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.

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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

U

  • 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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Y

Z

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

K

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

F

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

P

  • 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

HOW BANK HAPOALIM CONSPIRED WITH US CITIZENS TO HIDE $7.6 BILLION FROM THE IRS

Bank Hapoalim Tax evasion Scandal

Hiding US citizen cash in offshore accounts is uncovered and punished.

Israel’s Largest Bank, Bank Hapoalim, has admitted to conspiring with US taxpayers to hide $7.6 billion and has agreed a fine of $875 million for its sins.


Bank Hapoalim (Switzerland) and Bank Hapoalim B.M. (Israel) agree to pay nearly $875 Million and an entry of criminal charges against Bank Hapoalim B.M. for conspiring with U.S. taxpayers and others to hide more than $7.6 billion in more than 5,500 secret Swiss and Israeli bank accounts and the income generated in these accounts from the Internal Revenue Service (IRS).

The money will be paid to the U.S. Treasury, the Federal Reserve, and the New York State Department of Financial Services. It is the second-largest recovery by the DOJ in connection with its investigations into offshore U.S. tax evasion by foreign banks.

Manhattan U.S. Attorney Geoffrey S. Berman said:

“Israel’s largest bank, Bank Hapoalim, and its Swiss subsidiary have admitted to not only failing to prevent but to actively assisting U.S. customers to set up secret accounts, to shelter assets and income, and to evade taxes. The combined payment approaching $1 billion reflects the magnitude of the tax evasion by the Bank’s U.S. customers, the size of the fees the Bank collected to provide this illegal service, and the gravity of the illegal conduct.”

Principal Deputy Assistant Attorney General Richard E. Zuckerman said:

“The Department of Justice continues to aggressively prosecute banks and other financial institutions that help U.S. taxpayers conceal their income and assets in offshore bank accounts. Today, Bank Hapoalim is being held accountable for its conduct – it has admitted to its crimes and will surrender all fees it earned, repay the United States for lost tax revenue, and pay a substantial fine.”

IRS-CI Chief Don Fort said:

“Offshore tax evasion is a top priority for IRS Criminal Investigation and we are wholeheartedly committed to bringing offenders to justice. Today’s resolution serves as proof that financial institutions engaging in tax fraud face dire criminal and financial consequences for their behavior.”

BHBM and BHS have agreed to fully cooperate with further investigations into hidden bank accounts. Assuming BHBM’s continued compliance with its agreement to identify hidden accounts, the US Government has agreed to defer prosecution of BHBM for a period of three years, after which time the charge against BHBM will be dismissed.

BHBM is Israel’s largest bank and operates primarily as a retail bank with approximately 250 branches throughout Israel and more than 2.5 million accounts.

In addition to retail banking services, BHBM offered private banking services for onshore and offshore customers through its retail branches and its Global Private Banking Centre.

BHBM also wholly owned Poalim Trust Services Ltd. (BVI entity), which provided trust formation and management services. Outside Israel, BHBM owned BHS, a Swiss subsidiary that provided private banking. BHS is headquartered in Zurich and at times during the prosecution period had branches in Geneva, Luxembourg, and Singapore.

BHBM also had branches in New York, Miami, the Cayman Islands, the United Kingdom, and Jersey. It is likely investigations into entities in those jurisdictions will/are being conducted.

From at least in or around 2002, and continuing until at least 2014, the Bank conspired with employees, U.S. customers, and others to:

(1) defraud the United States with respect to taxes;

(2) file false federal tax returns; and

(3) commit tax evasion.

Employees of BHBM and BHS assisted U.S. customers in concealing their ownership and control of assets and funds held at the Bank, which enabled those U.S. customers to evade their U.S. tax obligations, by engaging in the following conduct:

  • Assisting U.S. customers with opening and maintaining accounts in the names of pseudonyms, code names, trust accounts, and offshore nominee entities;
  • Opening customer accounts for known U.S. customers using non-U.S. forms of identification;
  • Enabling U.S. taxpayers to evade U.S reporting requirements on securities’ earnings in violation of the Bank’s agreements with the IRS;
  • Providing “hold mail” services for a fee, avoiding any correspondence regarding the undeclared account being sent to the U.S.;
  • Offering back-to-back loans for U.S. taxpayers to enable them to access funds in the United States that were held in offshore accounts at the Bank in Switzerland and Israel; and
  • Processing wire transfers or issuing checks in amounts of less than $10,000 that were drawn on the accounts of U.S. taxpayers or entities in order to avoid triggering scrutiny.

