RISKS AND METHODS OF MONEY LAUNDERING AND TERRORISM FINANCING
Money Laundering and Terrorism Financing Methods
- Name economic and social effects and risks of money laundering
- Recognize methods used
- in banks and other deposit-taking institutions (e.g., credit unions, other credit institutions – building societies)
- in non-bank financial institutions (e.g., insurance companies, broker-dealers, casinos, precious metal dealers, dealers in real estate and high-value items, bureau de change, money services businesses)
- by gatekeepers (e.g., lawyers, notaries, accountants, auditors, investment advisors)
Recognition of Risks
- Recognize risks associated with
- new technologies (e.g., on-line banking, Internet casinos, on-line brokerage, e-commerce, secured payment processing, stored-value cards)
- terrorist financing methods (e.g., charities, non-governmental organizations)
- other known methods (e.g. FATF Typologies, FIU SAR reviews, Egmont Group’s showcases)
- Recognize risks inherent to structures designed to hide beneficial ownership (e.g., companies not registered, trusts, shell corporations, off -shore companies, shelf companies, bearer shares, bonds or other certificates of ownership)
- Identify differing jurisdictional risks dependent on legislation, regulation, and secrecy laws, and government reports (e.g., FATF member countries, World Bank / IMF sanctions, corruption index, various governmental agency advisories, off -shore banking centers)
COMPLIANCE STANDARDS FOR ANTI-MONEY LAUNDERING (AML) AND COMBATING THE FINANCING OF TERRORISM (CFT)
International
- Articulate FATF recommendations and other FATF initiatives
- Articulate BASEL customer due diligence and KYC principles
- Articulate Wolfsberg AML Principles for private and correspondent Banking, the financing of terrorism, and monitoring and screening for suspicious activity
Regional
- Articulate EU Directives on Money Laundering
- Articulate appreciation of key US legislative (e.g., USA PATRIOT Act) and regulatory initiatives applied to international transactions
AML COMPLIANCE PROGRAM
AML / CFT Compliance Program Design in Different Industry Settings
- Assess risk (e.g., product, customer, geography) and design a risk scoring model for the institution
- Advise the institution and specific business units of any AML concerns and recommend appropriate mitigating factors
- Develop internal AML policies, procedures, and controls
- Conduct ongoing AML training
- Obtain endorsement of senior management and / or board of directors
- Implement account opening controls (e.g., KYC, enhanced due diligence, customer verification)
- Evaluate, implement, and utilize Electronic AML Tools
- Perform background investigations on customers and potential employees
- Monitor and trace money or funds through a business
- Identify suspicious behavior associated with
- general client behavior (e.g., nervous demeanor, unusual questions, customer identification circumstances)
- transactions or account activity in different settings (e.g., cash transactions, non-cash deposits, wire transfers, correspondent and commercial accounts, safe deposit box, credit transactions, trade financing and investment activity, non-financial and non-bank financial institution settings)
- suspicious employee activity
- Process SARs / STRs internally and externally
- Report results to the competent authority
- Cooperate with the competent authority after reporting suspicious activity
- Manage regulatory or other legal implications of SARs / STRs
- Apply and implement a consolidated AML program for institutions operating in multiple jurisdictions including
- ongoing internal assessments of the AML program
- independent assessments of the AML program
- screening of high-risk and prohibited entities (e.g., PEPs, OFAC)
Maintenance of an Effective AML / CFT Compliance Program
- Identify
- best practices for embedding compliance into institutional culture
- trends from SARs / STRs and adapt the program as necessary
- Conduct and evaluate ongoing internal assessments of the current AML program
- Implement necessary program changes (e.g., policy / procedure change, enhanced training)
- Develop, implement, and document ongoing training
- Assess the risk of new business products and services
- Monitor and incorporate changes to legislation, regulations, and guiding principles
- Communicate program effectiveness to management and / or the board of directors
- Respond to AML audit findings, document the response, and adopt appropriate actions
- Identify and apply relevant trends from international and national typologies and exercises
- Ensure
- timely conduct of independent examinations or audits of AML and CFT programs
- institutional awareness of high-risk and prohibited entities (e.g., PEPs, OFAC, FEPs)
- Coordinate with the Human Resources department to implement appropriate screening programs to ensure high standards when hiring employees
CONDUCTING OR SUPPORTING THE INVESTIGATION PROCESS
SAR and STR Filing
- Ensure senior management and the board of directors are provided information regarding SARs / STRs including a
- summary of all SARs / STRs
- detailed listing of high-profile SARs / STRs (e.g., on employees, PEPs)
- Maintain an internal investigation log / diary
- Report SARs / STRs to appropriate authorities in the prescribed manner
- Maintain and secure all supporting documentation used to identify suspicious activity
- Deliver records to law enforcement and government authorities on request
- Provide evidential / expert statements on behalf of the institution
- Recommend to an institution whether to maintain or close an account after
- consulting legal counsel
- an appropriate written request by a law enforcement agency to leave an account open
Assistance of Institutional Investigations
- Contact and cooperate with enforcement agencies
- Identify and provide records that are legally available to law enforcement officers without a court order / subpoena
- Share information with other financial institutions or government agencies in accordance with applicable laws
- Recommend whether to terminate or suspend an employee within the institution who may be involved in an activity under investigation
- Coordinate an investigation of an employee or high-profit le customer or transaction with internal management, legal advisors, and auditors
Assistance of Legal and Government Inquiries Domestically and Internationally Within Parameters of the Law
- Identify appropriate interviewing techniques and content
- Interview customers and employees using appropriate techniques (e.g., body language, proximity)
- Interpret information gathered during a customer or employee interview
- Commence an investigation through the identification of research tools and sources of information
- List methods by which law enforcement may request information from a financial institution
- Deliver records to enforcement agencies in response to a subpoena or court order in accordance with the law
- Identify and provide records that are legally available to law enforcement officers without a court order or subpoena
- Explain
- how authorities (e.g., FIUs, central banks, governments, regulatory bodies) can cooperate across jurisdictions and how they lend expertise in money laundering investigations and prosecutions
- the role of authorities to guard against control or acquisition of significant participation in a financial institution by criminals or their confederates
- the basis and means for cooperation between countries in anti-money laundering investigations including:
- freezing
- seizure
- confiscation
- mutual legal assistance
- letters rogatory
- informed exchanges
- extradition
- What a government FIU does, what the ideal set up looks like, and how it interacts with the private sector
- Describe the role of strict safeguards on privacy and data protection