60 Best Money Laundering Research Papers, Books and web links.

60 BEST ANTI-MONEY LAUNDERING AND COUNTER TERRORISM FINANCING RESOURCES GLOBALLY

Research into money laundering goes deeper than reading ACAMS or Linkedin. Here we have provided links to the 60 Best Money Laundering Research Papers, books and web articles.

In the coming weeks we will be blogging about these articles and what they mean to the industry. Stay tuned and register with the site (bottom of the page) if you want to get our posts via your inbox (sent once a month only – no spam!)

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Title & LinkAuthor & Link to BibliographyDescription
(scroll to left to read)
Money launderingM Levi, P Reuter – Crime and Justice, 2006 – journals.uchicago.eduTechniques for hiding proceeds of crime include transporting cash out of the country, purchasing businesses through which funds can be channeled, buying easily transportable valuables, transfer pricing, and using “underground banks.” Since the mid-1980s …
 Dirty money: The evolution of money laundering counter-measuresWC Gilmore – 1999 – ncjrs.govThe first chapter provides an overview of the problem, as it notes that estimates of money from criminal activities range from 300 to 500 billion US dollars annually, money that is available for laundering. Such quantities of money, often linked with organized crime …
How big is global money laundering?J Walker – Journal of Money Laundering Control, 1999 – emerald.comKnown incidents of money laundering involving large amounts of money generated from crime are of tremendous public interest and are consequently given wide publicity. A wide range of national and international agencies have attempted to quantify organised crime …
 Macroeconomic implications of money launderingPJ Quirk – Washington, Fondo Monetario Internacional, WP, 1996 – elibrary.imf.orgThis paper reviews the main analytical, empirical, and policy issues related to the macroeconomic implications of money laundering. The paper discusses, first, how money laundering can be measured, given that it is unobservable, and reports cross-section …
 Chasing dirty money: The fight against money launderingP Reuter – 2005 – books.google.comOriginally developed to reduce drug trafficking, efforts to combat money foundering have broadened over the years to address other crimes and, most recently, terrorism. In this study,[the authors] look at the scale and characteristics of money laundering, describe and …
 Money laundering: a new international law enforcement modelG Stessens – 2000 – books.google.comThis book gives a broad analysis of the legal issues raised by the international fight against money laundering. It offers an extensive comparative research of the criminal and preventive law aspects from an international perspective. Stessens portrays money laundering as a …
Money laundering: muddying the macroeconomyPJ Quirk – Finance and Development, 1997 – search.proquest.comIMF staff went to a small island country to assess economic developments. As they walked around the capital, they noticed a surprisingly large number of small banks (more than 100 in a country of less than 100,000 people). A year later, it was revealed that many of these …
Money laundering and its regulationM Levi – The Annals of the American Academy of Political …, 2002 – journals.sagepub.comThis article examines definitions of” money laundering” and the conceptual and actual role its regulation plays in dealing with drug markets. If laundering is prevented, incentives to become major criminals are diminished. It identifies and critiques three aspects of harm …
Money laundering: the economics of regulationD Masciandaro – European Journal of Law and Economics, 1999 – SpringerEconomic research has not yet systematically undertaken the analysis of the existing interactions between criminal economy and financial markets. The present work belongs to a research field increasingly interested in such issues and focuses on the economic analysis of money laundering …
Money laundering: some factsF Schneider, U Windischbauer – European Journal of Law and Economics, 2008 – SpringerThis paper tackles the quite difficult topic of money laundering. After defining money laundering, and after explaining the three stages (steps), placement, layering and integration, the paper tries a quantification and estimation of the volume and development of …
Money laundering and the international financial systemV Tanzi – 1996 – ideas.repec.orgThe IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues …
Measuring Global Money Laundering:” The Walker Gravity Model”J Walker, B Unger – Review of Law & Economics, 2009 – degruyter.comMeasuring global money laundering, the proceeds of transnational crime that are pumped through the financial system worldwide, is still in its infancy. Methods such as case studies, proxy variables, or models for measuring the shadow economy all tend to under-or …
Money laundering—a global obstacleB Buchanan – Research in International Business and Finance, 2004 – ElsevierOne of the biggest obstacles to maintaining an effective operating international financial system is money laundering. A global phenomenon and international challenge, money laundering is a financial crime that often involves a complex series of transactions and …
An inquiry into money laundering tools in the Bitcoin ecosystemM Möser, R Böhme, D Breuker – 2013 APWG eCrime …, 2013 – ieeexplore.ieee.orgWe provide a first systematic account of opportunities and limitations of anti-money laundering (AML) in Bitcoin, a decentralized cryptographic currency proliferating on the Internet. Our starting point is the observation that Bitcoin attracts criminal activity as many …
 Black finance: the economics of money launderingD Masciandaro, E Takats, B Unger – 2007 – books.google.com” The recent dramatic wave of terrorist attacks has further focussed worldwide attention on the money laundering phenomena. The objective of this book is to offer the first systematic analysis of the economics of money laundering and its connection with terrorism finance …
 Critical reflections on transnational organized crime, money laundering and corruptionME Beare – 2003 – books.google.comTransnational crime, organized crime, money laundering and corruption are four concepts that have gained and continue to gain an international and domestic profile. Is the information given to the public concerning these concepts distorted by the vested interests of …
 The amounts and the effects of money launderingB Unger, M Siegel, J Ferwerda, W de Kruijf… – Report for the Ministry of …, 2006 – ftm.nl0.4. The amount of money laundered is sizeable 0.5. Where is the criminal money being laundered and placed? 0.6. The Netherlands are a transit country of crime and criminal money 0.7. What are the effects of money laundering? 0.8. The long term dangers of money  …
The consequences of money laundering and financial crimeJ McDowell, G Novis – Economic Perspectives, 2001 – ncjrs.govMoney laundering is seen as critical to the effective operation of transnational and organized crime. However, money laundering effects a country’s economy, government, and social well-being. This article briefly reviewed both the economic and social costs of money laundering …
 Money laundering: A guide for criminal investigatorsJ Madinger – 2011 – books.google.comMany changes have occurred in the twenty-five years that have passed since the enactment of the Money Laundering Control Act of 1986. The law has been amended, new underlying crimes have been added, and court decisions have modified its scope. The Act remains an …
 The hawala alternative remittance system and its role in money launderingPM Jost, HS Sandhu – 2000 – peacepalacelibrary.nlThe components of hawala that distinguish it from other remittance systems are trust and the extensive use of connections such as family relationships or regional affiliations. Unlike traditional banking or even the’chop’system, hawala makes minimal (often no) use of any …
The fight against money launderingH Geiger, O Wuensch – Journal of Money Laundering Control, 2007 – emerald.comPurpose–To provide an economic view on the costs and benefits of anti‐money laundering (AML) efforts. Design/methodology/approach–Based on a international, comparative study conducted in Switzerland, Singapore and Germany, the authors outline the impact of AML …
Bitcoin and money laundering: mining for an effective solutionD Bryans – Ind. LJ, 2014 – HeinOnlineTechnology forges ahead at a rapid pace, whether we like it or not. Criminals recognize this inevitability and use technological improvements to advance their craft,’committing crimes from half a world away in real time. Meticulous criminals also use technological …
Corruption and money laundering: a symbiotic relationshipD Chaikin, J Sharman – 2009 – Springer
 Financial havens, banking secrecy and money-launderingJA Blum, M Levi, RT Naylor, P Williams – 1998 – amnet.co.ilThe major money laundering cases coming to light in recent years share a common feature: criminal organizations are making wide use of the opportunities offered by financial havens and offshore centres to launder criminal assets, thereby creating roadblocks to criminal …
A typological study on money launderingP He – Journal of Money Laundering Control, 2010 – emerald.comPurpose–The purpose of this paper is to make objective descriptions on various money‐laundering techniques and to put forward countermeasures in order to combat money laundering more effectively and efficiently. Design/methodology/approach–This paper …
 Reference guide to anti-money laundering and combating the financing of terrorismPA Schott – 2006 – elibrary.worldbank.orgThis second edition of the Reference Guide is a comprehensive source of practical information on how countries can fight money laundering and terrorist financing. Aimed at helping countries understand the new international standards, it discusses the problems …
 Money laundering policyPC Van Duyne – Fears and Facts, 2003 – petrusvanduyne.nlIt is difficult to argue about the nature of smells. Some of them do not even have names. But one kind of smell has certainly been nominated and changed in our appreciation: the ‘moral smell’of money. Today the adage ‘money does not smell’does not apply any more. Now we …
Responding to Money LaunderingE Savona – 2005 – books.google.comResponding to Money Laundering has its origin in the International Conference on Preventing and Controlling Money Laundering and the Use of Proceeds of Crime: A Global Approach organised by ISPAC, the International Scientific and Advisory Board of the United …
 Dirty money: the evolution of international measures to counter money laundering and the financing of terrorismWC Gilmore – 2004 – books.google.comThis is the third edition of this publication which explores key issues in the fast evolving field of money laundering and terrorist financing, and which has been restructured so as to fully reflect the high international priority given to tackling the financing of terrorism since …
Money laundering and globalizationP Alldridge – Journal of law and society, 2008 – Wiley Online LibraryThe article traces the various imperatives generated by the combination of the money laundering panic of the late 1990s with the advent of globalization. If there is to be an attempt legally to regulate laundering, it (laundering) must be a relatively serious offence …