At least four senior executives of the Bank, including two former members of BHS’s board of directors, were directly involved in aiding and abetting tax evasion of U.S. taxpayers.

The Bank is now required to cooperate fully with ongoing investigations and affirmatively disclose any information it may later uncover regarding U.S. accounts. The Bank is also required to disclose information consistent with the Department of Justice’s Swiss Bank Program relating to accounts closed between Jan. 1, 2009, and Dec. 31, 2019. The agreements provide no protection from criminal or civil prosecution for any individuals. A worrying three years for anyone who was involved in this as the US authorities seek to recover taxes and prosecute those evading tax.

Both the penalty and fine amounts for BHBM take into consideration that the Bank, after initially providing deficient cooperation through an inadequate internal investigation and the provision of incomplete and inaccurate information and data to the US Government, thereafter conducted a thorough internal investigation, provided client-identifying information, and cooperated in ongoing investigations and prosecutions.

The Bank further implemented remedial measures to protect against the use of its services for tax evasion in the future.

The time it took to complete this investigation allowed the executives at the helm of the bank and aware of this scandal to avoid prosecution, something that has to change to motivate executives to ensure proper processes and to prevent criminality.

How to Assess and Manage Risk in Investment Fund Management

Investment fund risk

Risk management for providers of investment funds

The provision of investment funds can involve multiple parties: the fund manager, appointed advisers, the depositary and sub-custodians, registrars and, in some cases, prime brokers. Similarly, the distribution of these funds can involve parties such as tied agents, advisory and discretionary wealth managers, platform service providers and independent financial advisers.

The type and number of parties involved in the funds distribution process depends on the nature of the fund and may affect how much the fund knows about its customer and investors. The fund or, where the fund is not itself an obliged entity, the fund manager will retain responsibility for compliance with AML/CFT obligations, although aspects of the fund’s CDD obligations may be carried out by one or more of these other parties subject to certain conditions.

Funds can simply be a store of value for criminal asset to hide the asset from other jurisdictions. It is for this reason, these type of funds are attractive to a criminal element looking to hide money. The key is to identify who they are, where the asset is from and how it was funded – this is made more difficult by the obfuscation of who really owns the investment.

Investment funds may be used by persons or entities for ML/TF purposes:

  • Retail funds are often distributed on a non-face-to-face basis; access to such funds is often easy and relatively quick to achieve, and holdings in such funds can be transferred between different parties.
  • Alternative investment funds, such as hedge funds, real estate and private equity funds, tend to have a smaller number of investors, which can be private individuals as well as institutional investors (pension funds, funds of funds). Funds that are designed for a limited number of high-net-worth individuals, or for family offices, can have an inherently higher risk of abuse for ML/TF purposes than retail funds, since investors are more likely to be in a position to exercise control over the fund assets. If investors exercise control over the assets, such funds are personal asset-holding vehicles, which are mentioned as a factor indicating potentially higher risk in Annex III to Directive (EU) 2015/849.
  • Notwithstanding the often medium- to long-term nature of the investment, which can contribute to limiting the attractiveness of these products for money laundering purposes, they may still appeal to money launderers on the basis of their ability to generate growth and income.

This post is directed at:

  • Investment fund managers performing activities under Article 3(2)(a) of Directive (EU) 2015/849; and
  • Investment funds marketing their own shares or units, under Article 3(2)(d) of Directive (EU) 2015/849.
  • Other parties involved in the provision or distribution of the fund, for example intermediaries, may have to comply with their own CDD obligations and should refer to relevant chapters in these guidelines as appropriate.
  • The post, while EU centric, is good advice and a standard setter globally.

For funds and fund managers, our general risk management post may also be relevant.

