Anti-Money Laundering Terms: Account-a formal, continuing banking or business relationship established to provide regular services, dealings and other financial transactions. Alternative remittance systems-means of transferring funds and sometimes gold through traditional "underground" banking networks buy which trading companies accept money at one location and make it available in another. These systems are common in the Middle East (called Hawala), Africa, South Asia (called Hundi) and Asia. AFMLS- Asset Forfeiture and Money Laundering Section, Department of Justice AML- Anti-Money Laundering. Anti-money laundering program requirement- "Dealers in precious metals, jewels and stones" shall develop and implement a written anti-money laundering program reasonably designed to prevent the dealer from being used to facilitate money laundering and the financing of terrorist activities. The program must be approved by senior management. A dealer shall make its anti- money laundering program available to the Department of Treasury or its designee upon request. APEC- Asia Pacific Economic Cooperation ATF- Bureau of Alcohol, Tobacco and Firearms, Department of Treasury APG- Asia Pacific Group on Money Laundering Bank Secrecy Act-(BSA) passed in 1970, was amended by the USA PATRIOT Act of 2001. Consists of a number of record-keeping and reporting requirements designed to overcome foreign bank secrecy laws and to deter money laundering. The requirement to file Form FinCEN 8300 reporting currency transactions above $10,000 (CTR) is a Bank Secrecy Act rule. BSA-Bank Secrecy Act Beneficial Owner- the natural person(s) who ultimately owns or controls a customer and/or the person on whose behalf a transaction is being conducted and who has the authority to fund, direct or manage the account. Black List-See Non-cooperative countries or territories. Bulk cash smuggling-physical movement of currency as a means of secreting proceeds from criminal activity. Channeling account-used to receive, consolidate and retransfer laundered funds. Concentration account-also called clearing or omnibus account. Account used by a financial institution for bank-to-bank or administrative transactions. The USA PATRIOT Act prohibits use of concentration accounts for customer business because they hide the identity of the customer. Confiscation-Forfeit funds or assets to a Government regulatory agency. Confiscation can result if the account holder commits a crime or holds fund from a money-laundering scheme. A key AML tool, it assumes all assets of a money launderer are derived from money laundering. So, in an account of $1million, even if only $1000 can be directly tied to money laundering, the Government can confiscate all $1million. CHFI- Committee on Hemispheric Money Laundering CIP-Customer Identification Program. CMIR-Currency and Monetary Instrument Transportation Report. Core Principles-Refers to the Core Principles for Effective Banking Supervision issued by the Basel Committee on Banking Supervision, the Objectives and Priciples for Securities Regulation issued by the International Organization of Securities Commissions and the Insurance Supervisory Principles issued by the International Association of Insurance Supervisors. CTR-Currency Transaction Report. Currency and Monetary Instrument Transportation Report-(CMIR) Report to be filed with the Commissioner of Customs reporting bulk movement in or out of the U.S. of monetary instruments such as currency, bank checks, travelers checks, bearer securities, money orders, negotiable instruments and similar instruments of over $10,000. Currency Transaction Report-(CTR) Report filed with FinCEN to report cash transactions of over $10,000. Customer Identification Program-(CIP) An Anti-Money Laundering provision requiring in part that companies must check their customers against lists of known money launderers, such as the OFAC-SDN list. Concentration account-account in which funds of one or more customers are consolidated, pooled or commingled. Correspondent Account-an account established to receive deposits from, make payments on behalf of a foreign financial institution or handle other financial transactions relates to such institution. DEA- Drug Enforcement Administration, Department of Justice Dealer (in Precious Metals, Stones and Jewels)- Any person "engaged in the business of purchasing and selling jewels, precious metals, or precious stones, or jewelry composed of jewels, precious metals or precious stones" (USA PATRIOT Act Section 103.140). Covers manufacturers, refiners, wholesalers, retailers and any other entity engaged in the business of purchasing and selling jewes, precious metals, precious stones or jewelry. and who, during the prior calendar or tax year: (A) Purchased more than $50,000 in jewels, precious metals, or precious stones, or jewelry composed of jewels, precious metals, or precious stones; or (B) Received more than $50,000 in gross proceeds from transactions in jewels, precious metals, precious stones, and jewelry composed of jewels, precious metals, or precious stones.
