2. An overview of money laundering and AML regime goals

KEY QUESTIONS

•Why would somebody desire to sponsor a criminal activity?

•List the different types of yield from the commissioning of a crime.

•What kind of intangible utility can someone derive from a crime?

•How can currency be reinvested into criminal activity?

•Why is it necessary to conceal an illicit origin of proceeds?

•What kind of techniques do criminals use when trying to disguise the origin of proceeds from crime?

•What is the difference between the terms “legalized” and “legitimized”?

•Why is it important to mask multiple financial transactions in the course of money laundering?

•What is a predicate offence? Why is it called designated?

•Which methods are used to describe predicate offences?

•Name international conventions that cover specific predicate offences.

•How can tax evasion be defined as a predicate offence to money laundering?

•List major designated categories of offences covered by the General Glossary.

•List the articles of the Merida Convention which cover specific predicate offences.

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•What does a criminal do when he launders money in the narrow sense?

•Describe the differences between money laundering definitions in part (a) of Article 6 of the Palermo Convention.

•Which three actions, with proceeds from crime, will be qualified as money laundering in the broad sense?

•Define the term “basic concepts of a country’s legal system”.

•What is the difference between conversion and transfer of property?

•Compare different characteristics of criminal proceeds: nature, source, location, disposition and ownership rights.

•Is it fair to convict a person on money laundering charges for possession of proceeds from crime? Why?

•Why is it necessary, for competent authorities, to keep in mind that a perpetrator had to know at the time of receipt, that property was proceeds of crime?

•List eight activities that constitute money laundering in the broad sense.

•Describe the hierarchy of an organized criminal group and list the main activities of its actors.

•Why is it necessary to break large amounts of cash into smaller amounts during the “placement” phase of money laundering?

•Which activities will be performed during the “layering” phase of money laundering?

•What will a criminal do during the integration of proceeds from crime (based upon the three phase model)?

•Why are AML measures so important? Is it easy to convict criminals of commissioning predicate offences?

•Why do money launderers eventually seek to purchase real estate and stakes in legitimate companies?

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2.1. Basic concept of money laundering

•purchasing clothes, food and personal items;

•keeping stolen household Criminals desire to use proceeds from a

Trying to disguise the origin of proceeds, criminals send them through legal channels:

•use different financial institutions, make multiple financial transactions

•transfer funds to, through and from different countries, especially offshore financial centers (OFCs)

•establish shell companies

•use different financial instruments and value-storing assets

•use other intermediaries, such as financial advisers, realtors, accountants and service providers

When money is laundered and its illegal origin is disguised, the origins of illicit proceeds appear to look like a legitimate business. The ill-gotten gains of crime have been “legitimized”.

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2.2. Predicate offences: the scope and methods of AML/CFT description

Methods of describing predicate offences:

1.All offenses.

2.A threshold approach:

a.All offences that are designated “serious offences”, for example, indictable offences, felonies and crimes as opposed to misdemeanors.

b.All offences punishable by a minimum penalty of more than six months imprisonment.

c.All offences punishable by a maximum penalty of more than one

The 21 designated categories of offences (General Glossary):

1.Participation in an organized criminal

group and racketeering. Art. 5 of Palermo Convention

2.Terrorism, including terrorism financing.

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