Risk factors
Product, service or transaction risk factors

The following factors may contribute to increasing the risk associated with the fund:

  • The fund is designed for a limited number of individuals or family offices, for example a private fund or single investor fund.
  • It is possible to subscribe to the fund and then quickly redeem the investment without the investor incurring significant administrative costs.
  • Units of or shares in the fund can be traded without the fund or fund manager being notified at the time of the trade and, as a result, information about the investor is divided among several subjects (as is the case with closed-ended funds traded on secondary markets).

The following factors may contribute to increasing the risk associated with the subscription:

  • The subscription involves accounts or third parties in multiple jurisdictions, in particular where these jurisdictions are associated with a high ML/TF risk as defined in our generic risk post.
  • The subscription involves third party subscribers or payees, in particular where this is unexpected.

The following factors may contribute to reducing the risk associated with the fund:

  • Third party payments are not allowed.
  • The fund is open to small-scale investors only, with investments capped.

Customer risk factors

The following factors may contribute to increasing risk:

  • The customer’s behaviour is unusual, for example:
    • The rationale for the investment lacks an obvious strategy or economic purpose or the customer makes investments that are inconsistent with the customer’s overall financial situation, where this is known to the fund or fund manager.
    • The customer asks to repurchase or redeem an investment within a short period after the initial investment or before the payout date without a clear rationale, in particular where this results in financial loss or payment of high transaction fees.
    • The customer requests the repeated purchase and sale of shares within a short period of time without an obvious strategy or economic rationale.
    • The customer transfers funds in excess of those required for the investment and asks for surplus amounts to be reimbursed.
    • The customer uses multiple accounts without previous notification, especially when these accounts are held in multiple jurisdictions or jurisdictions associated with higher ML/TF risk.
    • The customer wishes to structure the relationship in such a way that multiple parties, for example non-regulated nominee companies, are used in different jurisdictions, particularly where these jurisdictions are associated with higher ML/TF risk.
    • The customer suddenly changes the settlement location without rationale, for example by changing the customer’s country of residence.
    • The customer and the beneficial owner are located in different jurisdictions and at least one of these jurisdictions is associated with higher ML/TF risk as defined in the general part of the guidelines.
    • The beneficial owner’s funds have been generated in a jurisdiction associated with higher ML/TF risk, in particular where the jurisdiction is associated with higher levels of predicate offences to ML/TF.

The following factors may contribute to reducing risk:

  • The customer is an institutional investor whose status has been verified by an EEA government agency, for example a government-approved pensions scheme;
  • The customer is a firm in an EEA country or a third country that has AML/CFT requirements that are not less robust than those required by Directive (EU) 2015/849.

Distribution channel risk factors

The following factors may contribute to increasing risk:

  • Unclear or complex distribution channels that limit the fund’s oversight of its business relationships and restrict its ability to monitor transactions, for example the fund uses a large number of sub-distributors for distribution in third countries;
  • Uhe distributor is located in a jurisdiction associated with higher ML/TF risk as defined in the general part of these guidelines.

The following factors may indicate lower risk:

  • The fund admits only a designated type of low-risk investor, such as regulated firms investing as a principal (e.g. life companies) or corporate pension schemes.
  • The fund can be purchased and redeemed only through a firm, for example a financial intermediary, in an EEA country or a third country that has AML/CFT requirements that are not less robust than those required by Directive (EU) 2015/849.

Country or geographical risk factors

The following factors may contribute to increasing risk:

  • Investors’ monies have been generated in jurisdictions associated with higher ML/TF risk, in particular those associated with higher levels of predicate offences to money laundering.
  • The fund or fund manager invests in sectors with higher corruption risk (e.g. the extractive industries or the arms trade) in jurisdictions identified by credible sources as having significant levels of corruption or other predicate offences to ML/TF, in particular where the fund is a single investor fund or has a limited number of investors.

