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Ill-Gotten Gains: Updates from the World of Anti-Money Laundering

Regulators are increasingly demanding greater evidence of well-developed anti-money laundering compliance programs, processes, and systems and controls, and yet global companies are struggling to keep pace with it all. Compliance Week reviews the landscape to help you navigate the world of AML.

What is money laundering? 

Money laundering is a criminal process in which illegally-gained revenue is made to appear legitimate through a number of transactions within the legitimate financial system. In this manner, so-called “dirty” money is made to appear “clean,” by obfuscating its origin.

Money laundering is often conflated with terrorism financing, since the methods used to channel funds into terrorist networks often make use of money laundering to do it.

How does money laundering work? 

First, money is secretly introduced into the legitimate financial system. There are many methods for this, such as use of cash-intensive businesses to make the funds look like they are part of a legitimate cash flow, buying real estate, smuggling the cash in bulk to another jurisdiction and then introducing it into the financial system there as legitimate funds, use of money services businesses such as check cashers or stored value cards, or running the money through various shell companies and trusts to obscure its origin and owner.

Then, the money is often transferred between multiple owners to further confuse its sense of origin and ownership. 

Finally, once the money is considered to be “clean,” it is transferred into the legitimate financial system as ordinary currency that no longer has an obvious connection to criminal activity. Once illegal proceeds no longer have a clear trail connecting them to their point of origin, the money is considered to have been fully laundered.

How do you report money laundering? 

While anti money laundering regulations vary, financial institutions are generally expected to file a Suspicious Activity Report (SAR) to government authorities, typically within 30 days of detecting any signs of potential money laundering activity, such as cash transactions over $10,000.

In the United States, financial institutions such as banks must use the Bank Secrecy Act BSA E-Filing System to submit an SAR. Futures commission merchants (FCMs) and introducing brokers (IBs) must use Form 101, Suspicious Activity Report by the Securities and Futures Industries (SAR-SF). Commodity pool operators (CPOs) and commodity trading advisors (CTAs) are not yet required to file SARs, but are encouraged to do so voluntarily, also using the SAR-SF.

The United Kingdom suggests SARs be reported through the SAR Online system, which provides instant acknowledgement of the report, as well as a reference number. SARs in the UK are overseen by the National Crime Agency.

What is AML?

Anti money laundering, or AML, are those rules, policies and procedures established by government regulators and enforcement agencies, to prevent the activities and financial transactions that are meant to hide the true origin of money (especially that which is generated illegally). Government agencies that oversee AML law typically also issue AML guidelines to aid with their compliance.

In the United States, the first AML regulations were codified by the Bank Secrecy Act of 1970, and have since been updated by other pieces of legislation, including:

  • the Money Laundering Control Act (1984)
  • the Anti-Drug Abuse Act of 1988
  • the Annunzio-Wylie Anti Money Laundering Act (1992),
  • the Money Laundering Suppression Act (1994),
  • the Money Laundering and Financial Crimes Strategy Act (1998),
  • the USA PATRIOT Act (2001)
  • the Intelligence Reform & Terrorism Prevention Act of 2004
     

The United Kingdom’s AML regime are codified by:

The Financial Actions Task Force is the largest international body dedicated to enforcing AML rules and regulations. 

What is AML compliance? 

AML compliance programs are the formal set of internal policies, procedures, and controls that 1) oversee all internal monitoring for signs of money laundering activities, 2) report said activities, and 3) independently test those first two capabilities to ensure they are working properly. Many industries within the financial services sector are required to have a formal AML program, which must be in writing, and must include a formally designated compliance officer, ongoing employee training, and an independent audit function to test the program. 

In the United States, the Financial Industry Regulatory Authority—a self-regulatory organization, has also set forth minimum standards for AML compliance programs under FINRA Rule 3310

The USA PATRIOT Act amended the Bank Secrecy Act to require various financial institutions to formally adopt AML compliance programs. Similar laws mandate AML compliance programs for mutual funds; credit card companies; money service businesses; broker-dealers; insurance companies; and dealers in precious metals, stones, or jewels.

News Article

U.K. FCA issues strong new financial crime reporting rules

Neil Hodge | September 13, 2016

Taking issue with numerous reports that London is an ideal environment for money laundering and other financial crimes, the city is fighting back, writes Neil Hodge.

Ebook

e-Book: The Challenges of Fighting Money Laundering

Sponsored by Pitney Bowes | June 30, 2016

In this e-Book, produced by Compliance Week in cooperation with Pitney Bowes, we explore this evolving AML regulatory and enforcement landscape, as well as how to reduce AML risk. We also take a look at how Pitney Bowes Entity Resolution for Financial Crimes and Compliance software is aiding in the fight against money laundering to improve bank compliance.

