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CSI COMPLIANCE AWARENESS TRAINING

Confidential Sample Attachment For Reference Only. CSI COMPLIANCE AWARENESS TRAINING. ANTI MONEY LAUNDERING. July 2004. This is confidential proprietary and trade secret information of American Express Travel Related Services Company, Inc. Objectives of today’s session.

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CSI COMPLIANCE AWARENESS TRAINING

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  1. Confidential Sample Attachment For Reference Only CSI COMPLIANCE AWARENESS TRAINING ANTI MONEY LAUNDERING July 2004 This is confidential proprietary and trade secret information of American Express Travel Related Services Company, Inc.

  2. Objectives of today’s session To raise your understanding of… • What money laundering is • How the card & merchant business could be used • The obligations on American Express and you personally • The ‘red flags’ for the business

  3. Question • What is Money Laundering?

  4. Money Laundering is…. • “The process by which the proceeds of criminal activity are moved through the financial system in order to hide all traces of their criminal origin”. Definition from American Express General Management Policy 23 July 2002

  5. Question • How much money do you think is laundered each year worldwide?

  6. The United Nations Office of Drug Control and Crime Prevention estimate • World-wide more than $500 billion is laundered annually.

  7. Question • What crimes do you think are covered by money laundering laws?

  8. Crimes covered by Money Laundering laws include….. • Terrorism • Smuggling • Fraud • Drug related crimes • Prostitution • Tax Evasion • Public Corruption • Extortion • Robbery

  9. Money Laundering and Terrorist Financing • Terrorist financing shares most of the fundamental attributes of money laundering (e.g. fundraising & funds transfer) but the primary motivation for terrorism is not financial. • The source of the fundsmay be legal but the objective is criminal.

  10. The three stages of the Money Laundering process • Placement • The physical placement of cash into the financialsystem. • Layering • Creating complex layers of financial transactions in order to hide the true source. • Integration • Putting the laundered funds back into the economy in such a way that they re-enter the financial system as legitimate funds.

  11. A Typical Money Laundering Cycle

  12. Anti Money Laundering Laws and Regulations • Internationally, money laundering legislation has been enacted and is in place. • Since events of September 11 2001, money laundering has an increased focus. • Evolving legislation continues to place additional regulatory and legal requirements upon us.

  13. USA PATRIOT ACT USA Patriot Act • This is comprehensive U.S Anti-TerrorismLegislation. • For the first time, “Operators of Credit Card Systems” are included. • American Express is applying similarstandards of the USA Patriot Act to the proprietary business. • We are likely to see the expansion of AML Laws to meet or exceed the requirements of the USA Patriot Act.

  14. Anti money Laundering Laws and Regulations • Financial Institutions are required by law to establish an anti-money laundering program that includes, at a minimum; • The development of internal policies, procedures and controls, including a Customer Identification Program • The designation of a Compliance Officer • An ongoing employee training program • An independent audit function to test programs

  15. Importance of compliance with the laws and regulations • To guard against the possibility of our products being used for money laundering purposes. • To guard ourselves and the business against the possibility of legal or regulatory action including fines and/or imprisonment.

  16. What the Law Requires • You must…. • Know Your Customer • Monitor Transactions • Report Suspicious Transactions

  17. What the Law Requires • You must not…. • Assist anyone you know or suspect of money laundering • Tip Off anyone who is under suspicion of money laundering

  18. Where is the Risk for Credit Card Operators? • The primary risk lies within the movement of money. • The fundamental purpose of a credit card • system is to effect payment from one person • (The Cardmember) to another (The • Merchant). In other words… our job is to move money.

  19. Reputational Risk – Why is it so important to protect our business? • Do you know the value of the Brand? • Amex ranked 15th in the top 100 Brands • Estimated value - $16.8bn • Source: Business Week/Interbrand Annual rating

  20. Where is the Risk for the Card Business? • Do we really know our Customers? • Do we really know our • Merchants?

  21. What do we in CSI need to do? • Know Your Customer (KYC) • The identity of all our • cardmembers and • merchants must be verified (as appropriate) • at the time of entering into a business relationship, i.e.when the account isopened.

  22. What do we in CSI need to do? • Monitor/Report Suspicious Transactions - Robust monitoring programs must be inplaceto identify suspicious transactions. Examples: Transaction Monitoring, Credit Balance Refund and Reporting, Limit Cash Payments etc. • - Procedures must be followed. Report suspicions to your Market Compliance Officer or CSI Compliance Officer. If in doubt – report it!

  23. Some examples of how Amex could be used to facilitate Money Laundering • Buying goods on the Card, paying the Card in cash then returning goods to the Merchant for a refund. This creates a credit balance on the Card Account for which the C/M could request a refund.

  24. Examples of how a Merchant accountcould be used to facilitate Money Laundering • Merchant submitting rocs through another Merchant account – i.e.a charge incurred at one Merchant but submitted through another. Do we really know where charges are coming from?

  25. Layering

  26. Integration Do we really know who runs the business?

  27. How a Card or Merchant account could be used to facilitate Terrorist Financing • A customer may request a donation to be made to a charitable organisation. Do we really know the true identity of the organisation? • Purchase of small goods with high • intrinsic value can be used to • transfer wealth – e.g. gold bullion • melteddown and disguised as • everydayobjects.

  28. Red Flags for the CSI Business • Reluctance to provide requested documentation at account opening. • Identification documents that cannot be readily verified. • Out of Pattern Account Activity – transaction inconsistent with customer or industry type. • Transactions that are financially illogical.

  29. Red Flags for the CSI Business • High concentration of chargesmade by one Cardmember at one Merchant. • Factoring. • High volume of disputes and chargebacks.

  30. You should now know….. • The money laundering process. • How the Card & GES Business could be used. • The obligations on American Express and you personally. • The ‘red flags’ for the business. Make sure you are alert to the red flags

  31. Anti Money Laundering – Key Contacts • Market AML Compliance Officer • Vacant – Regional AML Compliance Officer • Thomas George– CSI Compliance Manager J/APA • (612) 9271 8825

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