Download Money Laundering - Association of Corporate Counsel

5/23/2017
Money Laundering
Copyright© 2010 WeComply, Inc. All rights reserved.
5/23/2017
Money Laundering
Copyright© 2010 WeComply, Inc. All rights reserved.
What Is Money Laundering?
Money laundering: Process criminals use to disguise true
origin and ownership of cash by funneling it through lawful
enterprises
•Lucrative and sophisticated business
•Has significant impact on global economy
•Furthers other serious crimes — e.g., drug-smuggling and
terrorism
•It would severely undermine our organization's reputation to
be implicated in money-laundering scheme
• Individual employees could be subject to criminal/civil prosecution
• Three basic steps are placement, layering and integration
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Placement
Placement stage: "Dirty" money introduced into financial
system or transported out of country
Money launderers must circumvent financial system or
violate reporting requirements
Examples of placement:
•Depositing funds into a bank
•Transforming cash into other assets
•Buying goods in one country and reselling them in another
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Layering
Layering stage: Money launderer obscures criminal source of
money further by creating web of complicated transactions
Examples of layering techniques:
•Buying big-ticket items in friend's name
•Setting up "shell companies" in other countries and shuffling
money among them
•"Double invoicing" to move money in and out of U.S.
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Integration
Integration stage: Money has been "cleaned" and is
integrated into legitimate economic and financial system
Usually involves an asset purchase
Examples of integration:
•Purchase of investments
• Purchase of legitimate company with established track record
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Money-Laundering Laws of the U.S.
Money Laundering Control Act of 1986
•Makes it a crime to launder money or to help someone else
do so
•Amended in 2001 to target international activities and
financing of terrorism
•Covers foreign individuals and companies if any part of
money-laundering offense occurs in U.S.
•Carries stiff criminal penalties
• Two central provisions: Sections 1956 and 1957
• Prohibits transactions intended to promote/conceal criminal activity
• Prohibits transactions involving criminally derived property worth > $10,000
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Money-Laundering Laws of the U.S. (cont’d)
Money Laundering Control Act of 1986
•Makes it a crime to launder money or to help someone else
do so
•Amended in 2001 to target international activities and
financing of terrorism
•Covers foreign individuals and companies if any part of
money-laundering offense occurs in U.S.
•Carries stiff criminal penalties
• Two central provisions: Sections 1956 and 1957
• Prohibits transactions intended to promote/conceal criminal activity
• Prohibits transactions involving criminally derived property worth > $10,000
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Section 1956
Prohibits knowing that property involved in financial
transaction represents proceeds from specified unlawful
activity and using transaction to —
•Promote certain illegal activity
•Circumvent IRS requirement
•Conceal/disguise nature or origin of proceeds
•Avoid reporting requirements
"Specified unlawful activity" is broad in scope and includes —
•Crimes involving drugs and violence
•Bribery, copyright infringement, environmental offenses and tax evasion
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Section 1956 (cont’d)
Prohibits knowing that property involved in financial
transaction represents proceeds from specified unlawful
activity and using transaction to —
•Promote certain illegal activity
•Circumvent IRS requirement
•Conceal/disguise nature or origin of proceeds
•Avoid reporting requirements
"Specified unlawful activity" is broad in scope and includes —
•Crimes involving drugs and violence
•Bribery, copyright infringement, environmental offenses and tax evasion
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Pop Quiz!
Which of the following crimes would not constitute "specified unlawful activity"
that would be considered a "predicate" for money laundering?
A.Foreign bribery.
B.Copyright infringement.
C.An environmental offense.
D.Tax evasion.
E.All of these would be considered predicate offenses.
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Section 1957
Prohibits financial transactions involving proceeds of
specified unlawful activity where proceeds are worth
more than $10,000
No requirement that illegal transaction be concealed if
criminal proceeds are involved
Person need not know exact nature of underlying criminal activity
Purpose:
•To discourage law-abiding citizens from doing business with criminals and
profiting from ill-gotten gains
•To make it more difficult for criminals to ply their trade
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Section 1957 (cont’d)
Prohibits financial transactions involving proceeds of
specified unlawful activity where proceeds are worth
more than $10,000
No requirement that illegal transaction be concealed if
criminal proceeds are involved
Person need not know exact nature of underlying criminal activity
Purpose:
•To discourage law-abiding citizens from doing business with criminals and
profiting from ill-gotten gains
•To make it more difficult for criminals to ply their trade
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13
Pop Quiz!
