Define ML & how term differs between jurisdictions
Processing of criminal property (conceal, disguise or convert) in order to give appearance of having arisen from legitimate source when in fact proceeds of crime = requires benefit
- illegally moving cash through financial systems so appears legally acquired
- constitutes of ml differs between jurisdictions & depends on laws that create offences
- term ML misleading - not just money / can be physical assets
Outline examples of crime involving proceeds of ML
Drug dealing
Organised crime
Embezzlement
Illegal arms trade
Insider dealings
People trafficking
Tax evasion
Theft & terrorist financing
*if successful criminals can benefit & control proceeds & avoid detection
Outline the traditional model of ML
Placement
- place proceeds of crime into financial system / deposits into banking system
- identify funds as dirty money / reason for CDD at early stages
Layering
- use of complex web of transactions designed to hide source of ownership of funds
- lack of audit trail conceal true origin
Integration
- funds introduced into economy so appears originated from legitimate source
- funds integrated into banking system & now impossible to distinguish between dirty & clean money
*ML takes variety of forms ranging from simple & complex arrangements
Outline the harmful effects of ML on country
Wide range of effects on society & macro economy
Damaging to victims & society
Undermines democracy / allow criminals rewarded / expand enterprise & become entrenched in society
Rewards corruption / effects on developing countries / quality of life & well being of citizens
Undermines private sector / organised access to funds / offer subsidiaries rates / competitive advantages
Increased difficulty for tax collection/ higher rates charged & less resourceful
Undermines integrity of banking system / no framework & ethical standards / negative perception to customers
Legitimate business won’t go to jurisdictions if perceive to be influenced by organised crime
Risk of banking system failing/ collapse if criminal funds detected &removed
Outline harmful effects of ML on SP
Reputation damage to org, jurisdictions, regulator
Regulatory risk of sanctions / restrictions / revoke license to operate / AML reporting requirements
Org & individual prosecution
Principle / key person rules not F&P in regulator assessment / variety of imposed sanctions - public statement or prevent employment in FSB
greater financial risks / org exposed to risk of litigation / costs of remediation by regulator
Define terrorist financing
Terrorism act 2000 - harmful threat to population
Action designed to influence gov or intimidate public / to advance political, religious or ideological views
Involves
- serious violence again public
- damage to property
- endangers others lives
- creates serious risk to health/ safety of public
- designed to seriously interfere electronic systems
9/11 placed on high international agenda
How does ML & CFT differ & similar
Differs to ML as ultimate objective to cause intimidation to population / source of funds not illegal as not from criminal conduct necessarily
Similar
- conceal/ move funds / disguise ownership
- require fundamental protection & detection measures to stop
Outline the UN Security Council resolution 1373
&
International financial sanctions
UN
- country requirement for those participating to combat terrorism
- measures to freeze funds of terrorists, prohibit funding, offences to punish, ensure no safe havens to hide them
Sanctions
UK implement UN measures / crown dependencies have similar orders
Outline the Terrorism act 2000
Offences created to criminalise
- receipt of funds for terrorist purposes
- involvement in arrangement involving assets made available for it
Under this act, offence to disclose suspicion where reasonable grounds to know
Tipping off offence / disclose can prejudice investigations
Outline the FATFs 9 special recommendations
Intentional standard for AML/ CFT to combat against it/ other bodies help facilitate global approach
1) ratify & implement UN international resolutions 1373
2) criminalise financing of terrorism
3) freeze & remove terrorist assets
4) report suspicious transactions relating
5) cooperate with other countries on standards (exchange info ensure no safe havens)
6) ensure alternative remittance systems licensed & registered to recommendations
7) ensure wire transfers include info about originator of funds
8) ensure non profit orgs not misused
9) ensure cash couriers & transfer instruments detected & closed
