Date post: | 16-Aug-2015 |
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MONEY LAUNDERING‘Is enough being done to tackle it?’
Group Members:
Doushikabye PandooKhawsar SoogundJessica MootoosamyKarishma Ansaram
Structure of the presentation1. Money Laundering : Definition and Stages
2. Cases of Money Laundering done through various Institutions
3. What is being done for ML on international Level
4. What is being done for ML on National Level
5. Emerging Risks and Current Trend on ML
6. A Report on Different Countries
7. Survey by KPMG
8. Recommendations
Money LaunderingProcess of disguising illegal origin of
criminal proceeds
Growth of Money LaunderingCriminal proceeds amounted to 3.6% of Global GDP with 2.7%(USD
1.6 trillion) being laundered- Study by UN Office on drugs and crime (UNODC)
Money Laundering Investigations2014 2013 2012
Investigations Initiated1312 1596 1663
Prosecution Recommendations1071 1377 1411
Indictments/Informations934 1191 1325
Sentenced785 829 803
Incarceration Rate* 82.2% 85.4% 84.7%
Average Months to Serve66 68 64
Stages in Money Laundering
Sources of funds tax crimes, fraud,
embezzlement, drugs, theft, bribery
and corruption
Placement
Goal: To deposit criminal proceeds into the financial system Common Methods • Change of currency • Change of denomination • Transportation of cash • Cash deposits
Integration
Goal: Conceal the criminal origin of proceeds Common Methods: • Wire transfers • Withdrawals in cash • Cash deposits in multiple bank accounts • Split and merge of various bank accounts
LayeringGoal: Create an apparent legal origin for criminal processes Common Methods: • Creating fictitious loans, turnover, capital gains, contracts, financial statements etc. • Disguise ownership of assets • Use of criminal proceeds in transactions with third parties
Use of proceeds
for personal benefit
HOW CAN DIFFERENT INSTITUTIONS HELP IN MONEY LAUNDERING?
Money laundering through insurance institutions - Disguise the origin and nature of illegal proceeds and gains obtained by buying and altering insurance policies
Drug trafficker disguised the illegal origin and nature of his proceeds by buying an insurance policy of US$80,000 with proceeds and then selling it to cash in and the AGENT of
insurance company acted as a party to this conspiracy
EXAMPLE:
Money laundering through underground Banks- FATF 1999: Underground banking systems are also referred
to as alternative remittance systems
From the beginning of 1999 to August 2004, 15 accomplices that smuggled fuel and well-known cigarette from Vietnam and then distributed most of the goods in the South of China, 170 million of that money into dozens of bank accounts opened in other people’s name or with fake ID cards, drew the money and gave it to a middleman who transferred the money to the
accounts of 2 international trade companies via an underground bank
EXAMPLE:
Money laundering through shell company or front company
- Front company established by the criminals indicates the company with legal personality, legal business activities, and legal operating income, while whose establishment is for the purpose of laundering the proceeds of crime instead of making profits
The former Vice-Chairman of the NPC Standing Committee, took advantage of his position and power, accepting bribes of more than
¥41.09 million. In this case, the criminals established a shell company in advance and then fabricated transactions and paid for the tax in the
name of corporation income, through which the illicit money was legalized.
EXAMPLE:
Money laundering through professionals such as
lawyer or accountant - These professionals are highly regulated by professional
ethics and discipline, and they have respectable social status therefore It is unlikely to be suspected if they perform economic activities on behalf of their clients.
A lawyer was instructed by his client, a drug trafficker, to deposit cash into the lawyer’s trust account and then make routine payments to
mortgages on properties beneficially owned by the drug trafficker .The lawyer received commissions from the sale of these properties and
brokering the mortgages.
EXAMPLE:
The 40 Recommendations set out by the FATF
The FATF’s three primary functions :
1 • Monitoring members’ progress s
2 • Reviewing and reporting
3 • FATF AML standards globally.
IOSCO “Resolution on Money Laundering
Customer identifying
record-keeping
suspicious transactions
control of securities and futures businesses
informationMonitoring & compliance procedures
The resolution provides as
follows:
1) Global Programme against Money Laundering by the United Nations
The GPML is a resource for information, expertise and technical assistance in establishing or improving a country’s AML infrastructure.
2) Customer Due Diligence set out by the Basel Committee
Standards set out in Customer Due Diligence are intended to benefit banks beyond the fight against money laundering by protecting the safety and soundness of banks and the integrity of banking systems.
3) AML Guidance Notes for Insurance Supervisors and Insurance Entities set out by the IAIS
Those Guidance Notes are intended to be implemented by individual countries taking into account the particular insurance companies involved, the products offered within the country, and the country’s own financial system, economy, constitution and legal system.
AML Principles forPrivate Banking set outby the Wolfsberg Group of Banks
guidelines when dealing with the high net worth individuals and the private banking departments .
-customer identification-extra due diligence-Establishing beneficial ownership a/c.
Egmont Group of Financial Intelligence Units
Governments have created agencies to analyze information submitted by covered entities and persons pursuant to money laundering reporting requirements.
Such agencies are commonly referred to as financial intelligent units (FIUs).
