Anti-Money laundering

DEFINITION OF MONEY LAUNDERING

PROCESS OF MONEY LAUNDERING

Process of Money Laundering

Placement Layering Integration

How much money is laundered every year?

Since money laundering is an illegal activity therefore one can only

estimate the amount of money laundered every year.

The United Nations Office for drugs and crime, for example, had stated

in 2012 that the aggregate size of money laundering in the world could be

somewhere between 2-5% of the world’s gross domestic product

(UNODC)

This is $800 billion - $2 trillion in current US dollars.

Regulatory Authorities

United Nations

FATF (Financial Action Task Force)

IMF

World Bank

Pakistan’s Position Regarding Anti-Money

Laundering LawsActs and Ordinances Passed of AML Laws Uptil 2014

The Control of Narcotic Substances Act of 1997

National Accountability Ordinance of 1999

Anti-Terrorism Act of 2002

In 2010, the State Bank of Pakistan (SBP) passed the Anti-Money Laundering Act. The Act thereby replaces the 2007 AML Ordinance.

Oct 12 2013 Ordinance was passed (further amendments)

The Financial Action Task Force (FATF) has given timeframe till June 2014 to Pakistan to amend further the money laundering laws as well as Anti-Terrorism Act to incorporate the content of the ordinance before the February 2014 meetings.

Pressure by FATF to Convert Ordinance in to Permanent legislation through the parliamentary process.

The Sharif brothers (Hudaibiya Paper

Mill) Nawaz sharif and Shahbaz sharif were accused of laundering

money worth $35 million. This case was initiated after the military

coup in 1999.

This revelation was given by the Sharif brothers’ close associate

Ishaq dar.

Ishaq dar gave a 43 page confessional statement before the

District Magistrate Lahore on 25th April 2000.Dar was produced

before the court by FIA.

Dar, in his statement had admitted that he had been handling the

money matters of the Sharif family and he also alleged that Mian

Nawaz Sharif and Mian Shahbaz Sharif were involved in money

laundering worth at least $14.886 million.

Interestingly, Ishaq Dar also implicated himself by confessing in

the court that he along with his friends Kamal Qureshi and

Naeem Mehmood had opened fake foreign currency accounts in

different international banks.

Continued….. He said that the entire amount in these banks finally landed in

the accounts of Hudaibiya Paper Mills Limited.

Senator Ishaq Dar was the main witness against Nawaz and

Shahbaz Sharif in the case.( Waada ma’af gawah)

The statement by Senator Ishaq Dar is irrevocable as it was

recorded under section 164 of the Criminal Procedure Code

(CrPC).

The Hudaibiya Paper Mills case is still

pending in the National Accountability

Bureau.

Asif Ali Zardari (Mr 10%)

Asif Ali Zardari In 2003, a Swiss investigative magistrate decided he had

evidence of Zardari and Bhutto after pursuing a money trail from

offshore companies in the Caribbean to banks in Geneva to a

jewelry shop here.

In his 2003 verdict, the Swiss judge connected Zardari to a chain

of corruption that began with two Swiss companies, Cotecna and

SGS. (Container inspection equipment)

As part of a secret deal, the judge found, the Swiss contractors

funneled $11.9 million in bribes into three offshore firms in the

British Virgin Islands and ultimately into bank accounts in

Geneva.

The judge found that Zardari owned the third company, Bomer

Finance, which received about $8 million, and that “Bhutto

shares with her husband the assets” and “has power of

disposition” over the company, according to the documents.

Continued…. Zardari is accused of using illicit funds to acquire the 365-acre

Rockwood estate, a $6.5-million property featuring a Tudor-

style mansion and two adjoining farms in the Surrey district.

In 1995, a leading French military contractor, Dassault Aviation,

agreed to pay Mr. Zardari and a Pakistani partner $200 million

for a $4 billion jet fighter deal that fell apart only when Ms.

Bhutto’s Government was dismissed.

In the largest single payment investigators have discovered, a

gold bullion dealer in the Middle East was shown to have

deposited at least $10 million into an account controlled by Mr.

Zardari after the Bhutto Government gave him a monopoly on

gold imports that sustained Pakistan’s jewelry industry.

In 1994 and 1995, he used a Swiss bank account and an

American Express card to buy jewelry worth $660,000 —

including $246,000 at Cartier Inc. and Bulgari Corp. in Beverly

Hills, Calif., in barely a month.

International Cases Birmingham CASE:A gang of 32 men who laundered more than

£180 million for drug traffickers have been jailed for a total of 140

years.

A total of £160 million flowed through the firm’s accounts

between September 2008 and March 2011.

HSBC CASE :Mexico's Sinaloa cartel and Colombia's Norte del

Valle cartel between them laundered $881 million through HSBC

and a Mexican unit, the U.S. Justice Department said.

