ANTI-MONEY LAUNDERINGAND SUSPICIOUS

TRANSACTIONS …Highlights

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Disclaimer

Overview

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INTRODUCTION TO ANTI MONEY LAUNDERING

In October 1931, Al Capone was prosecuted and

convicted of Money Laundering , it was based on his

conviction that Robinson stated the below; 

"Money laundering is called what it is because that

perfectly describes what takes place - illegal, or dirty,

money is put through a cycle of transactions, or

washed, so that it comes out the other end as legal, or

clean, money. In other words, the source of illegally

obtained funds is obscured through a succession of

transfers and deals in order that those same funds can

eventually be made to appear as legitimate income".

Overview

•It is the method by which criminals disguise the illegal

origins of their wealth and protect their asset bases, so as

to avoid the suspicion of law enforcement agencies and

prevent leaving a trail of incriminating evidence.

•The application of intelligence and investigative

techniques can be one way of detecting and disrupting

the activities of terrorists and terrorist organizations.

Overview

The term "money laundering" is said to originate from Mafia

ownership of Laundromats in the United States. Gangsters

there were earning huge sums in cash from extortion,

prostitution, gambling and bootleg liquor. They needed to

show a legitimate source for these monies.

One of the ways in which they were able to do this was by

purchasing outwardly legitimate businesses and to mix their

illicit earnings with the legitimate earnings they received from

these businesses. Laundromats were chosen by these

gangsters because they were cash businesses and this was

an undoubted advantage to people like Al Capone who

purchased them 

Overview

Financial institutions rely on their reputation for probity and integrity. A

financial institution found to have assisted in laundering money will be

shunned by legitimate enterprises.

•STAGES OF MONEY LAUNDERING

I. PLACEMENT

This is the first stage in the washing cycle. Money laundering is a

"cash-intensive" business, generating vast amounts of cash from

illegal activities (for example, street dealing of drugs where

payment takes the form of cash in small denominations). The

monies are placed into the financial system or retail economy or

are smuggled out of the country.

Overview

II. LAYERING

In the course of layering, there is the first attempt at

concealment or disguise of the source of the

ownership of the funds by creating complex layers of

financial transactions designed to disguise the audit

trail and provide anonymity. The purpose of layering is to

disassociate the illegal monies from the source of

the crime by purposely creating a complex web of financial

transactions aimed at concealing any audit trail as

well as the source and ownership of funds.

            

Overview

iii. INTEGRATION

At this the money is integrated into the legitimate economic and

financial system and is assimilated with all other assets in the

system. Integration of the "cleaned" money into the economy is

accomplished by the launderer making it appear to have been

legally earned.

By this stage, it is exceedingly difficult to distinguish legal and illegal

wealth.

Elements of an Effective AML Program

Board Approval

A written program

Designation of an accountable officer

Training

An independent review of audits

A system of internal controls;

The most important baseline of an effective AML program (or any

compliance program, for that matter) is the board of directors’

and senior management’s support for maintaining a culture of

compliance throughout the entire institution.

AML / Suspicious Transaction Compliance Training

One of the basic pillars of a strong anti-money laundering (AML) program for any

financial institution depends on a well designed and effective transaction monitoring

system. The basic purpose of having a strong AML transaction monitoring system is to

identify and protect the institution from any transactions that may lead to money

laundering and terrorist financing and that will also enable the monitoring units to

identify related risks and file relevant Suspicious Activity Reports (SARs) with the

appropriate regulatory authorities.

Many financial institutions across the globe are using manually designed AML

transaction monitoring reports/alerts, but with the advancement of IT Technologies,

there are a number of automated.

Transactions and account Monitoring and Reporting……

AML transaction monitoring solution providers available in the market that give

you the option of purchasing complete AML packages including sanctions/black

list screenings, customer profiling, comprehensive transaction monitoring with

reports/alerts etc.

A key component of a sound AML transaction monitoring system are solid AML

transaction monitoring reports/alerts. There could be a number of AML transaction

monitoring reports/alerts designed through the rules defined in the systems

according to the requirements of financial institutions. This article will discuss basic

AML transactions reports/alerts for manual/electronic AML transaction monitoring

systems

Transactions and account Monitoring and Reporting……

Basic reports/alerts

1. Cash deposits above and below the threshold: The criteria for this report should

be daily. It should include all credit transactions for any single customer and the

threshold would depend on the requirements in each country. The report must

also indicate the total number of customer transactions and the total number of

report transactions.

2. Cash withdrawals above and below the threshold: The criteria for this report

should be daily. It should include all debit transactions by any single customer. The

threshold would depend on the requirements in each country. The report must

also indicate the total number of customer transactions and the total

number of report transactions.

3. Weekly and monthly cash deposits and withdrawals: The criteria for this report

should be weekly and monthly. It should include all debit transactions by any single

customer during the week/month. The report must also indicate the total number of

customer transactions and the total number of report transactions.

4. Incoming wire transfers above and below the threshold: The criteria for this report

should be daily, weekly and monthly. It should include all credit transactions for any

single customer. The threshold would depend on the requirements in each country.

The report must also indicate the total number of customer transactions and the

total number of report transactions.

Others are: Outgoing wire transfers above and below the threshold, Internal transfers

above and below the threshold, Instruments deposits above and below the threshold,

Check withdrawal report above and below the threshold,

 It should always be kept in mind that the success of any AML transaction monitoring

system is dependent on strong transaction monitoring alerts that are designed

according to specific rules and requirements of controlling units.