Money launderingN Morris-Cotterill – Foreign Policy, 2001 – JSTORFrom Moscow to Buenos Aires, money laundering scandals sap economies and destabilize governments. Policymakers blame crime cartels, tax havens, and new techniques like cyberlaundering. But dirty money long predates such influences. Without unified rules …
The economics of crime and money laundering: does anti-money laundering policy reduce crime?J Ferwerda – Review of Law & Economics, 2009 – degruyter.comAnti-money laundering policy has become a major issue in the Western world, especially in the United States after 9-11. Basically, all countries in the world are more or less forced to cooperate in the global fight against money laundering. In this paper, the criminalization of …
 Dirty dealing: the untold truth about global money laundering, international crime and terrorismP Lilley – 2003 – books.google.comPraise and ReviewsEntertaining, well written and well presented.JOHN MULQUEEN, The Irish TimesPaints an alarming picture of the power and scale of todays crooked and corrupt financial world. Lilley has done his homework.THE IODS DIRECTOR MAGAZINESChoice of …
System and method for analyzing and dispositioning money laundering suspicious activity alertsBJ Kloostra, C Dalvi, BN Behm – US Patent App. 12/258,784, 2009 – Google PatentsA system and method for analyzing, dispositioning, recording, reviewing, and managing potentially suspicious financial transactions. In some cases, the system models the steps taken by a subject matter expert to reach a conclusion so that a novice can follow similar …
A theory of “Crying Wolf”: The economics of money laundering enforcementE Takáts – The Journal of Law, Economics, & Organization, 2011 – academic.oup.comThe article shows how excessive reporting, called “crying wolf”, can dilute the information value of reports and how more reports can mean less information. Excessive reporting is investigated by undertaking the first formal analysis of money laundering enforcement …
Power and discourse in policy diffusion: Anti-money laundering in developing statesJC Sharman – International Studies Quarterly, 2008 – academic.oup.comTwenty years ago not a single country had a policy against money laundering; currently, over 170 have very similar anti-money laundering (AML) policies in place. Why have so many countries with so little in common adopted the same policy so rapidly? This extensive …
 Global financial crime: terrorism, money laundering and offshore centresD Masciandaro – 2017 – books.google.comThe scope for financial crime has widened with the expansion and increased integration of financial markets. Money laundering, terrorism financing and tax crime have all changed in both nature and dimension. As new technologies reduce the importance of physical …
AI fights money launderingJ Kingdon – IEEE Intelligent Systems, 2004 – ieeexplore.ieee.orgThe bank had approached Searchspace, formed by re- searchers from the Intelligent Systems Lab at University College London in 1993. It applies adaptive and learning- systems approaches to a range of business and finance tasks. However, until then, we had principally developed …
 Transnational criminal organizations, cybercrime, and money laundering: a handbook for law enforcement officers, auditors, and financial investigatorsJR Richards – 1998 – books.google.comWRITTEN BY A LAW ENFORCEMENT PROFESSIONAL FOR OTHER LAW ENFORCEMENT PERSONNEL IN THE TRENCHES This book examines the workings of organized criminals and criminal groups that transcend national boundaries. Discussions …
Trade-based money laundering and terrorist financingJS Zdanowicz – Review of law & economics, 2009 – degruyter.comMoney laundering can be defined, generally, as the process of concealing the existence, illegal source, or application of income derived from a criminal activity, and the subsequent disguising of the source of that income to make it appear legitimate. Deception is the heart of …
The tenuous relationship between the fight against money laundering and the disruption of criminal financeMF Cuéllar – J. Crim. L. & Criminology, 2002 – HeinOnlineThis article examines the fight against money laundering as a case study of the separation between an enforcement system’s objectives and performance. To launder money is to hide its illegal origin. The fight against money laundering is supposed to disrupt laundering in its …
 Detecting money laundering and terrorist financing via data miningJS Zdanowicz – Communications of the ACM, 2004 – dl.acm.orgThe use of international trade to move money, undetected, from one country to another is one of the oldest techniques used to circumvent government scrutiny. Either overvaluing imports or undervaluing exports can achieve this transfer. If an imported prod- uct is overvalued, the foreign …
Money laundering regulation: the micro economicsD Masciandaro – Journal of Money Laundering Control, 1998 – emerald.comThe analysis of the interactions between the criminal economy and the financial markets has not yet been systematically studied by the economists. This study belongs to a current research interested in this area, ie the economic analysis of money laundering. The work is …
Money laundering: The crime of the’90sGR Strafer – Am. Crim. L. Rev., 1989 – HeinOnlineIn the Money Laundering Control Act of 1986,’codified at sections 1956 and 1957 of Title 18 of the United States Code, Congress for the first time attempted to define and prohibit a category of activity known colloquially as” money laundering.” During an election year frenzy …
Applying data mining in investigating money laundering crimesZ Zhang, JJ Salerno, PS Yu – Proceedings of the ninth ACM SIGKDD …, 2003 – dl.acm.orgIn this paper, we study the problem of applying data mining to facilitate the investigation of money laundering crimes (MLCs). We have identified a new paradigm of problems—that of automatic community generation based on uni-party data, the data in which there is no direct …
Turnover of organized crime and money laundering: some preliminary empirical findingsF Schneider – Public choice, 2010 – SpringerAfter a short literature review, the paper quantifies the turnover of organized crime with the help of a MIMIC estimation procedure for the years 1995 to 2006 for 20 highly developed OECD countries. The volume of turnover from organized crime was US-270billionintheyear1995forthese20OECDc …
Money laundering: an international challengeLA Barbot – Tul. J. Int’l & Comp. L., 1995 – HeinOnlineIn the words of South American drug barons,” dirty money is best passed through clean hands.” 1 Money laundering is often defined as” the process by which one conceals the existence, illegal source or illegal application of income, and then disguises that income to …
Money laundering and its regulationA Chong, F Lopez‐De‐Silanes – Economics & Politics, 2015 – Wiley Online LibraryThe recent wave of terrorist attacks has increased the attention to money laundering activities, and the role played by the regulatory frameworks controlling feeder activities. We investigate empirically the determinants of money laundering and its regulation in close to …
 Money laundering: a concise guide for all businessD Hopton – 2009 – books.google.comWorldwide, anti-money laundering regulations and legislation have become one of the weapons of choice of governments that are fighting global terrorism and criminality. In this updated edition of Money Laundering, Doug Hopton explains how The Money Laundering  …
Virtual money laundering: the case of Bitcoin and the Linden dollarR Stokes – Information & Communications Technology Law, 2012 – Taylor & FrancisThis paper presents an analysis of the money laundering risks of two virtual currencies, the Linden dollar, the in-world currency of the interactive online environment Second Life, and Bitcoin, an experimental virtual currency that allows for the transfer of value through peer-to …
 Anti-Money Laundering: international law and practiceWH Muller, CH Kalin, JG Goldsworth – 2007 – books.google.comAnti-Money Laundering is the definitive reference on money laundering and practice. First an outline will be given of the general approach taken by supra-national organisations like the United Nations and the European Council. Next the approach taken by international …
 Crime, illicit markets, and money launderingP Williams – Managing global issues: Lessons learned, 2001 – carnegieendowment.orgPhil Williams organized crime is perhaps best understood as the continuation of commerce by illegal means, with transnational criminal organizations as the illicit counterparts of multinational corporations. During the 1990s, transnational organized crime—and the …
 Criminal finance: The political economy of money laundering in a comparative legal contextK Hinterseer – 2002 – books.google.comLike it or not, money launderers are major players in the world’s economy. Their strategies constrain national economic policies and undermine financial institutions. With the advent of secure transfer technologies, and with the help of modern financial theories of derivatives …
A comparative guide to anti-money launderingM Pieth, G Aiolfi – 2004 – academia.eduMoney laundering is the process by which criminals attempt to conceal the source and ownership of the proceeds of their illicit activities; if successful, the criminal maintains control and access to these funds when and where he chooses. The efforts to combat this …
 Money launderingFAT Force – Policy Brief July 1999, 1999 – bahamasb2b.comThe goal of a large number of criminal acts is to generate a profit for the individual or group that carries out the act. Money laundering is the processing of these criminal proceeds to disguise their illegal origin. This process is of critical importance, as it enables the criminal to …
Money Laundering: The Scope of the Problem and Attempts to Combat ItS Sultzer – Tenn. L. Rev., 1995 – HeinOnlineMoney laundering is the process of taking the proceeds of criminalactivity and making it appear legal. Money laundering has been called the” lifeblood” of crime because, without cleansing the profits of crime, the criminal enterprise cannot flourish. While drug money  …
Money laundering law: Forfeiture, confiscation, civil recovery, criminal laundering and taxation of the proceeds of crimeP Alldridge – 2003 – Bloomsbury Publishing
Money laundering and financial means of organized crime: some preliminary empirical findingsF Schneider – Paolo Baffi Centre Research Paper, 2008 – papers.ssrn.comAfter giving a short literature review, the paper tries a quantification of the volume of money laundering activities, with the help of a DYMIMIC estimation procedure for the years 1995 to 2006 for 20 highly developed OECD countries. The volume of laundered money was 273 …
Money‐Laundering: Estimates in FogPC Van Duyne – Journal of Financial Crime, 1994 – emerald.comThe paper examines certain problems in determining the extent of money‐laundering. The author first discusses the methodological problems inherent in assessing its volume. He then discusses two methods to estimate the extent of money‐laundering. One method is …

