- •Contents
- •Abbreviations and acronyms
- •Introduction
- •1.1. A brief history of money laundering
- •1. Al Capone, 1920–30s
- •2. Meyer Lansky, 1930–50s
- •3. Watergate Scandal, 1973
- •1.2. The first stage: Al Capone tax evasion charges
- •Illicit earnings were mingled with receipts from the laundromat business and then paid back to the mobsters, making an impression of legitimate income
- •1.3. The subsequent stages: better hiding techniques
- •1.4. The appearance of “money laundering” expression in the legal context
- •1.5. Further development of the international aml/cft standards.
- •2.1. Basic concept of money laundering
- •2.2. Predicate offences: the scope and methods of description
- •2.3. Definition of money laundering in the narrow sense
- •2.4. Definition of money laundering in the broad sense
- •2.5. Anti-money laundering measures of combating organized crime
- •2.6. The process of money laundering
- •3.1. Key institutions of a national aml/cft regime
- •Investigation and field operations, e.G. Making searches, taking witness statements
- •3.2. Methodology bases of a risk-based approach and national coordination
- •Identify
- •Implementation
- •3.3. Financial institutions: general definition and their activities and operations related to managing clients’ assets
- •Individual
- •3.4. Financial institutions: other activities and operations
- •3.6. Risk-assessment obligations and decisions for countries
- •Information necessary for conducting aml/cft risk assessments
- •Including changes to
- •4.1. An extension liability for money laundering to the predicate offence perpetrator: the adverse implications for the economy
- •I. The perpetrator of the predicate offence is not held liable for laundering the proceeds
- •II. The perpetrator of the predicate offence is held liable for laundering the proceeds
- •4.2. Dual criminality for offences committed internationally
- •In Beta this conduct is a predicate offence for money laundering
- •In Alpha this conduct is not a predicate offence for money laundering
- •In Beta this conduct is not a predicate offence for money laundering
- •In Alpha this conduct is a predicate offence for money laundering
- •4.3. “State of mind” connected with a money laundering offence
- •Vienna Convention, Art. 2.3
- •4.4. Confiscation and provisional measures
- •Vienna Convention
- •5.1. Social and economic origins of terrorism
- •5.2. Basic concept of terrorist financing
- •5.3. Legal definition of terrorism and terrorist financing
- •Indirectly
- •Its purpose is
- •It is intended to cause
- •5.4. Characteristics of the terrorist financing offence
- •5 .5. Targeted financial sanctions related to terrorism, terrorist financing and proliferation
- •6.1. The United Nations bodies of the international aml/cft framework
- •1. The United Nations Security Council (unsc)
- •2. The United Nations Office on Drugs and Crime (unodc)
- •It is responsible for carrying out the Global Program against Money Laundering (gpml est. 1997)
- •6.2. The United Nations organizations of the international aml/cft framework
- •1. The International Monetary Fund (imf)
- •2. The World Bank
- •6.3. Main functions of the Financial Action Taskforce
- •Identifying current money laundering and terrorist financing threats
- •Identification of high-risk and non-cooperative jurisdictions, release of relevant public documents
- •6.6. The Wolfsberg Group of banks and its documents
- •It is an association of eleven global private banks that came together in 2000 to develop aml/cft industry standards
- •7.1. General requirements for aml/cft programs of financial institutions and groups of financial institutions
- •Including appropriate compliance management arrangements
- •Intra-group sharing of information (on customers, accounts and transactions) is required for the purposes of cdd and ml/tf risk management
- •7.2. Methodology approach to customer due diligence
- •Information accompanying wire transfers (r. 16, in)
- •Veracity
- •Verifying the customer’s identity
- •Information
- •7.3. Additional features of the customer due diligence
- •It must be ensured that documents, data and information collected are kept up-to-date
- •It may be permitted to complete the verification as soon as practically possible
- •7.4. Customer due diligence measures for legal persons and their arrangements
- •It should be required to understand the following in relation to customers that are legal persons or legal arrangements, r. 10, in, (c)
- •If different, a principal place of business
- •7.5. Actions of financial institutions in case of inability to comply with customer due diligence requirements
- •If it is not possible for a financial institution to comply with the cdd requirements
- •If there are reasonable grounds to suspect that funds are proceeds of criminal activity or are related to terrorist financing, r. 20
- •If they report their suspicions in good faith, even if they do not know precisely what the underlying activity was (they do not know whether activity was criminal)
- •7.6. Record-keeping requirements for financial institutions
- •Information obtained through the cdd measures
- •8.1. Reliance on customer due diligence information received from third parties
- •8.2. Potentially higher-risk situations for enhanced customer due diligence measures
- •It is mandatory to apply enhanced cdd measures when the fatf calls for it, r. 19
- •It was identified by a mutual evaluation, assessment or published in a follow up report
- •8.3. Lower-risk situations for simplified customer due diligence measures
- •If these requirements can ensure adequate transparence of beneficial ownership
