method of money laudering
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Money Laundering
&Terrorist Financing
Abdur Rauf Shaikh
Master of Sociology (Pak)
Master of Transnational Crime Prevention (MTCP) - AustraliaCertified Anti-Money Laundering Specialist (CAMS) - USA
Federal Investigation Agency (FIA)
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Outlines
Banks & other Depository Institutions
oElectronic Funds Transfer (EFT)
oSmurfing/Structuring
oCorresponding Banking
oPrivate Banking
oBank Complicity
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Methods
ofMoney Laundering
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Methods of ML
Strict AML policies for the banking sector
Significant shift in laundering activity from
the traditional banking sector to the non-
bank financial sector and to non-financial
businesses and professions
Not only banks, but also non-bank financial
institutions and non-financial businesses
have become attractive avenues for
introducing illicit gains into regular financial
channels
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Wire / Electronic Funds Transfer
Funds transfer by electronic means-an electronic terminal, telephone,
computer, automated teller machine
(ATM) or magnetic tape
Funds transfer can happen within a
country or across borders
Trillions of dollars go through the
worldswires each day
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Electronic Funds Transfer (EFT)
The goal of launderers is to move the funds from
one account to another, from one bank toanother, from one jurisdiction to another, to
avoid tracing the origin of funds by law
enforcement agencies / tax authorities
The money launderer will do the following to avoid
detection:
varying the amounts sent
keeping them relatively small if possible
where possible will use reputable organizations
throughout the process
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Indicators of EFT
Funds transfers that occur to or from a
financial secrecy haven, or to or from a high-risk geographic location without an apparent
business reason
When the activity is inconsistent with thecustomersbusiness or history
Large, incoming funds transfers are received
on behalf of a foreign client, with little or no
explicit reason
Funds transfers are sent or received from the
same person to or from different accounts
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Structuring
The most commonly known ML method
The individuals engaged in structuring are
runners (smurfs), hired by the launderers
They go from bank to bank depositing cashand purchasing monetary instruments in
amounts under the reporting threshold
Smurfing can be done in many settings orindustries, including the banking, money
remittance and casino sectors
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Structuring / Smurfing
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Account Structuring / Smurfing
An account smurfer, works for a Forex
broker, opens numerous bank accounts indifferent banks as well as abroad
Accounts are opened in real and fictitious
names
Sometimes the account smurfers use
identification documents of dead persons
With funds supplied by the money brokers, the
account smurfer opens the accounts with
inconspicuous amounts, usually in the low
four-figures
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Account Structuring / Smurfing
Once the accounts are opened, the account
smurfer signs the newly-issued checks inblank, leaving the payee, date and amount
lines blank.
Money Brokers takes the cheques in hispossession.
An account smurfer may open many accounts.
The availability of hundreds of these accounts
leaves open the possibility that tens of millions
of dollars could be passing through them each
year
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Correspondent Banking
Provision of banking services by one bank(the correspondent bank) to another bank(the respondentbank)
Banks can undertake international financial
transactions for themselves and for theircustomers in jurisdictions where they haveno physical presence
The Bank of New York (BONY) scandal,1999 exposed ML through Russiancorrespondent accounts at BONY
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Private Banking
Provides highly personalized andconfidential products and services to well-heeled clients at fees that are often basedon assetsunder management.
Private banking often operates semi-autonomously from other parts of a bankand caters to wealthy customers who seekconfidentiality and personalized service.
Raul Salinas, the brother of former MexicanPresident was handled by privatebankers employed by Citibank in Mexico
City, New York, London and Geneva.
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Bank Complicity
A criminally co-opted bankemployee might facilitate ML
Insider can pose great ML threat
Financial institution employee canbe coerced / bribed not to fileSuspicious Transaction Report(STR) or Currency TransactionReports (CTR)
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Bank Complicity
Banks should identify and anticipatetrouble before it costs time, money and
reputation,.
Banks should develop programs to
closely monitor the people working
inside their own four walls.
Knowing your employee, or potentially
the enemy within, is crucial to a
bankssecurity
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Bank Complicity
In 2000, Lucy Edwards, a former
vice president of BONYs EasternEuropean Division, and her
husband, Peter Berlin, pleaded guilty
in New York federal court to ML
conspiracy linked to their facilitating the movement
of hundreds of millions of dollars of dubious origin
from Russia through corporate accounts Berlin had
opened at the bank
Background screening of prospective and current
employees, especially for criminal history, is
essential for banks
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Questions
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