AML-Resources U to Z

AML Resources U to Z

A to EF to JK to OP to TU to Z

Bring yourself up to date with this useful list of AML resources and help documents. We design training packages for your staff, the below is just a small section of our knowledge base. It is important to consider your requirement for bespoke training aligned to your risk.

See our training page to book some training

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  • United Nations Convention Against Corruption
  • United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances
  • United Nations Convention for the Suppression of the Financing of Terrorism
  • United Nations Convention Against Transnational Organised Crime and the Protocols.

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  • SEC Rules on Whistle-blowing
  • Wolfsberg Private Banking Principles. – The Principles were initially formulated in 2000 (and revised in 2002) to take into account certain perceived risks associated with private banking. Such risks continue to warrant appropriate levels of attention, no less today than ten years ago. Regulators continue to expect strong anti-money laundering standards, robust controls, enhanced client due diligence and suitable AML policies and procedures. The Wolfsberg Principles detail the groups considerations. –
  • Wolfsberg Guidance on Sanction Screening

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A to EF to JK to OP to TU to Z

AML-Resources K to O

AML Resources K to O

A to EF to JK to OP to TU to Z

Bring yourself up to date with this useful list of AML resources and help documents. We design training packages for your staff, the below is just a small section of our knowledge base. It is important to consider your requirement for bespoke training aligned to your risk.

See our training page to book some training

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L

M

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  • New Zealand – Audit of AML/CTF programs and risk assessments

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  • OECD – Standard for Automatic Exchange of Financial Account Information in Tax Matters
  • Organised Crime – United Nations Convention Against Transnational Organised Crime and the Protocols.-

A to EF to JK to OP to TU to Z

AML-Resources F to J

AML Resources F to J

A to EF to JK to OP to TU to Z

Bring yourself up to date with this useful list of AML resources and help documents. We design training packages for your staff, the below is just a small section of our knowledge base. It is important to consider your requirement for bespoke training aligned to your risk.

See our training page to book some training

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G

H

I

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A to EF to JK to OP to TU to Z

AML-Resources P to T

AML Resources P to T

A to EF to JK to OP to TU to Z

Bring yourself up to date with this useful list of AML resources and help documents. We design training packages for your staff, the below is just a small section of our knowledge base. It is important to consider your requirement for bespoke training aligned to your risk.

See our training page to book some training

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  • PEPs. FATF guidance on PEPs –
  • POLICY – An Anti-Money Laundering and Terrorist Financing Policy is the document that guides all AML activity and helps your organization guide staff. It is a critical document that should detail a lead from the top of the organization. Below we provide three institutional policies for you to peruse contrast and compare (the first is a Real Estate policy, the second/third are banking policies) . We make no comment on the quality. We provide this service for you to reassure you, your policy will meet the required regulatory rigour.
  • AML/CTF Policies and Procedures template – Seek our advice before using this. –

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  • Real Estate Policy Template. NB: Seek advice this is a guide only.
  • Risk Assesment and AML/CTF program audits – New Zealand
  • Risk Assessment – BSA/AML Example – for a bank. We do not warrant the quality of this document. –

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  • Securities Exchange Commission Rules on Whistle-blowing
  • Guidance on Sanction Screening from Wolfsberg –

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  • Standard for Automatic Exchange of Financial Account Information in Tax Matters OECD
  • Template for AML program for a small firm – US centric NB- We do not warrant the quality of this document. You must seek our advice.
  • Template for AML/CTF Policies and Procedures – Seek our advice before using this. –
  • Template for Real Estate AML/CTF Policy. NB: Seek our advice this is a guide only.
  • Terrorism. United Nations Convention for the Suppression of the Financing of Terrorism –
  • Transparency International Exporting Corruption Report
  • Company Trusts. FATF guidance on Company formation agents and Trusts – A risk based approach to their work and the risk they face in the climate to remove hidden Beneficial Ownership. For a summary and the full report go here, or download the full report.

