method of money laudering

8/10/2019 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

method of money laudering

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