Measures

The measures funds or fund managers should take to comply with their CDD obligations will depend on how the customer or the investor (where the investor is not the customer) comes to the fund. The fund or fund manager should also take risk-sensitive measures to identify and verify the identity of the natural persons, if any, who ultimately own or control the customer (or on whose behalf the transaction is being conducted), for example by asking the prospective investor to declare, when they first apply to join the fund, whether they are investing on their own behalf or whether they are an intermediary investing on someone else’s behalf.

The following paragraph is referenced elsewhere in this post and should be read carefully. It dictates the level of risk and measures to be applied in each circumstance.

The customer is:

  • (A) A natural or legal person who directly purchases units of or shares in a fund on their own account, and not on behalf of other, underlying investors; or
  • (B) A firm that, as part of its economic activity, directly purchases units of or shares in its own name and exercises control over the investment for the ultimate benefit of one or more third parties who do not control the investment or investment decisions; or
  • (C) A firm, for example a financial intermediary, that acts in its own name and is the registered owner of the shares or units but acts on the account of, and pursuant to specific instructions from, one or more third parties (e.g. because the financial intermediary is a nominee, broker, multi-client pooled account/omnibus type account operator or operator of a similar passive-type arrangement); or
  • (D) A firm’s customer, for example a financial intermediary’s customer, where the firm is not the registered owner of the shares or units (e.g. because the investment fund uses a financial intermediary to distribute fund shares or units, and the investor purchases units or shares through the firm and the firm does not become the legal owner of the units or shares).

In the situations described in bullet points ‘A’ and ‘B’ above, examples of SDD and EDD measures a fund or fund manager should apply in high-risk situations include:

  • Obtaining additional customer information, such as the customer’s reputation and background, before the establishment of the business relationship;
  • Taking additional steps to further verify the documents, data or information obtained;
  • Obtaining information on the source of funds and/or the source wealth of the customer and of the customer’s beneficial owner;
  • Requiring that the redemption payment is made through the initial account used for investment or an account in the sole or joint name of the customer;
  • Increasing the frequency and intensity of transaction monitoring;
  • Requiring that the first payment is made through a payment account held in the sole or joint name of the customer with an EEA-regulated credit or financial institution or a regulated credit or financial institution in a third country that has AML/CFT requirements that are not less robust than those required by Directive (EU) 2015/849;
  • Obtaining approval from senior management at the time of the transaction when a customer uses a product or service for the first time;
  • Enhanced monitoring of the customer relationship and individual transactions.

In lower risk situations, to the extent permitted by national legislation, and provided that the funds are verifiably being transferred to or from a payment account held in the customer’s sole or joint name with an EEA-regulated credit or financial institution, an example of the SDD measures the fund or fund manager may apply is using the source of funds to meet some of the CDD requirements.

SDD and EDD measures to be taken in situations described in bullet point ‘C’ above.

In the situations described in ‘C’ (above), where the financial intermediary is the fund or fund manager’s customer, the fund or fund manager should apply risk-sensitive CDD measures to the financial intermediary. The fund or fund manager should also take risk- sensitive measures to identify, and verify the identity of, the investors underlying the financial intermediary, as these investors are beneficial owners of the funds invested through the intermediary. To the extent permitted by national law, in low-risk situations, funds or fund managers may apply SDD measures similar to those described in the ‘pooled accounts section of our Retail Banking Risks post, subject to the following conditions:

  • The financial intermediary is subject to AML/CFT obligations in an EEA jurisdiction or in a third country that has AML/CFT requirements that are not less robust than those required by Directive (EU) 2015/849.
  • The financial intermediary is effectively supervised for compliance with these requirements.
  • The fund or fund manager has taken risk-sensitive steps to be satisfied that the ML/TF risk associated with the business relationship is low, based on, inter alia, the fund or fund manager’s assessment of the financial intermediary’s business, the types of clients the intermediary’s business serves and the jurisdictions the intermediary’s business is exposed to.
  • The fund or fund manager has taken risk-sensitive steps to be satisfied that the intermediary applies robust and risk-sensitive CDD measures to its own customers and its customers’ beneficial owners. As part of this, the fund or fund manager should take risk-sensitive measures to assess the adequacy of the intermediary’s CDD policies and procedures, for example by referring to publicly available information about the intermediary’s compliance record or liaising directly with the intermediary.
  • The fund or fund manager has taken risk-sensitive steps to be satisfied that the intermediary will provide CDD information and documents on the underlying investors immediately upon request, for example by including relevant provisions in a contract with the intermediary or by sample-testing the intermediary’s ability to provide CDD information upon request.

