copyright© 2010 wecomply, inc. all rights reserved. 5/22/2015 money laundering

Copyright© 2010 WeComply, Inc. All rights reserved.

04/18/23

Money Laundering

Copyright© 2010 WeComply, Inc. All rights reserved. 3

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


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


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.


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


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


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


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


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


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.


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


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


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.


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


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


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 reporto Must be filed by anyone entering or leaving U.S. with

currency or monetary instruments > $10,000o Must be filed if someone mails, ships or otherwise

transports currency

• Foreign bank account formo Must be filed by U.S. persons controlling more than $10,000 in bank account

in another country


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


Money-Laundering Targets

Businesses that are particularly vulnerable to money-laundering 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.


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


In the news…


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


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.


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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Final Quiz


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Questions?


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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. 5/22/2015 money laundering

Documents

money laundering slide

moneylaundering offense

moneylaundering laws

shuffling money

dirty money

country money launderers

integration slide

placement placement