HSBC Holdings Plc agreed to pay a record $1.92 billion in fines

to U.S. authorities for allowing itself to be used to launder a river

of drug money flowing out of Mexico and other banking lapses.

International Laws on money

laundering

The Financial Action Task Force

Inter-governmental body established in 1989 by the Ministers of

its Member jurisdictions

In collaboration with other international stakeholders, the FATF

also works to identify national-level vulnerabilities with the aim of

protecting the international financial system from misuse.

Members of FATF

France

Germany

Greece

Gulf Cooperation

Council

Norway

Portugal

Russia

Singapore

South Africa

South Korea

Spain

Sweden

Hong Kong

Iceland

India

Ireland

Italy

Japan

Luxembourg

Mexico

Netherlands

New Zealand

Switzerland

Turkey

• Argentina

• Australia

• Austria

• Belgium

• Brazil

• Canada

• China

• Denmark

• European Commission

• Finland

• United Kingdom

• United States

Primary functions of FATF

Identify the risks, and develop policies and domestic

coordination;

Pursue money laundering, terrorist financing and the financing of

proliferation

Apply preventive measures for the financial sector and other

designated sectors

Establish powers and responsibilities for the competent

authorities (e.g., investigative, law enforcement and supervisory

authorities) and other institutional measures

Facilitate international cooperation

Recommendations

1. Assessing risks and applying a risk-based

approach

2. Money laundering offence

3. Non-profit organizations

49…

European Requirements

The European Federation of Accountants (FEE) has a Money

Laundering Task Force, which coordinates AML policy for the

profession across Europe, including lobbying the European

Commission and FATF. FEE has issued a survey on the

implementation of the Third Money Laundering Directive in

September 2009, and a Fact Sheet on money laundering and the

fight against organized crime in October 2003.

The European Union's current requirements are as laid out in

the Third Money Laundering Directive

US requirements

The United States of America has strict federal AML systems and

procedures requirements on banks and certain other financial

institutions, which tend to have extra-territorial effect, through

requirements for US banks to control their relationships with

correspondent and shell banks. As at August 2009, it has not

introduced systems and procedures requirements on law or

accountancy firms.

Anti-Money Laundering Law of

Pakistan

AMLA ‘10

On 27 March 2010, the Federal Government of Pakistan

promulgated the Anti-Money Laundering Act, 2010.

Offence of Money Laundering:

(i) acquires, converts, possesses or transfers

property, knowing or having reason to believe that

such property is proceeds of crime; or

(ii) renders assistance to another person for the

acquisition, conversion, possession or transfer of, or

for concealing or disguising the true nature, origin,

location, disposition, movement or ownership of

property, knowing or having reason to believe that

such property is proceeds of crime.

• Which Court has Jurisdiction?

• Appeal to High Court

• Non-Cognizable and Non-Bailable

• Corporate Liability

OVERSIGHT INSTITUTIONS:

• National Executive Committee

• General Committee

INVESTIGATION, PROSECUTION

AND ADJUDICATION

• Search of Persons

• Surveys

• Investigation

• Arrest

Drawbacks of Anti-Money

Laundering Laws

These laws have become expensive and intrusive

Adverse affects on population, NGOs, public

remittances of the third world countries

Costly for the banking and financial sector

The Western Union Case

Giving the task of spying on the customers

Transforming the WU model into its liabilities

73 changes into its system

Minimizing the Risk of Money

Laundering

No individual state has power to curb down money

laundering

The most prominent international organization in this

respect is probably the Financial Action Task Force

(FATF)

Cont’d

The measures given by FATF on banking

sector are:

Identify and do background checks on depositors.

Build an internal taskforce to identify laundering clues

Financial institutions should not keep anonymous

accounts or accounts in obviously fictitious

Cont’d Financial institutions should, in relation to

politically exposed persons, in addition to performing normal due diligence measures: Have appropriate risk management systems to

determine whether the customer is a politically exposed person.

Obtain senior management approval for establishing business relationships with such customers.

Take reasonable measures to establish the source of wealth and source of funds.

Conduct enhanced ongoing monitoring of the business relationship.

Cont’d

Financial institutions should maintain, for at

least five years, all necessary records on

transactions, both domestic or international,

to enable them to comply swiftly with

information

Financial institutions should pay special

attention to all complex, unusual large

transactions, and all unusual patterns of

transactions, which have no apparent

economic or visible lawful purpose

If a financial institution suspects or has

reasonable grounds to suspect that funds are the

proceeds of a criminal activity, or are related to

terrorist financing, it should be required, directly

by law or regulation, to report promptly its

suspicions to the financial intelligence unit (FIU).

THANK YOU!!!!!!!!