Where the risk is increased, in particular where the fund is designated for a limited number of investors, EDD measures must apply and may include those set out above relating to higher risk (A and B in the bullet list)

SDD and EDD measures to be taken in situations described in bullet point ‘D’ above.

In the situations described in bullet point ‘D’ above, the fund or fund manager should apply risk-sensitive CDD measures to the ultimate investor as the fund or fund manager’s customer. To meet its CDD obligations, the fund or fund manager may rely upon the intermediary in line with, and subject to, the conditions set out in Chapter II, Section 4, of Directive (EU) 2015/849.

To the extent permitted by national law, in low-risk situations, funds or fund managers may apply SDD measures. Provided that the conditions listed in relation to the risk for a ‘C’ classified customer are met, SDD measures may consist of the fund or fund manager obtaining identification data from the fund’s share register, together with the information specified in Article 27(1) of Directive (EU) 2015/849, which the fund or fund manager must obtain from the intermediary within a reasonable time-frame. The fund or fund manager should set that time-frame in line with the risk-based approach.

Where the risk is increased, in particular where the fund is designated for a limited number of investors, EDD measures must apply and may include those set out in the measures for customers identified as bullet points ‘A’ and ‘B’ above.

How To Assess and Manage Risk with Wealth Management

Wealth Management

Guidelines to manage risk within wealth management

Wealth management is the provision of banking and other financial services to high-net- worth individuals and their families or businesses. It is also known as private banking. Clients of wealth management firms can expect dedicated relationship management staff to provide tailored services covering, for example, banking (e.g. current accounts, mortgages and foreign exchange), investment management and advice, fiduciary services, safe custody, insurance, family office services, tax and estate planning and associated facilities, including legal support.

Many of the features typically associated with wealth management, such as wealthy and influential clients; very high-value transactions and portfolios; complex products and services, including tailored investment products; and an expectation of confidentiality and discretion are indicative of a higher risk for money laundering relative to those typically present in retail banking. Wealth management firms’ services may be particularly vulnerable to abuse by clients who wish to conceal the origins of their funds or, for example, evade tax in their home jurisdiction.

Firms in this sector should consider the following risk factors and measures alongside those set out in our general post on Risk Management.

Risk factors
Product, service and transaction risk factors

The following factors may contribute to increasing risk:

  • Customers requesting large amounts of cash or other physical stores of value such as precious metals;
  • Very high-value transactions;
  • Financial arrangements involving jurisdictions associated with higher ML/TF risk (firms should pay particular attention to countries that have a culture of banking secrecy or that do not comply with international tax transparency standards);
  • Lending (including mortgages) secured against the value of assets in other jurisdictions, particularly countries where it is difficult to ascertain whether the customer has legitimate title to the collateral, or where the identities of parties guaranteeing the loan are hard to verify;
  • The use of complex business structures such as trusts and private investment vehicles, particularly where the identity of the ultimate beneficial owner may be unclear;
  • Business taking place across multiple countries, particularly where it involves multiple providers of financial services;
  • Cross-border arrangements where assets are deposited or managed in another financial institution, either of the same financial group or outside of the group, particularly where the other financial institution is based in a jurisdiction associated with higher ML/TF risk. Firms should pay particular attention to jurisdictions with higher levels of predicate offences, a weak AML/CFT regime or weak tax transparency standards.

Customer risk factors

The following factors may contribute to increasing risk:

  • Customers with income and/or wealth from high-risk sectors such as arms, the extractive industries, construction, gambling or private military contractors.
  • Customers about whom credible allegations of wrongdoing have been made.
  • Customers who expect unusually high levels of confidentiality or discretion.
  • Customers whose spending or transactional behaviour makes it difficult to establish ‘normal’, or expected patterns of behaviour.
  • Very wealthy and influential clients, including customers with a high public profile, non-resident customers and PEPs. Where a customer or a customer’s beneficial owner is a PEP, firms must always apply EDD in line with Articles 18 to 22 of Directive (EU) 2015/849.
  • The customer requests that the firm facilitates the customer being provided with a product or service by a third party without a clear business or economic rationale.