- •It was identified by a mutual evaluation
- •8.4. Enhanced customer due diligence measures
- •Information from public databases
- •Volume of assets
- •Increasing the number and timing of controls applied
- •8.5. Simplified customer due diligence measures
- •Verify the identity of
- •Inferring the purpose and nature of the business relationship
- •9.1. Aml/cft requirements for cross-border correspondent banking relationships
- •Including whether the institution has been subject to a money laundering or terrorist financing investigation or regulatory action
- •9.2. Definition of wire transfers and activities of involved parties
- •Initiates the wire transfer and transfers the funds on behalf of the originator
- •Intermediary financial institution(s)
- •Irrespective of whether the originator and the beneficiary are the same person
- •Includes wire transfers that take place entirely with the borders of the European Economic Area (eea)
- •9.4. Aml/cft measures of information gathering related to wire transfers
- •In the absence of an account
- •9.5. Aml/cft responsibilities of financial institutions performing wire transfers
- •9.6. Aml/cft obligations for persons that provide money or value transfer services
- •If these institutions are subject to aml/cft requirements
- •10.1. Definition of politically exposed persons
- •Individuals who are (have been) entrusted with prominent public functions such as
- •It covers family members and close associates of pePs
- •It does not cover middle ranking or more junior individuals
- •10.2. Additional measures for politically exposed persons
- •In case of a higher risk
- •10.3. Aml/cft requirements for financial institutions with foreign operations
- •If aml/cft legislature of the host country does not permit the implementation of
- •If these measures are not sufficient
- •10.4. Customer due diligence and record-keeping requirements for designated non-financial businesses and professions
- •Independent legal professionals
- •Independent accountants
- •10.5. Other aml/cft requirements for designated non-financial businesses and professions
Increasing the number and timing of controls applied
Selecting patterns of transactions that need further examination
Requiring the first payment to be carried out through an account in the customer’s name with a bank subject to similar CDD standards
8.5. Simplified customer due diligence measures
Simplified CDD measures
Where the risks of money laundering and terrorist financing are lower
There is a suspicion of money laundering or terrorist financing
Are not acceptable if
Specific higher-risk scenarios apply
After the establishment of the business relationship
The customer
Verify the identity of
The beneficial owner
E.g. if account transactions rise above a defined monetary threshold
Reducing
The frequency of customer identification updates
The degree of on-going monitoring and scrutinizing transactions
Based on a reasonable monetary threshold
Inferring the purpose and nature of the business relationship
From the type of transactions
From the business relationship established
Not collecting specific information
Not carrying out specific measures
To understand the purpose and intended nature of the business relationship
Lecture 9. Additional AML/CFT measures for specific activities of financial institutions
Key terms
correspondent banking
payable-through accounts
wire transfer
originator
cover payment
serial payment
beneficiary financial institution
batch transfer
straight-through processing
domestic wire transfer
European Economic Area (EEA)
cross-border wire transfer
qualifying wire transfer
originator’s information
transaction reference number
Key questions
What financial institutions should be required to perform in addition to normal CDD measures when they establish cross-border correspondent banking and other similar relationship?
How can a financial institution determine the reputation of a counterpart in cross-border correspondent banking relationship?
Define payable-through accounts.
List the main parties of a wire transfer.
What does the intermediary financial institution do in a wire transfer?
Give the definition of a cover payment.
What are the responsibilities of a beneficiary financial institution involved in a wire transfer?
Define straight-through processing.
Give the definition of a batch transfer.
What is the difference between a cross-border wire transfer and a qualifying wire transfer?
Where can the system used to transfer the payment message of a domestic wire transfer be located?
Which way domestic wire transfers can be designated supra-national jurisdiction? Give an example.
List three objectives of applying AML/CFT measures to wire transfers.
What information are financial institutions required to gather on the originator of any wire transfer?
What information should contain the customer identification number of the originator of a qualifying cross-border wire transfer?
What are the responsibilities of the ordering financial institution in a wire transfer?
List the obligations of the intermediary financial institution in a wire transfer.
What is common in responsibilities of the intermediary financial institution and the beneficiary financial institution in a wire transfer?
Which procedure should the beneficiary financial institution in a qualifying wire transfer perform toward the beneficiary?
Define money or value transfer services.
Should separate licensing for MVTS be imposed on financial institutions that are already licensed as banks and provide such services?
What information about its agents should the MVTS provider maintain?