A to EF to JK to OP to TU to Z

What is a Mutal Legal Assistance Treaty

Financial compliance AML CTF audit

What is a Mutual Legal Assistance Treaty?

What is a mutual legal assistance treaty
What is a mutual legal assistance treaty

What is an MLAT and how can you request and send one? MLATs are treaties between cooperating states to request legal assistance. This article details a broad view on them.

MLAT AML – Cooperation Between Countries

Practices that restrict international cooperation between supervisory authorities or FIUs in analysing and investigating suspicious transactions, money laundering crimes, confiscating assets or extraditing accused money launders are serious obstacles to combating money laundering.

Methods for International Cooperation

  1. International ML Information Network
  2. Mutual Legal Assistance Treaties
  3. Financial Intelligence Units

IMOLIN – RESEARCH
Imolin is a Clearing house of money laundering information for the benefit of national and international AML agencies. Developed and administered by the UNODC ( Global Program Against Money Laundering) on behalf of the UN and other international organizations.

IMOLIN has five main features:

  1. Reference data: Research and analysis, bibliography, conventions, etc
  2. Country page: Includes full text of AML legislation, links to national FIUs
  3. Calendar of events: Training etc
  4. Current events: News of recent initiatives
  5. AML International Database – AMLID (password protected): compendium of laws, information and contacts internationally.

Mutual Legal Assistance Treaties

  • In money laundering cases, an MLAT can be extremely useful as a means of obtaining banking and other financial records from treaty partners.
  • Classical “Gateway” and powerful bilateral weapon embodied in a Mutual Legal Assistance Treaty (MLAT).
  • In the US: Negotiated by the Department of State in cooperation with the Department of Justice to facilitate cooperation in criminal matters.
  • MLATs are in force between countries globally.

The MLAT is a treaty-based mechanism for seeking foreign law enforcement cooperation and assistance in support of an ongoing criminal investigation or proceeding. The MLAT process, and its benefits, are available only to government officials, typically prosecutors. They are applied for via the country prosecuting agency and sometimes have clauses to prevent abuse. An MLAT can be multi-lateral or thematic, for example multi-lateral tax treaty agreements.

MLATs generally allow for the exchange of evidence and information in criminal and related matters. They provide a legal basis for transmitting evidence that can be used for prosecution and judicial proceedings. If evidence is required from another jurisdiction, a request can be made for “mutual legal assistance”.

Most MLATs require the country that receives a request for assistance to take certain actions, such as:
• Taking testimony or statements of persons
• Providing documents, records and evidence
• Service of documents on persons or organizations in the requested country
• Locating or identifying persons
• Executing requests for search and seizure
• Identifying, seizing and tracing proceeds of crime

FIU data sharing and analysis
FIU data sharing and analysis

FATF cooperation between countries.

The financial action task force makes several recommendations with regard to sharing information internationally – MLATs are just one…
• Recommendation 36: Implementation of Conventions
• Recommendation 37: Mutual Legal Assistance Treaties (MLATs)
• Recommendation 38: Freezing and confiscation
• Recommendation 39: Extraditable offenses
• Recommendation 40: Other forms of cooperation

FATF Recommendation 36

International Instruments

  • Countries should take immediate steps to become party to and implement fully:
    • The Vienna Convention, 1988;
    • The Palermo Convention, 2000;
    • The United Nations Convention against Corruption, 2003; and
    • The Terrorist Financing Convention, 1999.

FATF Recommendation 37

Mutual Legal Assistance:

Countries should rapidly, constructively and effectively provide the widest possible range of mutual legal assistance in relation to money laundering, associated predicate offences and terrorist financing investigations, prosecutions, and related proceedings. Countries should have an adequate legal basis for providing assistance and, where appropriate, should have in place treaties, arrangements or other mechanisms to enhance cooperation (…) Countries should render mutual legal assistance, notwithstanding the absence of dual criminality, if the assistance does not involve coercive actions. Countries should consider adopting such measures as may be necessary to enable them to provide a wide scope of assistance in the absence of dual criminality.

FATF Recommendation 38

Mutual Legal Assistance: Freezing and Confiscation:

  • Countries should ensure that they have the authority to take expeditious action in response to requests by foreign countries to identify, freeze, seize and confiscate property laundered;
  • Proceeds from money laundering, predicate offences and terrorist financing; instrumentalities used in, or intended for use in, the commission of these offences; or property of corresponding value.
  • This authority should include being able to respond to requests made on the basis of non-conviction-based confiscation proceedings and related provisional measures, unless this is inconsistent with fundamental principles of their domestic law.
  • Countries should also have effective mechanisms for managing such property, instrumentalities or property of corresponding value, and arrangements for coordinating seizure and confiscation proceedings, which should include the sharing of confiscated assets.

FATF Recommendation 39 Extradition:

  • Countries should constructively and effectively execute extradition requests in relation to money laundering and terrorist financing, without undue delay.
  • Countries should also take all possible measures to ensure that they do not provide safe havens for individuals charged with the financing of terrorism, terrorist acts or terrorist organizations.
  • Countries should ensure that they have clear and efficient processes for the timely execution of extradition requests including prioritization where appropriate.
  • Countries should monitor progress of requests a case management system should be maintained;
  • Countries should not place unreasonable or unduly restrictive conditions on the execution of requests; and
  • They ensure they have an adequate legal framework for extradition.
  • Each country should either extradite its own nationals, or, where a country does not do so solely on the grounds of nationality, that country should, at the request of the country seeking extradition, submit the case, without undue delay, to its competent authorities for the purpose of prosecution of the offences set forth in the request.
  • Those authorities should take their decision and conduct their proceedings in the same manner as in the case of any other offence of a serious nature under the domestic law of that country. (…)

FATF Recommendation 40

  • Other forms of cooperation:
    • Countries should ensure that their competent authorities can rapidly, constructively and effectively provide the widest range of international cooperation in relation to money laundering, associated predicate offences and terrorist financing.
    • Countries should do so both spontaneously and upon request, and there should be a lawful basis for providing cooperation.

MLATs are useful tools for FIUs to exchange evidence, documents and even people suspected of criminality. Banks receiving requests based on MLATs should respond in a timely manner to avoid criticism and reputational damage in post court press. Talk to us to advice on institute response.

For information on FIUs see this post.

How to Investigate Money Laundering

Retail Banking

How to Investigate Money Laundering – A short Guide

How to investigate Money Laundering
How to investigate Money Laundering

There are many new entrants to the AML sector that have little to no investigative experience. That’s natural in any sector. Below are some tips on how to instigate and progress an investigation into Money Laundering or Terrorist Financing within a bank. And the factors that will impact it. What needs to be considered with every investigation is the proportionality of it. It may just be a case of reviewing transactions, or going the extra mile due to the value and volume of transactions. That comes with experience and an understanding of the risk a customer or series of transactions places on an organisation. Read ‘How to investigate money laundering’ to get some insight.

Investigations Initiated by a Financial Institution

Common investigation initiators include:

  1. Regulatory recommendation or findings
  2. Transaction monitoring rules designed to detect potentially suspicious activity
  3. Referrals from customer-facing employees regarding potentially suspicious activity
  4. Information obtained from internal hotlines
  5. Negative media information
  6. Receipt of a governmental subpoena or search warrant
  7. Whistle-blowers.