The term ``dealer'' does not include: (A) A retailer, i.e., a person engaged in the business of sales to the public of jewels, precious metals, or precious stones, or jewelry composed thereof, other than a retailer that, during the prior calendar or tax year, purchased more than $50,000 in jewels, precious metals, precious stones, or jewelry composed of jewels, precious metals, or precious stones, from persons other than dealers (such as members of the general public or persons engaged in other businesses); or (B) A person who engages in transactions in jewels, precious metals, or precious stones for purposes of fabricating finished goods that contain minor amounts of, or the value of which is not significantly attributable to, such precious metals, precious stones, or jewels. Department of Homeland Security- (DHS) The new cabinet-level Federal Government Department created to coordinate the anti-terrorist activities of 22 Government agencies. These include the Coast Guard, Customs and Immigration, FBI, Treasury, FEMA etc. Designated non-financial businesses and professions:
Real estate agents
Dealers in precious metals
Dealers in precious stones
Lawyers, notaries, other independent legal professionals and accountants (within professional firms)
Trust Company Service Providers that:
Act as a formation agent of legal persons
Act as a director or secretary of a company, partner, or similar position in relation to other legal persons.
Provide a registered office; business address or accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement.
Act as a trustee of an express trust.
Act as a nominee shareholder for another person.
Designated Threshold-Amount above which transaction might be subject to analysis as money-laundering or terrorist finance. For instance, the FATF sets $15,000 or euros as the level at which cash transactions in precious metals or stones should be reported. The U.S. sets this level at $10,000. DHS-Department of Homeland Security. Egmont Group-An unofficial forum for Financial Intelligence Units to establish standards and mechanisms for cooperation and establish protocols for exchanging information. Escalation-When an employee reports suspicious activity to the AML Compliance Officer, a senior manager or enforcement agency Extradition-Persons are surrendered by one country to another according to terms of bilateral treaties. Often, an accused or convicted person is returned to the country in which he or she is a national. FATF-GAFI-or FATF-Financial Action Task Force on Money Laundering. FBAR-Foreign Bank and Financial Accounts Report Federal receiver-appointed by the court to collect, marshal and take custody, control and possession of laundered assets. Financial Action Task Force on Money Laundering-(FATF-GAFI-or FATF) International anti-money laundering organization with legal, financial and law enforcement expertise. Monitors AML policies in different countries, sets AML standards, etc. http://www1.oecd.org/fatf/ Financial Crimes Enforcement Network-(FinCEN)-bureau in the U.S. Department of the Treasury formed in 1990 to oversee, centralize and coordinate financial intelligence gathering, regulatory compliance, government initiatives, criminal prosecution and enforcement having to do with laundering and associated foreign financial transactions and relationships, information on currency flows and financial criminal activities. The main U.S. body to to prevent and detect money laundering. FinCEN-Financial Crimes Enforcement Network. Financial institutions- any person or entity who conducts as a business one or more of the following activities or operations for or on behalf of a customer:
Acceptance of deposits and other repayable funds from the public.
The transfer of money or value.
Issuing and managing means of payment (e.g. credit cards, checks)
Financial guarantees and commitments.
money market instruments
exchange, interest rate and index instruments
commodity futures trading
Participation in securities issues and the provision of financial services related to such issues.
Individual and collective portfolio management.
Safekeeping and administration of cash or liquid securities on behalf of other persons.
Investing, administering or managing funds or money on behalf of other persons.
Underwriting and placement of life insurance and other investment related insurance.
Money and currency changing.
Financial Intelligence Unit- (FIU) A centralized Government agency that collects, records, analyzes, disseminates and sometimes investigates suspicious financial activity and SAR's. The United States' FIU is FinCEN. FIU-financial intelligence unit. Foreign Bank and Financial Accounts Report-(FBAR) Report filed with FinCEN for foreign accounts of over $10,000 held by U.S. companies or individuals. Forfeiture-See Confiscation. Front company-An entity used to hide the beneficial owner. FSF- Financial Stability Forum GAFI-Groupe d'Action Financiere sur le blanchiment de capitaux. Name in France for Financial Action Task Force. Gatekeepers-professionals such as lawyers, accountants, investment advisors that can block or expedite funds from entering the banking system. In certain cases, they can use their own accounts to effect entry and thereby hide the identity of the beneficial owner. The FATF recommendations encourage countries to apply their AML requirements for financial institutions to gatekeepers. GCC- Gulf Cooperation Council Geographic targeting