Country or geographical risk factors

The following factors may contribute to increasing risk:

  • Business is conducted in countries that have a culture of banking secrecy or do not comply with international tax transparency standards.
  • The customer lives in, or their funds derive from activity in, a jurisdiction associated with higher ML/TF risk.

Measures

The staff member managing a wealth management firm’s relationship with a customer (the relationship manager) should play a key role in assessing risk. The relationship manager’s close contact with the customer will facilitate the collection of information that allows a fuller picture of the purpose and nature of the customer’s business to be formed (e.g. an understanding of the client’s source of wealth, why complex or unusual arrangements may nonetheless be genuine and legitimate, or why extra security may be appropriate). This close contact may, however, also lead to conflicts of interest if the relationship manager becomes too close to the customer, to the detriment of the firm’s efforts to manage the risk of financial crime.

Consequently, independent oversight of risk assessment will also be appropriate, provided by, for example, the compliance department and senior management. It is particularly prudent to thoroughly ensure outsourced Compliance firms are well trained and up to date with current regulations, processes and practices – especially where they have a relationship with the relationship manager and no contact with the client.

Enhanced customer due diligence

The following EDD measures may be appropriate in high-risk situations:

  • Obtaining and verifying more information about clients than in standard risk situations and reviewing and updating this information both on a regular basis and when prompted by material changes to a client’s profile. Firms should perform reviews on a risk-sensitive basis, reviewing higher risk clients at least annually but more frequently if risk dictates. These procedures may include those for recording any visits to clients’ premises, whether at their home or business, including any changes to client profile or other information that may affect risk assessment that these visits prompt.
  • Establishing the source of wealth and funds; where the risk is particularly high and/or where the firm has doubts about the legitimate origin of the funds, verifying the source of wealth and funds may be the only adequate risk mitigation tool. The source of funds or wealth can be verified, by reference to, inter alia:
    • An original or certified copy of a recent pay slip;
    • Written confirmation of annual salary signed by an employer;
    • An original or certified copy of contract of sale of, for example, investments or a company;
    • Written confirmation of sale signed by an advocate or solicitor;
    • An original or certified copy of a will or grant of probate;
    • Written confirmation of inheritance signed by an advocate, solicitor, trustee or executor;
    • An internet search of a company registry to confirm the sale of a company.
  • Establishing the destination of funds.
  • Performing greater levels of scrutiny and due diligence on business relationships than would be typical in mainstream financial service provision, such as in retail banking or investment management.
  • Carrying out an independent internal review and, where appropriate, seeking senior management approval of new clients and existing clients on a risk-sensitive basis.
  • Monitoring transactions on an ongoing basis, including, where necessary, reviewing each transaction as it occurs, to detect unusual or suspicious activity. This may include measures to determine whether any of the following are out of line with the business risk profile:
    • Transfers (of cash, investments or other assets);
    • The use of wire transfers;
    • Significant changes in activity;
    • Transactions involving jurisdictions associated with higher ML/TF risk.
  • Monitoring measures may include the use of thresholds, and an appropriate review process by which unusual behaviours are promptly reviewed by relationship management staff or (at certain thresholds) the compliance functions or senior management.
  • Monitoring public reports or other sources of intelligence to identify information that relates to clients or to their known associates, businesses to which they are connected, potential corporate acquisition targets or third party beneficiaries to whom the client makes payments.
  • Ensuring that cash or other physical stores of value (e.g. travellers’ cheques) are handled only at bank counters, and never by relationship managers.
  • Ensuring that the firm is satisfied that a client’s use of complex business structures such as trusts and private investment vehicles is for legitimate and genuine purposes, and that the identity of the ultimate beneficial owner is understood.

Simplified customer due diligence

Simplified due diligence is not appropriate in a wealth management context.