AML /SUSPICIOUS TRANSACTIONS TRAINING

Typologies of Money Laundering

 In the AML context, the term “typologies” refers to the various techniques used

to launder money or finance terrorism. Criminals are very creative in

developing methods to launder money .Money laundering typologies in any

given location are heavily influenced by the economy, financial markets, and

anti-money laundering. Consequently, methods vary from place to place and

over time.

Association with corruption (bribery, proceeds of corruption & instances of

corruption undermining AML/CFT measures): Corruption (bribery of officials) to

facilitate money laundering by undermining AML/CFT measures, including

possible influence by politically exposed persons (PEPs):

AML /SUSPICIOUS TRANSACTIONS TRAINING

  e.g. investigating officials or private sector compliance staff in banks being

bribed or influenced to allow money laundering to take place.

Cash couriers / currency smuggling: concealed movement of currency to

avoid transaction / cash reporting measures.

AML /SUSPICIOUS TRANSACTIONS TRAINING

Structuring (smurfing): A method involving numerous transactions (deposits,

withdrawals, transfers), often various people, high volumes of small transactions

and sometimes numerous accounts to avoid detection threshold reporting

obligations.

Use of Wire transfers: to electronically transfer funds between financial

institutions and often to another jurisdiction to avoid detection and

confiscation.

AML /SUSPICIOUS TRANSACTIONS TRAINING

 Abuse of non-profit organizations (NPOs): May be used to raise terrorist funds,

obscure the source and nature of funds and to distribute terrorist finances

Mingling (business investment): A key step in money laundering involves

combining proceeds of crime with legitimate business monies to obscure the

source of funds.

Use of shell companies/corporations: a technique to obscure the identity of

persons controlling funds and exploit relatively low reporting requirements.

Identity fraud / false identification: used to obscure identification of those

involved in many methods of money laundering and terrorist financing.

AML /SUSPICIOUS TRANSACTIONS TRAINING

Use “gatekeepers” professional services (lawyers, accountants, brokers etc): to

obscure identity of beneficiaries and the source of illicit funds. May also include

corrupt professionals who offer ‘specialist’ money laundering services to

criminals.

New Payment technologies: use of emerging payment technologies for money

laundering and terrorist financing. Examples include cell phone-based

remittance and payment systems.

Identification and reporting of suspicious transaction

Reporting of suspicious transaction is preceded by first identifying such transactions and clients that are likely to fall in to that categoryPlease note that this is not an exhaustive list. So what constitutes suspicious transactions? •Transactions involving large cash amounts. •Funds being "accidentally" paid into the wrong bank account. •Constant movement of money amongst different business units (e.g. From collective investments to linked products and vice versa) without any apparent purpose. •Requests for payments to be made to 3rd parties. •Transfer of funds to other product providers.•Cash discovered in e.g. dwelling of the deceased/disclosed by family. •Payment of bequest amounts in cash. •Purchasing of assets from an estate in cash. •Transaction which has no apparent business or lawful purpose.

Identification and reporting of suspicious transaction

Who is a suspicious client?•A client who provides vague or contradictory information or references. •A client who has no record of past or present employment or involvement in a business but who engages frequently transactions involving large sums of money. •A client whose business or sources of funds are ill-defined, or who is reluctant to provide details about his/her business or source of funds. •A client who uses a financial institution which is located far from his/her home or place of work. •A client who is reluctant to disclose other bank or business relationships. •A client who operates different accounts at different branches of the same financial institution. •A client who enters into transactions that do not appear to have a legitimate business purpose or that are out of the ordinary given the client’s profile. •A client who is reluctant to reveal information concerning the nature of his/her specific business or does not seem to be fully aware of the nature of the business. •A client who acts for an undisclosed principal.

Identification and reporting of suspicious transaction

Scenarios of suspicious activities to be considered:The threshold for additional information in our country is N5, 000,000 for Individuals and N10, 000,000 for Clients.

Scenario 1: A customer sends a N4, 900,000 money transfers. The next day the customer sends N4, 900,000 to the same person. The customer may be structuring his transactions in order to avoid High Currency Amount Transaction Reporting requirements. You should consider whether a Suspicious Transaction Report should be filed. Scenario 2: A Corporate client sends money transfers just below N10, 000,000 over the course of several days. The customer may be structuring his purchases and you should consider whether a Suspicious Transaction Report needs to be filed. 

Scenario 3: A customer comes in several times on the same day to pick up money transfers which adds up to more than N5, 000,000 you should also consider whether a Suspicious Transaction Report needs to be filed. 

Scenario 4: A customer picks up a money transfer from your location. After the customer has left, you discover that the customer also picked up money transfers at some of your other offices on the same day. The customer may be attempting to avoid the reporting requirements. You should consider whether structured or suspicious activity has occurred. If you conclude that structured or suspicious activity has occurred, you must file a Suspicious Transaction Report. If the total amount of currency paid to the customer passes the Money laundering transaction reporting requirements, you should also consider filing a money laundering transaction report. Scenario 5: A corporate client says that he wants to send a N11, 000,000 money transfers and wants to pay for it with cash. When you tell the customer that you will need to complete money laundering transaction report. If the client says that it no longer wants to send the transaction, or asks how it can avoid having a report filed on the transaction. You should consider filing a suspicious transaction Report on the transaction or attempted transaction

AML /SUSPICIOUS TRANSACTIONS TRAINING

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