Regulatory Findings

  • Investigation may be initiated based on regulatory findings or recommendations:
    • Identify remedial measures
    • Ongoing reviews
    • One-time reviews
    • Require internal and external reporting
    • Document results of investigations
    • Escalate to senior management

Transaction Monitoring Rules

The below transactions are from an account. Let’s see what the transaction monitoring rule does.

Rule: Incoming aggregated cash deposits more than $20,000 and outgoing wire transfers more than $20,000 within 10 days on individual accounts:

DateTransactionAmount
14/11/2019 Cheque Deposit Lantana Inc, BVI$5500
15/11/2019 Cash Deposit$8000
16/11/2019ATM Withdrawal$200
17/11/2019Cash Deposit$9000
18/11/2019Cash Deposit$8500
19/11/2019ATM Withdrawal$500
20/11/2019ATM Withdrawal$300
21/11/2019Cheque deposit – Lantana Inc, BVI$5500
22/11/2019 Wire Out Lantana Ltd, Panama($11000)
23/11/2019Wire Out Lantana Ltd, Singapore($24000)

Transaction Monitoring Rules – What Met the Rule?

DateTransactionAmount
14/11/2019Cheque Deposit Lantana Inc, BVI$5500
15/11/2019Cash Deposit$8000
16/11/2019ATM Withdrawal$200
17/11/2019Cash Deposit$9000
18/11/2019Cash Deposit$8500
19/11/2019ATM Withdrawal$500
20/11/2019ATM Withdrawal$300
21/11/2019Cheque Deposit – Lantana Inc, BVI$5500
22/11/2019Wire out Lantana Ltd, Panama($11000)
23/11/2019Wire out Lantana Ltd, Singapore($24000)
  • Cash Deposits equal $25,500 in less than 10 days.
  • Wire out on the 23rd equals $24000.

Transaction Monitoring Rules – What did not?

DateTransactionAmount
14/11/2019Cheque Deposit Lantana Inc, BVI$5500
15/11/2019Cash Deposit$8000
16/11/2019ATM$200
17/11/2019Cash Deposit$9000
18/11/2019Cash Deposit$8500
19/11/2019ATM$500
20/1/2019ATM$300
21/11/2019Cheque Deposit – Lantana Inc, BVI$5500
22/11/2019Wire out Lantana Ltd, Panama($11000)
23/11/2019Wire out Lantana Ltd, Singapore($24000)
  • Cheque deposits only $11,000
  • Wire out less than $20,000

What should be investigated?

DateTransactionAmount
14/11/2019Cheque deposit – Lantana Inc, BVI$5500
15/11/2019Cash Deposit$8000
16/11/2019ATM$200
17/11/2019Cash Deposit$9000
18/11/2019Cash Deposit$8500
19/11/2019ATM$500
20/11/2019ATM$300
21/11/2019Cheque Deposit – Lantana Inc, BVI$5500
22/11/2019Wire out Lantana Ltd, Panama($11000)
23/11/2019Wire out Lantana Ltd, Singapore($24000)

The wire out to Lantana Ltd in Panama, it looks like the two Cheque deposits are being aggregated into the payment to Panama. The $24000 payment to Lantana in Singapore also needs investigating. The fact the transactions are going to jurisdictions that have secretive business registrations and low tax plus the similarity in name raise suspicions enough to ask questions.

Referrals from Customer-Facing Employees

  • Financial institutions may maintain an internal communication system to report activities identified by customer facing employees.
  • Referrals would be completed by the employee and sent to the compliance investigations unit. Examples include:
    • Internal form
    • Internal email
    • Internal database
    • Observed activity, behavior relevant to determining whether something suspicious.
    • Executed transactions may be identified by transaction monitoring rules, but not the observed activity.

Internal Hotlines

Negative Media

Adverse media
Adverse media
  • Investigations can be initiated by information obtained in the public domain such as:
    • Information about a financial institution’s customer
    • How a product is used in the market
    • Geographic location it serves or
    • Money laundering or terrorist event
  • Negative media should be considered in the STR process

Receipt of Governmental Subpoena or Search Warrant

  • Subpoena / Warrant
    • Compulsory legal process issued by a court to compel the appearance of a witness at a judicial proceeding, sometimes requiring the witness to bring specified documents.
  • Search warrant
    • A grant of permission from a court for a law enforcement agency to search certain designated premises and to seize specific categories of items or documents.
    • Generally, the requesting agency is required to establish that probable cause exists US, suspicion in the UK) to believe that evidence of a crime will be located.
    • The warrant is authorised based on information contained in an affidavit submitted by a law enforcement officer.

Legal and AML Obligations

  • Financial institutions maintain two independent obligations:
    • Fulfill the requirements of the subpoena or warrant; and
    • Determine whether the activity of its customer identified in the subpoena or warrant requires the filing of a STR
    • Excerpt from the Wachovia Bank, NA civil money penalty (2010) on AML program failures, including investigating subpoenas:
Wachovia subpoena
Wachovia subpoena

Summons and Subpoenas

  • If the FI is served with summons/subpoena compelling the production of documents senior management and/or counsel should review it.
  • If there are no grounds for contesting the summons or subpoena, the institution should comply with the summons or subpoena on a timely and complete basis. Failure to do so can result in adverse action and penalties for the institution.
  • Do not notify/tip off the customer who is being investigated.
  • If the government asks the bank to keep certain accounts open, such a request should be obtained in writing under proper letterhead and authority from the government.

What To Do – Search Warrant

  • Inform the institute counsel.
  • Review the warrant to understand its scope.
  • Ask for and obtain a copy of the warrant.
  • Ask for a copy of the affidavit/laying of information document that supports the search warrant. The agents are not obligated to provide a copy of the affidavit, but, if an institute is allowed to see the affidavit, the institute can learn more about the purpose of the investigation.
  • Remain present while the agents record an inventory of items they seize.
  • Make copies of the records taken by the agents.
  • Ask for a copy of law enforcement’s inventory of what they have seized.
  • Write down the names and agency affiliations.
  • Attorney-client records: Suggest, as an alternative, that the records be given to the court for safekeeping.

In the UK the law enforcement are required to leave inventories and should not have to be asked. CYW provide a private to public liaison service designed to advise on what the authorities can and cannot do and the likely action that would be taken in an inquiry/operational search/seizure. Contact us for more.

Order to Freeze an Account

If the law enforcement agency or a prosecutor obtains a court order to freeze an account or to prevent funds from being withdrawn or moved, the institution should obtain a copy of the order and should comply with it.
Generally, the order is obtained based on a sworn affidavit/laying of information. Ask to see the affidavit. It provides clues about why a customer’s information is being requested. Whether authorities are obligated to provide the affidavit depends on laws and regulations.

Conducting the Investigation

In the course of conducting an effective financial investigation, consider the following steps:

  • Review internal records
  • Review external information related to subjects of the investigation
  • Review adverse media
  • Review business registrations
  • Review links to other businesses and accountants/law firms
  • Review links to business registration agents
  • Review large purchases through real estate, brokers, high net purchase retailers.
  • Review publicly available movement tracking databases.
  • Conduct open source intelligence searches
  • Conduct trade based inquiries
  • Review fraud databases.
  • Cross match and merge records, telephone numbers, email, IP addresses, digital footprints.
  • Consult with internal witnesses.
  • Contact the business line responsible for the account relationship
  • Generate a written report recording relevant findings
  • Follow the money trail
  • Maintain an investigative mindset
  • Include digital data searches for digital footprints.
  • Include basic CCTV inquiries for ATM/counter withdrawals, who was it?
  • Consider facial recognition if your institute has it.
  • Share and request data relating to transactions and customers with partner agencies and institutes.
  • For more contact us…

CYW are creating a network to share intelligence between agencies. The network removes the identity of the requesting institute, scores, weights and grades intelligence return and removes the identity of the returning agency. Protecting commercial interest while improving AML investigations. #Opembrace

Review Internal and External Information

  • Review internal records covering the time frame of the suspected activity, including time before and after. Examples:
    • Signature cards
    • Account statements
    • Deposit tickets, checks and withdrawal items
    • Credit and debit memorandums
    • Records on loans, cashier’s checks, certified checks, traveler’s checks and money orders
    • Request further information from other agencies.
    • Liaise with partners.