Which of the following is one of the primary differences between Section 1956 and
Section 1957:
A.1956 requires concealment; 1957 does not.
B.1956 has a $10,000 threshold; 1957 does not.
C.1957 violations involve proceeds from "specified unlawful activity"; 1956
violations do not.
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Reporting Requirements
Other laws establish reporting requirements that
government uses to flag suspicious transactions
IRS Form 8300
•Required when we receive more than $10,000 in cash in
single or related transactions
• Must be filed within 15 days after cash is received
• Failure to file Form 8300 could result in fines and imprisonment
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Reporting Requirements (cont’d)
Other laws establish reporting requirements that
government uses to flag suspicious transactions
IRS Form 8300
•Required when we receive more than $10,000 in cash in
single or related transactions
• Must be filed within 15 days after cash is received
• Failure to file Form 8300 could result in fines and imprisonment
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Anti-Money-Laundering Tools
Other reporting requirements:
•Currency transaction report
o Must be filed by financial institution that receives/dispenses
more than $10,000 in currency
•Currency and monetary instruments report
o Must be filed by anyone entering or leaving U.S. with
currency or monetary instruments > $10,000
o Must be filed if someone mails, ships or otherwise
transports currency
• Foreign bank account form
o Must be filed by U.S. persons controlling more than $10,000 in bank account
in another country
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Structuring
Structuring: Designing financial transaction so that it falls
below $10,000 threshold
•Making two $8,000 deposits instead of one $16,000 deposit
would constitute illegal structuring
•Also unlawful to structure payment scheme for sale of goods
or services
•Structuring can also form basis of additional charge of
money laundering under Money Laundering Control Act if
person knows illegal nature of funds
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Money-Laundering Targets
Businesses that are particularly vulnerable to moneylaundering schemes include —
•Banks
•Brokerage firms
•Check-cashing outlets
• Foreign-currency exchanges
• Restaurants and theaters
• Dealers of "big ticket" items — art, automobiles, boats, real estate, etc.
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Red Flags
Report these "red flags" to your supervisor or the Legal
Department:
•A client who refuses to provide information or avoids
personal meetings
•Larger cash deposits or purchases than should be
expected
• Transactions that don't make sense or don't tie in with client's business
• Large/frequent transactions involving foreign banks or shell corporations
• Bank/credit information that is insufficient or suspicious
• Unusual funds-transfer activities
• Any attempt to avoid reporting requirements
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In the news…
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Co-Workers
Activities that might indicate involvement with money
laundering include —
•Sudden changes in lifestyle
•Preoccupation with outside business ventures
•Vendor address that matches employee address
•Employee who is unusually reluctant to take vacation
• Non-payroll checks made out to employees
Report these red flags to your supervisor or the Legal Department
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22
Pop Quiz!
Brian, XYZ Inc.'s HR manager, was reviewing personnel files and noticed that Dana
hadn't taken a single day off for the past two years, in stark contrast to earlier
years. She had also started driving a luxury car that belied her modest salary. What
should Brian do?
A.Congratulate Dana for perfect attendance.
B.Speak to Dana's supervisor.
C.Call the FBI.
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Prevention
Ways you can help prevent our organization from being
used in money-laundering scheme:
•Know your customers
•Be alert for situations where person whose name is on
account doesn't seem to control it
•Keep records concerning a customer's identity
• Scrutinize transactions that might lend themselves to money laundering —
especially those in cash
Be vigilant and take all possible measures to prevent and deter money laundering
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5/23/2017
Final Quiz
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5/23/2017
Questions?
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5/23/2017
Thank you for participating!
This course and the related materials were developed by
WeComply, Inc. and the Association of Corporate Counsel.
Copyright© 2010 WeComply, Inc. All rights reserved.