Monitoring Screening and Searching Technique
Suspicious Transactions
Reporting
This set of principles identifies issues that should be addressed in order for financial institutions to develop suitable monitoring, screening and searching processes using a risk-based profile approach
Financial institution suspecting or has reasonable grounds to suspect that funds are the proceeds of a criminal activity, or are related to terrorist financing, report its suspicions to the applicable financial intelligence unit
What is being done nationally to combat money laundering ?
BANK OF MAURITIUS GUIDANCE NOTES
-Guidance Notes is to help practitioners develop policies and procedures appropriate to combat
money laundering- focus on the “Know Your Customer”
("KYC") principle
THE ECONOMIC CRIME AND ANTI-MONEY LAUNDERING ACT
2000-The Economic Crime and Anti-
Money Laundering Act 2000 captured under its umbrella, fraud
and corruption.
The FINANCIAL INTELLIGENCE AND ANTI-MONEY LAUNDERING ACT
2002Anti-Money Laundering Act 2002, giving explicit powers to gather,
analyse and disseminate information to a Financial Intelligence Unit (FIU).
• The Act is the result of recommendations made by the (FSAP) mission of the lMF and the World Bank and has brought certain changes to the institutional and regulatory framework with regards to AML
Anti-Money Laundering Act 2003
EMERGING RISKS AND CURRENT TRENDS
4. Tax Haven Countries-offshore Channels
1. Virtual currencies-limited identification & verification of
investors-lack of clarity for AML/CFT compliance-online hackers attack
2. Mobile Money
-technological misuse.
3. Finance Facilitators-They have the expertise & capabilities -E.g changing foreign currencies, transporting cash , changing money into larger bills
EMERGING RISKS AND CURRENT TRENDS
Banking Sector
Correspondent Banking
Offshore Banking
Private Banking Cyber
Currency
EMERGING RISKS AND CURRENT TRENDS
Offshore Sector-lack of political will-strong banking confidentiality
A conflict between the western AML laws and the benefit they
enjoy
A Report on Different Countries
Greece
- Free Trade Zone
-FIU-Free Trade Zone subject to
AML/CFT
India
-informal economy-persistent corruption-existence of terrorist
organisations
-member of FATF- Amendments in its Money
Laundering Act
Singapore
-lack of reporting of large currencies-rapid growth of private banking
-use of stand alone ML charges
-the suspicion transaction reporting office
France
-large informal sector-informal transfer system -hawalas
-tracfin hired new officers-updated investigation
methods-updated vigilance
What about Mauritius?
Swiss Leaks ripple effect: Mauritius ranks 94th in international fiscal
evasion scam-81 Mtian possess bank a/cs in Switzerland-Former Prime Minister
• Tax haven alert: Mauritius tops Sub-Saharan Africa in financial
secrecy-ranked 19th position with a score of
80 points by Tax Justice Network-a leading offshore financial hub- Fsc is taking additional norms
Government Programme 2015-2019-a Financial Crime Commission will be set up-Prevention of Corruption Act will be amended - The entire process of tendering, procurement and contract allocation will be reviewed
Government programme 2015-2019Government programme 2015-2019Government programme 2015-2019
SURVEY BY KPMG
The overarching aims of this year’s global AML survey include:
• Identifying emerging trends, opportunities and threats;• Capturing industry perceptions on regulation, cost, and effectiveness; and• Benchmarking AML efforts in the financial services industry.
Global Anti Money Laundering Survey 2014
Senior managem
ent
Asset mgt
sector
Compliance cost
Question 1 :Senior management focus is on the rise again
84%BOD takes an active
part in AML
• 98%• AML discusse
d on board
Question 3 :Cost of compliance is on increase
-clients becoming unhappy
-looking for software to reduce compliance burden
-’out of box’
-heavy investment in KYC
-issue of customer due diligence
-challenge of keeping KYC updated
-Cost of retaining skilled staff
-Additional investment in their well being and training
Question 4 :
Politically Exposed Persons continue to leave organizations exposed
-The importance of obtaining robust source of wealth/ income information should not be underestimated.
-firms struggle to turn the information into a coherent story and hence identify gaps and red flags.
Question 5 : Asset Management Sector
• Asset managers face particular challenges in:
managing the risks arising from the use of or reliance upon third
parties
obtaining appropriate data
to enable meaningful transaction monitoring
implementing appropriate
customer risk assessment
models.
Recommendations of KPMG
• Nominate a member of the Board with responsibility for maintaining effective AML controls.
• Ensure a broad-ranging assurance program is in place which tests systems, processes.
• Prepare effectively for regulator visits, and ensure that the
Board can demonstrate awareness and oversight.
Recommendations for a better AML Framework
Ensuring True Commitment and Resolute Political Will
Providing Clear Policy Guidance to the Private Sector
Launching an Awareness Raising Campaign
Developing Regional/International Collaboration
Ensuring Continuous Training for Both the Public and the Private Sectors
Conclusion• Combating illegal profits is certainly not a recent, revolutionary
development.
• Rules will not always be obeyed.
• These problems cannot be solved simply by generating more and more regulations.
• More regulations also increase the likelihood of information overload and false positives.