Utilising the Internet when Conducting Financial Investigations

Open source intelligence
Open source intelligence
  • Start with Metasearch (search tool that sends user requests to several other search engines and aggregates results into a single list) and then move to specific search engines
  • Tips on search engines:
    • Use multiple search engines
    • Use local (foreign) search engines when searching in a foreign country
    • Ideally you should be employing an Open Source search company or software. The internet has many search options, not least different language. Unless you are very proficient in search you should employ experts. You will miss critical evidence/intelligence otherwise.
    • Search social media accounts.
    • Employ a system that does all of this with AI capability.

STR Decision-Making Process

  • Decision whether or not to file a STR/SAR often involves weighing the aggravating and mitigating factors arising from the research conducted during the investigative process.
  • The final decision should be documented and supported by the factors that were used to make the determination.
    • File report to Financial Intelligence Unit
    • Comply with STR timelines

Quality Assurance

  • Financial institutions are required to file timely and complete STR/SARs and the quality of STRs can be an indication of the quality of the institutes AML/CFT program. For this reason managers should dip sample and provide feedback on STR/SAR submission.
  • QA review helps to ensure that STR filings are internally consistent, the right decisions are being made and high priority matters are identified and escalated to leadership.
  • The institute should have a clear direction for its staff, in policy, that indicates what, when, how and why to escalate an investigation. Guidance to staff is critical.

Quality Assurance Impacts Investigations

Bank SAR
Bank SAR
  • TCF National Bank
  • 2013 consented to a $10M civil money penalty for AML program violations
  • Quality of investigation process cited in consent order

Closing the Account Based on its internal investigation, the institution should make an independent determination as to whether to close the account. Consider: – The legal basis for closing an account. – The institution’s policies and procedures for closing an account. – How serious is the underlying conduct? If the conduct is serious and rises to the level where the account would ordinarily be closed, then consider closing the account. If Law Enforcement requests the institution to keep the account open, request it in writing. In addition, the institution should determine whether or not to file a STR.

Communicating with Law Enforcement
Communicating with Law Enforcement

Law Enforcement Investigations vs. Bank Examinations

In the U.S. and several other jurisdictions, the banking regulatory agencies do not need to use subpoenas or search warrants. Their authority to conduct examinations includes the ability to inspect all books and records of a regulated institution.

Law Enforcement Investigations

  • WHEN: Law enforcement investigations can be triggered by STRs, tips from sources and information from other cases.
  • WHAT: The agency can request information from an institute in order to obtain evidence.
  • HOW: Requests for information can come in several forms: subpoenas, search warrants, etc.
  • WHY: The documents and testimony are designed to allow the agency to investigate suspicious transactions, develop evidence and put together a case for prosecution.

Steps Law Enforcement Agencies Take in a Money Laundering Investigation

  • Follow the money – Identify the unlawful activity (predicate offense)
  • Document the underlying activity and transactions, flow of funds through bank accounts
  • Review databases (FIU databases, commercial databases)
  • Review public records (court records, corporate filings, newspapers)
  • Review licensing and registration files (including motor vehicle department)
  • Analyze the financial transactions and account activity of the target.
  • Review STR/SARs
  • In cross-border cases, seek international assistance via MLAT or other.

Decision to Prosecute a Financial Institution

When considering whether – or to what extent – to bring a case against a Financial Institution involving ML-related charges, prosecutors will look at:

  • Does the institution have a criminal history?
  • Has the institution cooperated with the investigation
  • Did the institution discover and self-reported the ML -related issues
  • Does the institution have a comprehensive and effective AML program
  • Did the institution take timely and effective remedial action
  • Are there civil remedies available that can serve as punishment
  • Will deterring wrongdoing be served by a prosecution

Responding to a Law Enforcement Investigation

  • Respond quickly and completely to all requests.
  • If a request is overly broad/unduly intrusive, the institut can attempt to narrow the request or can even seek to contest the request, in court. Typically, the most effective strategy is to cooperate with investigators and prosecutors.
  • Never ignore, defer or otherwise put aside or delay responding to a law enforcement inquiry or request for documents.
  • Obtain counsel.
  • Create a centralised control policy: To ensure requests are responded to on a complete and timely basis and to establish a complete record of what is provided.
  • Keeping a centralised record will also assist with regard to the institute’s own internal investigation.
  • The FI needs to ensure that appropriate senior management is informed.
  • Someone should be designated as being responsible for responding to all law enforcement requests.
  • If the inquiry appears to be focused on the institution and not just an account or customer, then the Board of Directors should be kept appraised as well.
  • Information about an investigation should not be provided to any employees, officers or directors of the institution who might be a suspect in the investigation.

CYW can support institutes under investigation.

Legal Counsel

Upon notification of a law enforcement investigation, especially one directed at the institution, consideration should be given to the retention of qualified, experienced legal counsel.

  • Guides the institution through the inquiry.
  • Contests requests that are perceived to be improper.
  • Assist in negotiating settlements if necessary.
    • If the inquiry is merely focused on a particular account or is only seeking to obtain financial evidence about a customer and there is no apparent wrongdoing by the institution, there is a less pressing need to obtain counsel. Each case, however, requires individualized review and analysis.

We have articles on MLATs and FIU roles and responsibilities. We recommend you read these in continuing learning around investigations. Follow the links.

MLAT learning

FIU role learning.

Factors That Impact Your AML Success

Encrypted messaging platform

Factors That Impact Your AML Success

Operation Embrace is our project to design a cutting edge intelligence solution to help banks route out criminals and criminality from their systems.

Data management in banking
Data management in banking

Big data is all around. It is said that in 20 years Facebook will have over 70,000 data points on our children. It seems to me that is perverse when the banking industry can’t yet match customer data within their own four walls.

With an industry bursting at the seams with data, yet no credible way to make use of it, it is time for a change of thought process.

Software available to banks to manage AML, be that the process to manage a case, or alert to a risk, is letting them down.

Badly.

The solution to this all relates to information governance and dissemination.

Sharing data
Sharing data

Institutes should be sharing data on customers and transactions automatically. This should be expanded to include public sector authorities also sharing data to provide a more holistic view of risk and criminality.

Currently all intelligence products focus on the same data-sets.

  • Adverse media
  • ‘Some’ open source
  • Their own records
  • Fraud data-sets
  • Sanctions/watch lists

Imagine a solution that did all of that and included;

  • Social Media
  • Dark Net
  • Police Data
  • Full open source
  • Digital footprints
  • Tracking movement software
  • Biometrics
  • Psychographics
  • Port authority
  • Customs
  • Criminal data
  • Financial Industry intelligence network
  • and more…

Now imagine a system that utilised a sharing engine to control how the network ethically, lawfully and commercially shared data.

