to-face customers?
Additional measures for non face-to-face customers.
Risk-based approach to non face-to-face customers.
16 SUSPICIOUS CONDUCT AND TRANSACTIONS.
What is a suspicious transaction?
Activity inconsistent with the customer's business.
Avoiding a national reporting or record-keeping requirement.
Wire or fund transfers.
Insufficient or suspicious information by customer.
Other suspicious customer activity.
17 UNUSUAL TRANSACTIONS.
The identification of unusual transactions.
The development of policy.
The types of events that might cause suspicion.
The problems of customer identification.
What might highlight terrorist activity?
18 INVESTIGATING SUSPICIONS.
The investigation process.
Making a report.
What is meant by "knowledge" and "suspicion"?
What is meant by "reasonable grounds" to know or suspect?
The investigation by the nominated officer.
Reporting in the UK.
Sanctions and penalties for failing to comply.
19 ONGOING MONITORING.
The importance of ongoing monitoring.
The link to customer relationship management.
What does ongoing monitoring involve?
Enhanced ongoing monitoring.
The risk of dormant accounts.
What type of enhanced monitoring is required?
Automated vs. manual systems of monitoring.
Issues to consider when implementing a monitoring system.
20 TIPPING OFF.
Letting the customer know.
The problems in practice.
Penalties for tipping off.
Communications with customers under investigation.
21 RECORD KEEPING.
The purpose of record keeping.
What records have to be kept?
In what form should records be kept?
Failure to keep records.
22 RISK MANAGEMENT.
The relationship between money laundering deterrence and terrorist fi nancing programmes and risk management.
The risk of money laundering and terrorist fi nancing.
Money laundering and terrorist fi nancing risk.
23 MONEY LAUNDERING DETERRENCE SOFTWARE.
What is money laundering deterrence software?
The effectiveness of money laundering deterrence software.
What type of actions will be monitored by the software?
The benefi ts of anti-money laundering (AML) software.
What type of software is currently on the market?
Selecting your software.
What about the smaller firm?