The Filing Cabinet Blog

Poll: Panama Papers will cause financial crime enforcement to spike

Jaclyn Jaeger | August 25, 2016

As the Panama Papers saga continues to unfold, global enforcement of financial crimes are expected to spike over the next year, according to a recent poll conducted by Deloitte Advisory. Jaclyn Jaeger reports.

The Filing Cabinet Blog

FinCEN wants to extend AML programs to all banks

Joe Mont | August 25, 2016

Banks lacking a Federal functional regulator have been hit with proposed rules by the Treasury Department’s Financial Crimes Enforcement Network that would require them to implement anti-money laundering programs. Joe Mont has more.

Enforcement Action Blog

Mega Bank fined $180 million for AML violations

Jaclyn Jaeger | August 23, 2016

The New York Department of Financial Services has ordered Mega International Commercial Bank of Taiwan to pay a $180 million penalty and install an independent monitor for violating New York’s anti-money laundering laws. Jaclyn Jaeger reports.

The Big Picture Blog

It’s time for a risk-based approach to KYC

Neil Jeans | August 16, 2016

One size definitely does not fit all when it comes to managing know-your-customer and anti-money laundering exposures, but a risk-based approach to these challenges still poses a complex solution that requires time, energy, and dedication, writes Neil Jeans.

The Man From FCPA Blog

AML due diligence for non-financial institutions

Tom Fox | August 8, 2016

What does the 1MDB scandal portend for non-financial companies and anti-money laundering compliance? Plenty, especially if they haven't reviewed their AML policies and procedures in the last 12 months. Tom Fox reports.

Global Glimpses Blog

Basel Index finds slippage in AML efforts

Joe Mont | August 3, 2016

The Basel Committee on Banking Supervision, an international consortium that develops banking standards, has issued its “Basel AML Index,” an annual ranking of country risk regarding money laundering and terrorism financing. The overall conclusion this year, says Joe Mont: A majority of countries fall short in the effective implementation and enforcement of AML laws.

The Man From FCPA Blog

Corporations and the financing of terrorism

Tom Fox | April 24, 2017

The recent case of LafargeHolcim’s involvement in keeping a cement facility in Syria safe and operational during civil war has raised questions regarding a company’s responsibilities for ensuring monies it pays out do not go to fund terrorism.

The Man From FCPA Blog

Acquisitions, data privacy, and national security concerns

Tom Fox | April 6, 2017

The attempted takeover of the U.S. company MoneyGram International Inc. by China-based Ant Financial Services raises regulatory concerns and questions.

News Article

European Union updates AML rules

Neil Hodge | April 4, 2017

The European Union is proposing some updates to anti-money laundering rules in an attempt to streamline coordination among member states in fighting terrorism financing and money laundering.

News Article

The international reach of compliance

Bill Coffin | March 21, 2017

The challenges facing global compliance programs are only getting more complex, with money laundering, fraud, KYC, sanctions, and cyber-risk leading the way.

The Filing Cabinet Blog

Sen. Brown asks Treasury to probe President’s business ties

Joe Mont | March 8, 2017

U.S. Sen. Sherrod Brown (D-Ohio) has asked the Treasury Department to review President Trump’s investment partners and business associates to assess whether there are violations of anti-terrorist financing, sanctions, or money laundering laws.

Global Glimpses Blog

5 key strategies for your AML program

Simone Jones | March 7, 2017

An effective AML program is far more than just a written protocol; it is a blend of best practices put into effect every day throughout the organization. Here are five ways to make sure your AML program is running at peak efficiency.

The Filing Cabinet Blog

Western Union settlement is a stern warning about AML compliance

Joe Mont | January 26, 2017

If you need further proof of how costly failed AML and BSA compliance can be, writes Joe Mont, look no further than a the $586 million settlement Wester Union was just hit with.

The Filing Cabinet Blog

Podcast: Oh, Canada...and compliance resources

Joe Mont | January 24, 2017

In this edition of the Compliance Week podcast, we talk to Ellen Zimiles, a managing director at Navigant Consulting, about governance enhancements in Canada that allow CCOs to report their companies for not giving them enough budget to be effective. 

The Man From FCPA Blog

Banks and bankers on front line of AML fight

Tom Fox | January 11, 2017

The first foreigner, Jens Sturzenegger, a former branch manager at Falcon Private Bank in Singapore, was recently convicted in the 1MDB scandal. Tom Fox reports.

The Filing Cabinet Blog

FinCEN gives guidance on sharing SARs

Joe Mont | January 5, 2017

The Financial Crimes Enforcement Network has clarified when a casino can share Suspicious Activity Reports and to whom it can provide the information. Joe Mont reports.