The police today work in a ‘plural’ policing network. Working with private companies, public authorities and security companies to keep us safe. They share data with all of them to prevent crime. And yet the banking industry doesn’t receive this data.

Add to these concepts an artificial intelligence solution that intelligently merges data-sets to create a product that provides less false positives and more meaningful and accurate data results. Shutting out the criminal with nefarious aims.

All of this is possible with today’s technology. A solution that can;

Data accuracy and relevance
Data accuracy and relevance
  • Weight
    • Relevance
    • Accuracy
    • Timliness
    • Provenance
  • Grade
    • Dissemination rules
    • Utility
  • Score
    • To aid decision-making.

Operation Embrace is building this system. The team has over 200 years experience and critically, none of it is in IT with most forged from hard years at the front-line of AML. A team with a breadth of experience that includes military and policing intelligence experience.

Do you want to see the future? Contact us to shape it with us. #OpEmbrace

What is a Politically Exposed Person?

What is a Politically Exposed Person?

What is a politically exposed person
What is a politically exposed person

This post will give a definition for a PEP and answer what is a politically exposed person. It also provides details of red flags that indicate a PEP is acting criminally. There is also a detailed guide from FATF.

PEPs are governed by the recommendations of FATF, recommendations 12 and 22 specifically.

FATF recommend enhancing due diligence when dealing with a PEP in financial transactions or account dealing.

An individual is a PEP if he is or has been entrusted with a prominent function. Many PEPs hold political positions that can be abused for the purpose of laundering stolen funds or other predicate offences such as corruption or bribery. A PEP includes politicians/councillors, senior police, business and military people. Checks with the relatives and associates of PEPs is also recommended to prevent second person related offences.

Because of the risks associated with Politically exposed people, FATF recommends additional Anti-Money Laundering or Counter Financing of Terrorism measures with PEPs. The measures are to prevent offences not criminalise PEPs specifically.

It is a fundamental principle of managing PEPs that institutes know who their customers are. Institutes need data to identify PEPs, be they domestic or foreign. Intelligence systems exist globally to help identify who is and who is not a PEP. However, these databases are not sufficient to comply with the PEPs requirements.

Institutes should find ways to share data throughout the industry to help identify customers as they conduct business with the institute.

The below list identifies many of the ‘red flags‘ that indicate a PEP is abusing their position of trust.

Politically Exposed Persons – Red Flags

  1. The determination that a customer is a PEP is not an aim in itself but forms part of the process that enables financial institutions and DNFBPs to assess the different types of higher risks related to PEPs. Determining that a customer is a PEP does not absolve financial institutions and DNFBPs of further ongoing due diligence specifically tailored to the fact that the client is a PEP.
    Being a PEP does not prejudge a link to criminal activities, or equate to being a criminal and / or subsequent abuse of the financial system. Similarly, the fact that a person is a domestic/international organisation PEP does not automatically imply that he/she poses a higher risk. Financial institutions and DNFBPs need nevertheless to be aware of the risks that a PEP may abuse the financial system to launder illicit proceeds, and financial institutions and DNFBPs need to be aware of the red flags / indicators that can be used to detect such abuse.
  2. The list of red flags below is relevant to detect those PEPs that abuse the financial system, and does not intend to stigmatize all PEPs.
  3. PEP red flags are not an exhaustive list and are complementary to the usual ML red flags that a reporting entity may be using. The methods of those PEPs that engage in illicit activity change and therefore indicators of their activity will do so as well. Also, there may be other red flags that should be considered as equally important in a particular country or region.

Detecting Misuse of the financial system by PEPS – Red Flags and Indicators for suspicion.

A. PEPS ATTEMPTING TO SHIELD THEIR IDENTITY:

PEPs are aware that their status as a PEP may facilitate the detection of their illicit behaviour. This means that PEPs may attempt to shield their identity, to prevent detection. Examples of ways in which this is done are:

  • Use of corporate vehicles (legal entities and legal arrangements) to obscure the beneficial owner.
  • Use of corporate vehicles without valid business reason.
  • Use of intermediaries when this does not match with normal business practices or when this seems to be used to shield identity of PEP.
  • Use of family members or close associates as legal owner.

B. RED FLAGS AND INDICATORS RELATING TO THE PEP AND HIS BEHAVIOUR:

  • Use of corporate vehicles (legal entities and legal arrangements) to obscure i) ownership, ii) involved industries or iii) countries.
  • The PEP makes inquiries about the institution’s AML policy or PEP policy.
  • The PEP seems generally uncomfortable to provide information about source of wealth or source of funds.
  • The information that is provided by the PEP is inconsistent with other (publicly available) information, such as asset declarations and published official salaries.
  • The PEP is unable or reluctant to explain the reason for doing business in the country of the financial institution or DNFBP.
  • The PEP provides inaccurate or incomplete information.
  • The PEPs seeks to make use of the services of a financial institution or DNFBP that would normally not cater to foreign or high value clients.
  • Funds are repeatedly moved to and from countries to which the PEPs does not seem to have ties with.
  • The PEP is or has been denied entry to the country (visa denial).
  • The PEP is from a country that prohibits or restricts its citizens to hold accounts or own certain property in a foreign country.

C. THE PEP’S POSITION OR INVOLVEMENT IN BUSINESSES:

The position that a PEP holds and the manner in which the PEP presents his/her position are important factors to be taken into account. Possible red flags are:

  • The PEP has a substantial authority over or access to state assets and funds, policies and operations.
  • The PEP has control over regulatory approvals, including awarding licences and concessions.
  • The PEP has the formal or informal ability to control mechanisms established to prevent and detected ML/TF.
  • The PEP (actively) downplays importance of his/her public function, or the public function s/he is relates to associated with.
  • The PEP does not reveal all positions (including those that are ex officio).
  • The PEP has access to, control or influence over, government or corporate accounts.
  • The PEP (partially) owns or controls financial institutions or DNFBPs, either privately, or ex officio.
  • The PEP (partially) owns or controls the financial institution or DNFBP (either privately or ex officio) that is a counter part or a correspondent in a transaction.
  • The PEP is a director or beneficial owner of a legal entity that is a client of a financial institution or a DNFBP.

D. RED FLAGS AND INDICATORS RELATING TO THE INDUSTRY/SECTOR WITH WHICH THE PEP IS INVOLVED:

A connection with a high risk industry may raise the risk of doing business with a PEP. Under FATF Recommendation 1, competent authorities, financial institutions and DNFBPs are required for determining which types of clients may be higher risk. For this, financial institutions and DNFBPs will also be guided by national guidance or risk assessments. Which industries may be at risk depends on the risk assessments and varies from country to country, and on other industry safeguards that may be in place. Examples of higher risk industries are:

  • Arms trade and defence industry.
  • Banking and finance.
  • Businesses active in government procurement, i.e., those whose business is selling to government or state agencies.
  • Construction and (large) infrastructure.
  • Development and other types of assistance.
  • Human health activities.
  • Mining and extraction.
  • Privatisation.
  • Provision of public goods, utilities.