order- HIFCA-High Intensity Money Laundering and Related Financial Crime Area Hawala-See alternative remittance system. Hundi-See alternative remittance system. Joint and Travel Rule-Requires certain information to be recorded for wire transfers of $3,000 or more. Includes: name, address or transmitter and recipient, amount, identity of recipient's financial institution, account number IEEPA- International Emergency Economic Powers Act IFI- International financial Institution IMF- International Monetary Fund INL- Bureau for International Narcotics and Law Enforcement Affairs, Department of State Integration-Mentioned in the USA PATRIOT Act as the third and final stage of money laundering in which funds introduced into the financial system are invested or applied. The stages are Placement, Layering and Integration. Interbank account-an account held by one financial institution at another, primarily for facilitating customer transactions. Laundered funds deposited into a foreign bank can be seized and forfeited from the foreign bank's interbank account in the U.S.. International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001-Title III of the USA PATRIOT Act. This section covers many of the Act's AML provisions. Jewel- Jewel means an organic substance with gem quality market-recognized beauty, rarity, and value, and includes pearl, amber, and coral. KYC- Know your customer, in re. due diligence. From a policy standpoint, the practices applied to determine the identity of a customer, to define an account's normal business and to identify behavior that deviates from this norm. KYE-Know your employee. Understanding an employees background, conflicts of interest and susceptibility to money laundering complicity. Large Currency Transaction Form-Form 4789, on which cash transactions over $10,000 must be reported. Layering-in the USA PATRIOT Act, the stage of laundering in which the origin and trail of funds introduced into the financial system are hidden by creating layers of transactions. The stages are Placement, Layering and Integration. Legal persons-bodies corporate, foundations, anstalt, partnerships, associations, or any similar bodies that can establish a permanent customer relationship with a financial institution or otherwise own property. Long arm jurisdiction-describes a country's extraterritorial reach. For inistance, under the USA PATRIOT Act, the US can convict non-residents of crimes in which they participated while outside the US. MLAT-Mutual Legal Assistance Treaty MLCA- Money Laundering Control Act of 1986 MLCC-Money Laundering Coordination Center, U.S. Customs Service, Department of the Trreasury MLSA- Money Laundering Suppression Act of 1994. Money Laundering-There is no single definition. In general, hiding the existence, origin, use, movement or disposition of illegally derived funds to make them appear legitimate. The USA PATRIOT Act mentions three stages of the process--placement, layering and integration. Money Laundering Control Act of 1986-(MLCA- Title 18, US Code Section 1956) Makes money laundering a crime with up to 20 years in prison. Sets a threshold of $10,000. MSB-Money Service Business. Money Service Business-(MSB) Certain non-bank financial services companies, including currency dealers or exchangers, check cashers and travelers check issuers. Mutual Legal Assistance Treaty- Bilateral treaty to permit cooperation between countries to conduct investigations, gather evidence and secure witnesses. NCCT's-Non-cooperative countries or territories. NFTB-Non-financial trades and businesses Non-cooperative countries or territories-(NCCT) Countries designated by the FATF as consistently ignoring money laundering or unwilling to pass or enforce laws to prevent money laundering. The "black list" is revised annually. Non-financial trades and businesses-(NFTB) businesses subject to the Bank Secrecy Act that are not financial institutions, eg. dealers in precious metals and stones, real estate agents, lawyersand car dealers. OAS- Organization of American States OECD- Organization for Economic Cooperation and Development OFAC-Office of Foreign Assets Control, Department of the Treasury OFC- Offshore financial Center Office of Foreign Assets Control-A department of U.S. Treasury that enforces trade and anti-money laundering sanctions. Publishes the OFAC list of known money launderers. It is illegal to do business with individuals or companies on OFAC's lists. Offshore banking license-license to conduct banking activities, but prohibiting the licensee from banking with citizens or currency of the country granting that issued the license. OGBS- Offshore Group of Banking Supervisors PACS-Patriot Act Communications System Patriot Act Communications System-(PACS) A means to communicate with FinCEN, including electronic filing of SAR's and CTR's to FinCEN. Payable-through account-correspondent account opened at a depository institution by a foreign financial institution to engage, either directly or through a sub-account, in banking activities. Payable through accounts can hide the identity of a customer. PEP-Politically Exposed Person. Physical presence-a place of business that:
is maintained by a foreign bank.
is located at a fixed address (not electronic) in a couuntry in which the foreign bank operates.
employs 1 or more individuals full time.
maintains operating records.
is subject to inspection by the banking authority which licensed the foreign bank.
