Anti-Money Laundering and

Terrorist Financing

BY
FAISAL KAMRAN
MONEY LAUNDERING
IS
ANY TRANSACTION
WHICH SEEKS TO
CONCEAL OR
DISGUISE PROCEEDS
FROM ILLEGAL
ACTIVITIES
 Another definition:

• Any attempt to disguise the origin or

purpose of funds derived from
criminal activity,
• to conceal the existence of such
funds, or
• to move the funds with the intent to
commit a criminal act.
 Money Laundering
The process by which the proceeds

of crime are converted into assets

which appear to have a legitimate

origin.
 It’s no longer just
drugs...
• Drugs money

• Terrorist financing

• Tax evasion

• All crimes
The Traditional Process
• Dirty to clean
– placement
– layering
– integration
• But often the aim is to make clean
money dirty
– e.g. support for a local terror group
Three 3 Stages of Money
Laundering
•Placement
•Layering
•Integration
 PLACEMENT
• Placing the money into the financial system
or retail economy i.e introduction of dirty
money
• Structuring or “smurfing” of deposits
– Placing funds in amounts just under the legal
reporting threshold
• Perhaps the most important stage for law
enforcement, but it requires the full
cooperation of all banks and non-bank
financial institutions
 Placement
• Getting dirty money into the system
– often in emerging markets overseas
– or use a “useful” business
• Bureaux de Change (exchange companies)
• car, art, antiques, boat
• precious metal dealers
• estate agents
• travel agents
• cash intensive businesses
• friends / relatives
 LAYERING
• Making the money trail as muddy and
murky as possible, because if funds cannot
be connected to criminal act, they cannot
be seized
• Usually involves separating and/or
consolidating funds and transferring the
funds through multiple accounts and
financial instruments
• Involves series of transactions, accounts,
institutions and sometime countries.
 Layering
• Moving money around to confuse its
origins
– offshore banks, weak controls
– shell / brass plate banks
– company formation agents
– trusts
– professionals
– trade related activities
• Characterised by
– complexity
– lack of commercial rationale
– nominee accounts (benamee)
 INTEGRATION
• The final stage: turning the funds
into a tangible asset, such as real
estate, or reinvesting the funds into
a business to give the appearance of
legitimacy.

• At this stage, it is almost impossible

to trace the funds back to their
original criminal source
 Integration
• Into legitimate economy
– purchase of an income generating asset

• Dirty to clean
– may be most difficult to spot

• Clean to dirty
– may be the starting point
 Common vehicles of
laundering
• Financial institutions
• Cash intensive businesses,
• Brokerage firms,
• Real estate agents
• Crooked LAWYERS and
ACCOUNTANTS
• (Not all the 3 stages of money
laundering take place in every case)
Elements of a well-designed AML
regime
– Comprehensive anti-money laundering
law
– All financial institutions and other
entities covered by AML law
– Well functioning FIU
– Monitoring and enforcement of laws and
regulations
– Adherence to international standards
(FATF 40 +9)
FATF 40 Recommendations
• Recommendations for AML/CFT
regime
• AML requirements for financial
institutions and non-financial
businesses (now includes casinos, precious
metal dealers, accountants, and lawyers, etc.)
– Customer due diligence and record
keeping
– Reporting of suspicious transactions
(STRs)
FATF 40 Recommendations
• Clear penalties for violations
• Regulation and supervision of
institutions
• Establishment of an FIU
• Recommended law enforcement
strategies
• Mutual legal assistance
Chasing the Money
Chasing the Money
Chasing the Money
Chasing the Money