E. BUSINESS RELATIONSHIP / TRANSACTION, PURPOSE OF BUSINESS RELATIONSHIP:

Red flag and indicators can also relate to the specific business relationship or transaction:

  • Multiple STRs (sometimes called a SAR) have been submitted on a PEP.
  • (Consistent) use of rounded amounts, where this cannot be explained by the expected business.
  • Deposit or withdrawal of large amounts of cash from an account, use of bank cheques or other bearer instruments to make large payments. Use of large amounts of cash in the business relationship.
  • Other financial institutions and DNFBPs have terminated the business relationship with the PEP.
  • Other financial institutions and DNFBPs have been subject to regulatory actions over doing business with the PEP.
  • Personal and business related money flows are difficult to distinguish from each other.
  • Financial activity is inconsistent with legitimate or expected activity, funds are moved to or from an account or between financial institutions without a business rationale.
  • The account shows substantial activity after a dormant period; or over a relatively short time; or shortly after commencing the business relationship.
  • The account shows substantial flow of cash or wire transfers into or out of the account.
  • Transactions between non-client corporate vehicles and the PEP’s accounts.
  • A PEP is unable or reluctant to provide details or credible explanations for establishing a business relationship, opening an account or conducting transactions.
  • A PEP receives large international funds transfers to a gaming account. The PEP withdraws a small amount for gaming purposes and withdraws the balance by way of cheque.
  • A PEP uses third parties to exchange gaming chips for cash and vice versa with little or minimal gaming activity.
  • A PEP uses multiple bank accounts for no apparent commercial or other reason.

F. PRODUCTS, SERVICE, TRANSACTION OR DELIVERY CHANNELS:

The FATF Recommendations contain examples of products, industries, service, transaction or delivery channels, which are of a higher risk, irrespective of the type of customer. These examples are:

  • Private banking.
  • Anonymous transactions (including cash).
  • Non-face-to-face business relationships or transactions.
  • Payments received from unknown or un-associated third parties.

If these industries, products, service, transaction or delivery channels are used by PEPs, then this adds an additional risk factor (depending on the nature of the PEP). In addition to the examples already listed in the FATF Recommendations, there are other products, industries, service, transaction or delivery channels that can become additionally vulnerable when used by PEPs.
Examples of these are:

  • Businesses that cater mainly to (high value) foreign clients.
  • Trust and company service providers.
  • Wire transfers, to and from a PEP account that cannot be economically explained, or that lack relevant originator or beneficiary information.
  • Correspondent and concentration accounts.
  • Dealers in precious metals and precious stones, or other luxurious goods.
  • Dealers in luxurious transport vehicles (such as cars, sports cars, ships, helicopters and planes).
  • High end real estate dealers.

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G. COUNTRY SPECIFIC RED FLAGS AND INDICATORS

The FATF Recommendations contain examples of higher risk country or geographic risk factors, irrespective of the type of customer. Additionally, the following red flags and indicators relating to countries can be taken into account when doing business with a PEP:

  • The foreign or domestic PEP is from a higher risk country.
  • Additional risks occur if a foreign or domestic PEP from a higher risk country would in his/her position have control or influence over decisions that would effectively address identified shortcomings in the AML/CFT system.
  • Foreign or domestic PEPs from countries identified by credible sources as having a high risk of corruption.
  • Foreign or domestic PEPs from countries that have not signed or ratified or have not or insufficiently implemented relevant anti-corruption conventions, such as the UNCAC, and the OECD Anti-Bribery Convention.
  • Foreign or domestic PEPs from countries with a mono economies (economic dependency on one or a few export products), especially if export control or licensing measures have been put in place.
  • Foreign or domestic PEPs from countries that are dependent on the export of illicit goods, such as drugs.
  • Foreign or domestic PEPs from countries (including political subdivisions) with political systems that are based on personal rule, autocratic regimes, or countries where a major objective is to enrich those in power, and countries with high level of patronage appointments.
  • Foreign or domestic PEPs from countries with poor and/or opaque governance and accountability.
  • Foreign or domestic PEPs from countries identified by credible sources as having high levels of (organised) crime.

If you need to train your staff on recognising a PEP or putting measures in place to mitigate risk, contact us to provide you with a bespoke training package.

What is Tax Evasion?

What is Tax Evasion?

Tax evasion can be conducted through many methods. It is sometimes confused with tax avoidance, which is not illegal. In this article we will identify what is tax evasion and where it is conducted globally.

What is the penalty for tax evasion?

The penalty for tax evasion can be severe. It can range from significant fines to sentences for jail time. See some of the more serious convictions in the table below.

CountryMax FineMax SentenceCase Example
United States$250,00010 YearsJack Abramoff
United KingdomUnlimited7 Years Abul Kalam Muhammad
Australia10 YearsFanny Beerepoot
Greece20 YearsSee the Lagarde List
Germany10% of evasion10 YearsUli Hoeness
France3 Million Euros7 YearsPatrick Balcony
Spain5 YearsRicardo Cavalho
Italy6 YearsSilvio Berlusconi
Russia10 YearsPlaton Lebedev

In Greece we couldn’t find a conviction for tax evasion which demonstrates why the nation suffered significantly in the 2008 financial crash. They just don’t pay tax in Greece! The Lagrade list controversially identified several Greeks ‘hiding’ money in Swiss bank accounts but despite this being in the hands of authorities since 2009, still no one has been convicted.

The fines possible range from a set maximum to percentages of the total evaded going up as the amount increases. Then of course there are back taxes to pay.

In the United States the IRS pay significant rewards to whistle-blowers for reporting tax evasion. The whistle-blower doesn’t need to be a US citizen to get rewarded, just support the case in a substantial way leading to tax recovery. The biggest whistle-blowing reward in the US is $56 million to a single whistle-blower.

If you know of a Tax evasion/Fraudster contact us via our military grade encrypted messaging system. You can report anonymously. We provide you with an Attorney.

In September 2017, HMRC received a boost to its criminal powers following the introduction of the failure to prevent the facilitation of tax evasion offences under the Criminal Finances Act 2017.

How much is evaded in tax each year?

HMRC estimated that in the 2016-2017 tax year the total cost of tax evasion in the UK was as much as £5.3 billion.

In the US the IRS claim between 2008 and 2010 $458 billion was evaded in taxes.

What is the difference between tax evasion and tax avoidance?

While tax evasion involves an individual or business deliberately subverting the tax system and is criminal, tax avoidance involves using the tax laws to your benefit. Arranging your finances in a way that reduces the amount of tax paid but in a way that is arguably lawful is common among the wealthy and seen as good practice.

Tax evasion usually carries with it a heavy maximum penalty and/or an unlimited fine, it is rarely taken lightly.

There are also tax avoidance schemes that exist that encourage people to make complex transactions that will ultimately save them money on tax. These are ‘too good to be true’ and will end up costing the tax-dodger more in the long run. It will also end them up in jail if enough is evaded.

Here are some methods of evading tax.

  • Hide wealth offshore in privacy locations.
  • Hide personal assets in a company (planes, property and yachts)
  • Incorporate businesses in offshore tax havens
  • Put your money in trusts
  • Utilise nominee directors of companies
  • Avoid beneficial ownership rules
  • Accept payments in cash
  • Invest in cash intensive business and clean it through the dark web
  • Structure your finances offshore
  • Utilise a law firm who will claim client confidentiality/privilege.
  • Under report income
  • Under or Over invoice
  • Get paid offshore and take a loan as a salary
  • Set up cross border complex transactions
  • Clean your money through a bitcoin tumbler
  • Claiming personal expense as business
  • Keeping two sets of books
  • Engaging in sham transactios

What is Cheating the Public Revenue?

Due to the serious nature of the crime, the maximum sentence for cheating public revenue in the UK is life in prison or an unlimited fine. It relates to any activity that HMRC can prove you did knowingly and willfully to cheat the exchequer.

This offence is a common law offence and is reserved for the significant criminal/criminality. It is a conduct offence, meaning a loss by HMRC isn’t absolutely necessary to convict.

Contact us in complete confidence to discuss any information you may have about an offence of tax evasion.