MONEY LAUNDERING

1. MONEY LAUNDERING

2. Organisations Fighting Money Laundering

3. Organisations Fighting Money Laundering • Financial Action Task Force (FATF): in France called Grouped’actionfinancieresur le blanchiment de capitaux (GAFI) • It is an inter-governmental body founded in 1989 by the G7. • The FATF Secretariat is housed at the headquarters of the Organisation for Economic Corporation and Development. • Currently it is formed of 32 full members including the European Commission and many EU member states. • FATF keeps a list of non-cooperative countries and territories which it considers do not have adequate money laundering measures in place • The purpose of FATF is to develop policies to combat money laundering and terrorist financing.

4. Organisations Fighting Money Laundering • FATF has produced: • Forty recommendations on money laundering: • 1st issued in 1990 – completely revised in 1996 and 2003. • Nine special recommendations on terrorist financing following the September 11th terrorist attacks. • Both sets of measures: • Are implemented at National level through legislation – recommendations are binding on its members. • Set the international standard (benchmark) for anti-money laundering measures and combating the financing of terrorism.

5. Organisations Fighting Money Laundering • The responsibilities of FATF fall into 3 main areas: • Setting appropriate standards for national anti-money laundering programmes. • Evaluating the extent to which individual countries have implemented suggested standards. • Identifying trends in money laundering methods. • NB: FATF does not itself become involved in law enforcement as this is the responsibility of individual countries.

6. Organisations Fighting Money Laundering The forty recommendations devised by FATF require its members, amongst other things, to: Implement record keeping and suspicious transaction reporting requirements for financial institutions. Establish a financial intelligence unit to receive and disseminate suspicious transaction reports. Cooperate in investigating and prosecuting money laundering. • Implement relevant international conventions. • Criminalise money laundering and enable authorities to confiscate the proceeds of money laundering. • Implement customer due diligence e.g. identity verification

7. Organisations Fighting Money Laundering • Serious Organised Crime Agency (SOCA): • Non-departmental Public Body of the British Government • National law enforcement agency in the UK. • Operates from at least 40 offices across the UK. • Performs a number of surveillance roles. • Some officers enjoy powers of arrest. • Operationally independent of the Home Office. • Has a provisional budget of £457million. • There are 4,200 staff split equally between criminal investigators and intelligence analysts • Exempt from the Freedom of Information Act

8. Organisations Fighting Money Laundering • SOCA is split into four directorates: • Intervention (finding ways to obstruct organised criminals) • Intelligence (building up a detailed picture of organised crime gangs) • Enforcement (investigating organised crime gangs) • Corporate Services (administrative backup to operations) • The board has decided: • 40% devoted to combating drug trafficking • 25% tackling organised immigration crime • 10% spent on fraud • 15% on other organised crime • 10% supporting other law enforcement agencies

9. Organisations Fighting Money Laundering • SOCA responsibilities: • Reduce the impact of serious organised crime on people and communities. • For pursuing and recovering the proceeds of crime. • Three of its major priorities relate to: • Drug trafficking • Immigration crime. • Money laundering • In April 2008 the Assets Recovery Agency became part of SOCA

10. Organisations Fighting Money Laundering • SOCA deals with the suspicious activity reports (SARs). • In 2005 200,000 SARs were received: • SOCA states 1 in 3 of SARs add substantially to terrorism investigations. • HMRC states 1 in 5 SARs identifies new subjects of interest • Overall 1 in 4 SARs leads to arrest and confiscation of criminal assets. • In April 2008 the Assets Recovery Agency became part of SOCA

11. Overview of Money Laundering

12. Overview of Money Laundering • Process by which criminals attempt to conceal • True origins and • True ownership of their • Criminal Activity • Criminal Activity can include a number of things such as: • Drug trafficking, terrorist activity, corruption, tax evasion, forgery, blackmail etc. or • Any other offence where benefit is gained

13. Overview of Money Laundering • Successful money laundering allows the criminal: • Maintain control over the proceeds of crime. • Provide a legitimate cover for their source of income.

14. Overview of Money Laundering • Criminal Justice Act 1993: • Covers the proceeds of criminal activity on top of that derived from drug trafficking and terrorism. • Money Laundering Regulations 1993: • Required firms to establish and maintain procedures to guard against their business being used to launder money. • The Proceeds of Crime Act 2002 • Came into force 24th February 2003 • Supercedes previous regulation.

15. Overview of Money Laundering • Proceeds of Crime Act 2002 • Consolidated previous legislation. • Imposes on people working within the regulated sector the obligation to disclose any knowledge or suspicion of money laundering. • Created an offence called “tipping off” • Offence to make someone aware that they are suspected of money laundering and that they are under investigation. • Further information can be found in the FSA Sourcebook - a copy is held in Compliance.

16. What is Money Laundering?

17. What is Money Laundering? • Six stages to money laundering: • Creation • Preparation • Placement • Layering • Integration • Realisation • Each transaction looks to ‘cloud’ and obscure the audit trail ultimately creating untraceable “clean” money.

18. What is Money Laundering? • Creation • This is criminal activity which gives rise to “dirty money which subsequently has to be laundered. • Preparation • Process where the criminal prepares the proceeds of the crime for placement. • Placement • Initial (first step) transfer of “dirty cash” into an account or other non-cash asset.

19. What is Money Laundering? • Layering • Objective is to pass the money through many transactions including use of offshore assets. • Confuse the audit trail. • Break the link with the original criminal source of funds. • Integration • Process where the money is made ready to be moved into the legitimate economy without suspicion. • Realisation • Final stage where criminal finally gets hold of his money.

20. What Can Happen to ME?

21. What can happen to me? • Failure to comply with the money laundering rules: • Assisting a money launderer: • Up to 14 years imprisonment or a fine or both. • Failing to report a suspicious transaction: • Up to 5 years imprisonment or a fine or both. • “Tipping off” - revealing to an individual that they are under investigation: • Up to 5 years imprisonment or a fine or both.

22. What are my responsibilities?

23. What are my responsibilities? • As business to business packager: • Ultimate responsibility for following money laundering rules are with the lender. • They use strict ID requirements for customers. • We have an obligation to the lenders which we submit business to assist with any rules they impose: • All staff have a duty to report to Compliance any transaction they are suspicious of. For e.g. • It may be that an intermediary asks you to submit business which compromises the lenders ID requirements.

24. What are my responsibilities? • Use the “Suspicious Activity Report Form” to report any money laundering suspicions. • Available on the NLD Website. • Return the completed form to compliance (Mark Hobbs). • Must not be discussed with anyone else.

25. Any Questions