Placement-Mentioned in the USA PATRIOT Act as the initial money laundering stage in which criminally derived funds are introduced into the financial system. The stages are Placement, Layering and Integration. Politically Exposed Person-(PEP) Individual entrusted with prominent public functions in a foreign country. Business relationships with family members or close associates of PEP's involve reputation risks similar to those with PEP's themselves. The risk is hiding graft or illegally derived funds. Precious Metal-Defined in the proposed regulations of the USA PATRIOT Act to include Gold, iridium, osmium, palladium, platinum, rhodium, ruthenium, or silver, having a level of purity of 500 or more parts per thousand; and an alloy containing 500 or more parts per thousand, in the aggregate, of two or more of the metals listed (above). Precious Stone-Defined in proposed regulations of the USA Patriot Act "to include inorganic substances that have a market-recognized gem level of quality, beauty, and rarity and value, and includes diamond, corundum (including rubies and sapphires), beryl (including emeralds and aquamarines), chrysoberyl, spinel, topaz, zircon, tourmaline, garnet, crystalline and cryptocrystalline quartz, olivine peridot, jadeite jade, nephrite jade, spodumene, feldspar, turquoise, lapis lazuli, and opal.. ...precious stones of industrial quality are not covered by the Act. Predicate Offences-Crimes underlying money laundering or terrorist finance activity. Initially, these were drug-related offences, which continue to be the primary predicate offences. Most countries have broadened the definition of predicate offences to include any serious crime. Private Banking Account-Special accounts for high-net worth individuals in which an individual "private banker" coordinates the financial institution's services with the customer's requirements. Accounts generally require a minimum balance of US$1 million. Transactions tend to be marked with confidentiality, complex beneficial ownership arrangements, offshore investment vehicles, tax shelters, and credit extension services. Private banking is viewed by many governments as vulnerable to money laundering. Red Flag-An alert that signals possible money-laundering or terrorist financing. Red flags require investigation and possibly filing an SAR. Repatriation of assets-If funds or assets are transferred out of U.S. jurisdiction by a suspected launderer, FinCEN may obtain a subpoena for their return to the U.S. Risk Matrix-Chart to assess customer risk based on pre-defined varables, such as location, nature of business, etc. Safe harbor-protects persons or agencies disclosing or reporting suspicious activity in good faith from civil liability to person that was reported. SAR-Suspicious Activity Report. SAR-SF-The form used to report suspicious activity. Includes transactions involving proceeds derived from illegal activity or from a plan to violate federal regulations, to avoid reporting requirements and to facilitate criminal activity. SDN List-Specifically Designated Nationals and Blocked Persons List. List of individuals and companies known by U.S. Treasury to be money launderers. Shell Bank-a bank incorporated in a jurisdiction in which it has no physical presence and which is unaffiliated with a regulated group. Smurfing-Using structured transactions or multiple small bank accounts to evade reporting requirements. STR-suspicious transaction reports. Structured transaction-Attempt to evade cash or other reporting requirements by a composite of small transactions or by other devices. Substitute property-If funds or assets are transferred out of U.S. jurisdiction by a suspected launderer, FinCEN may obtain a subpoena to seize property of equivalent value from the suspected launderer. Suspicion-doubt based on some foundation extending beyond speculation but not necessarily sufficient to constitute a belief. Suspicious Activity-relates to funds from illegal activity, hiding the source of funds, or circumventing reporting requirements or activity inconsistent with a customer's business or industry practice. Suspicious Activity Report-(SAR) Report filed with FinCEN to report suspected money laundering activity. Financial institutions are required to file SAR's within 30 days of detection of suspicious activity if the suspect is known, 60 days if not known. Dealers in precious metals and stones are not required to file SAR's but are encouraged to do so. Suspicious Transaction Report-(STR) Term used in Europe and by the FATF for Suspicious Activity Report. Terrorist financing-Funding sources and infrastructure used by terrorist groups. Characterized by hiding sources and divorcing them from the terrorist activity they support. State-supported fincing is becoming less common. Much activity is through charities. Smuggling, kidnapping, credit card fraud and other illegal activities are also used. Title III-Known formally as the International Money Laundering Abatement and Anti-Terrorism Act of 2001. Refers to the anti-money laundering portion of the USA Patriot Act of 2001. Treasury Department-Anti-money laundering responsibility and decision-making authority rests with the Secretary of the Treasury. Treasury is the center of the U.S. anti-money laundering effort. Policymakers at the Treasury make all substantive policy decisions involved in rulemaking. The rules are developed with input from all interested parts of the Federal Government enforcement and coordination are centralized at the Treasury Department. Typology-A term used by the FATF to describe money laundering and terrorist finance methods and techniques. U.N. Security Council Resolution 1373 (2001)-Requires members to freeze terrorist assets and calls for members to assist one another in investigations and to not support terrorist acts or provide safe havens. USA PATRIOT ACT-as an acronym, stands for "Uniting and Strengthening America by providing Appropriate Tools Required to Intercept and Obstruct Terrorism" (October 25, 2001) Vienna Convention-Made money laundering an international offense in 1988 for which signatories agreed to extradition. Willful blindness-Deliberate avoidance of knowledge of the facts. Permitting illegal activity knowing it was taking place. The standard of what constitutes knowledge is a legal definition. In the US, this generally means knowing or suspecting. The fringe question is whether a party should have known, given the facts or circumstances, or whether knowledge was deliberately avoided. A person found willfully blind is treated under the law as though he or she had had actual knowledge. Wofsberg Group-Leading international banks formulating AML guidelines, procedures and preventive measures.