Anti Money Laundering

March 5, 2019 | Cheena Tuteja
Anti Money Laundering
What is Money Laundering?

Money laundering is the process by which the proceeds of crime and the true ownership of those proceeds are changed so it appears to come from a legitimate source.

The main aim of criminal acts is to generate profit for the individual/group that is carrying out the act. Money laundering is the processing of these criminal proceeds to disguise their illegal origin.

Illegal arms sales, smuggling, activities of organised crime; drug trafficking and prostitution rings can generate huge amounts of proceeds. Embezzlement, insider trading, bribery and computer fraud schemes are also included in money laundering.

When a criminal activity generates profits, the individual/group involved finds a way to control the funds without attracting attention to the underlying activity or the persons involved. Criminals do this by jeopardizing the sources, changing its form, or move the funds to a place where they are less likely to attract attention. Therefore, Anti money laundering (AML) is designed to detect money-laundering acts, to stop them and report them.

How is money laundered?

A privacy policy is a legal statement that informs how a party collects, uses, discloses, and manages a customer’s data otherwise you will say Personal info. It’s a legal demand to shield a user’s privacy. Personal data means something like person’s name, address, and date of birth, marital status, contact info, financials, credit and medical history. In case of business, It informs the users what specific data is collected, and whether or not it’s unbroken confidential, shared with partners, or sold-out to different companies or enterprises.

The contents of a particular privacy policy can depend on the applicable law, geographical boundaries and legal jurisdictions.

Major countries have their own guidelines for policies. At this time in blog, we are only focusing on European Union (EU). In general, data protection laws in Europe hood the public sector as well as non-public sector.

Few benefits of privacy policy

There are three stages to Money Laundering:

  • Placement

  • Layering

  • Integration

Stage 1- Placement: When the cash proceeds from a criminal activity (the dirty money) and injected into the financial system. For example – stolen goods are sold for cash, which is then deposited into a bank account. Examples of Placement include:

  • Depositing into bank accounts via tellers, ATMs.

  • Changing currency to cashier’s checks, bankers drafts or other negotiable instruments

  • Exchanging small notes/bills for large notes/bills

Stage 2- Layering: is the second stage in money laundering where attempts are made to cover up the illegal route through layers of financial transactions. Examples of Layering include:

  • Loans and borrowing against financial and non-financial assets

  • Creating complex financial transactions

Stage 3- Integration: is taking this laundered money and using that money to buy expensive things like property, boats, cars, watch etc. Examples are:

  • Investing in luxury goods

  • Buying commercial property

The estimated amount of money laundered globally in one year is 2 – 5% of global GDP, or $800 billion – $2 trillion in current US dollars

Anti-money laundering compliance

AML compliance can be understood as set of requirements that organizations have to comply with. It comprises of three Fs: the finding, freezing and forfeiture of criminal assets. AML rules and regulations rose to global recognition during the 1989 and thus Financial Action Task Force (FATF) was formed. It is a “governmental policy-making body” whose main purpose is the development and promotion of policies to stop money laundering and terrorist financing. The AML helps in:

  • Identifying the money laundering risks and fraud

  • Protecting consumers from the abuses of financial crime

  • Preventing money laundering or the financing of terrorist activities

Key AML Regulators
  1. Office of foreign asset control
  2. Office of the comptroller of currency (OCC)
  3. Financial crimes enforcement network (FinCen)
  4. Federal reserve
  5. Federal deposit insurance corporation (FDIC)
  6. Internal revenue service
  7. Securities and exchange commission
  8. Financial Action Task Force (FATF)
Recent Cases
  • Texas-Based U.S. Gold Refinery Pleads Guilty for Failing to Maintain an Adequate Anti-Money Laundering Program and Agrees to Forfeit $15M, Continuing Trend of Criminal Enforcement Actions and Prosecutions for Compliance Failures.

  • Deutsche Bank headquarters raided over money laundering.

  • European Commission adds US Territories to “Dirty Money” List in departure from FATF.

Introduction of new AML Directive

“European Commission proposes new Anti-Money Laundering Directive i.e. 6AMLD”

The most important element of 6AMLD is to provide a harmonised list of twenty two predicate offences. Environmental crimes are also included. The EU’s new rule is aimed at strengthening its financial crime regime. So it proposed these measures as they think that the existing measures are neither comprehensive nor coherent. All EU countries are expected to bring into force the laws and provisions related with this directive by 3 December 2020.This directive includes maximum imprisonment of four years and additional fines can also be imposed, as well as exclusion from access to public funding.

Solution Guide

Xoriant LEI Data Quality Monthly Report

LEI Quality Monthly Report summarizes Xoriant CDi’s Data Quality assessment on LEI population for a month, this accuracy test is based on some pre-defined criteria with respect to Name & country etc.

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