Anti-Money Laundering Services

Transcription

1 Anti-Money Laundering Services Forensic 17 June 2011

2 Agenda 1. What is Money Laundering/Terrorism Financing? 2. A bit of history 3. Size of the problem internationally and in NZ 4. Impact of ML/TF 5. Stages of ML/TF 6. ML methods used globally and in NZ 7. Case study 8. So what can we do about it? 1

3 What is Money Laundering/ Terrorism Financing? Serious Offences - punishable by imprisonment for a term of 5 years or more. - Drive/motive - Source of funds - Amount ML Proceeds from illegal activities Clean money reentering into economy Disguised funds used for illegal activities TF Funds from legitimate source Definition - The process by which income and assets derived from illegal activity are converted into or disguised as apparently legitimate income 2

4 A bit of history s Al Capon comingling dirty money Late 70 s early 80 s Mafia become globalised cash in FI Late 80 s FATF global efforts against ML cash out of FI Early Russian Mafia 2. Crisis of 2003 and 2007 (Cash back into FI) September 11, 2001 Terrorist attack FT to the forefront 3

5 Size of the problem internationally and in NZ Internationally World wide money laundering amounts to 2-5% of global GDP ($590 billion-$1.5 trillion) (International Monetary Fund). $3.5 billion are laundered through the Australian financial system each year (AUSTRAC estimate). Regarded as the worlds third largest industry after international oil trade and foreign exchange New Zealand Estimates of extent of ML in NZ is in excess of a $billion Largely drugs, dishonesty offences NZ adult gangs & Asian organised crime NZ Methamphetamine market est $1.2 billion, adult gangs linked to about 80% meth labs Prosecution rate is low (0.2%) Success rate is poor (34%) resulted in ML convictions 77, Total crime Known crime Reported crime Investigation Arrests Prose cution 51 convictions 4

6 Impact of ML/TF why do we care? Money Laundering Money Laundering has devastating economic, security and social consequences Countries with lax laws provide encouragement to drug criminals to operate and expand It brings bad reputation to the country, unsafe living place and unbalanced economy where power sits with criminals It is NOT a victimless crime! Criminal Profit Funding and encouraging crime Financing of Terrorism People are terrified Economy goes backwards (diverting recourse and funds for disaster recovery) Tourism income takes a dive Reputational damage Economic loss Destabilising financial sector Financial impact & stress on victims Adverse affect on the public 5

7 What is Money Laundering/ Terrorism Financing cont... Three stages of M/L follow the money - 1. Placement enters the financial system 2. Layering changing hands (transactions) 3. Integration legitimizing (purchasing assets) 6

8 ML methods used globally and in NZ 22 in total and still evolving... Wire/electronic transfer Money remitters/foreign exchange/banks/casino Possible indicators 1. Significant, frequent cash payments 2. Amount rounded & under $10, Transfer to/from high risk countries 4. Money carousels 5. Multiple transfers to same person 6. Same address provided by multiple remitters 7. Reluctance to provide personal details 8. Declared/known income at odds with transfers 7

9 Smurfing/Structuring using series of accomplices to make smaller deposits into number of accounts (each under the reporting threshold). Possible indicators 1. Significant, frequent cash payments 2. Amount rounded & under $10, Transfer to/from high risk countries 4. Multiple deposits to same person 5. Reluctance to provide personal details 6. Declared/known income at odds with transfers 8

10 ML methods used globally and in NZ Purchase of valuables/ cash deposits Including precious metals, gems, art, antiques No ownership trail and can be moved cross borders easily valuation is subjective and loose ownership record Possible indicators 1. Regular buying selling not fiscally prudent 2. Cash purchases 3. Customers requesting safe custody arrangements with financial institutions (safety deposit boxes) 4. Declared/known income at odds with purchase 9

11 ML methods used globally and in NZ Shell companies A company which serves as a vehicle for business transactions without itself having any significant assets or operations. Possible indicators - 1. NZ registered, overseas directors - bank accounts 2. Several companies same office address/same directors or shareholder 3. Virtual office (Company formation Agents) 4. Complex structure lacking personal details 5. No legitimate business operation 10

12 ML methods used globally and in NZ Legitimising through a refund Possible indicators Overpayments and refunds 1. Casino gaming machines - buying large quantities of chips with cash, gambling very little, then requesting from the cashier a cheque, a wire, or the money put into an account 2. Frequent payments to utility companies 3. Purchase of primarily life insurance - up front lump sum purchase and early redemption Co-mingling Combining proceeds of crime with legitimate income Possible indicators 1. Significant cash deposits despite having EFTPOS/credit card facilities 2. Merging businesses to create layers/complex ownership structure 3. Income not comparative to business 11

13 ML methods used globally and in NZ Investment in Capital Markets Trading in securities such as stock, bonds, futures and options, currency speculation (layering stage) Possible indicators 1. Securities accounts opened to trade in shares of only one listed company 2. Transactions resembles a form of insider trading 3. Unusual settlements requesting cheques to third parties 4. Funds deposited into stockbrokers account with immediate requests for repayment 5. No or hardly any securities transactions recorded on the account 12

14 ML methods used globally and in NZ Other methods used 1. Underground banking Hawala/Hundi an informal value transfer system based on the performance and honour of a huge network of money brokers, which are primarily located in the Middle East, Africa, and South Asia. 2. Abuse of non profit organisations (charities) Mainly used for terrorism activities 3. Cash exchange (refining) exchanging smaller denomination bills into larger ones (most common with drug dealers) / Cash couriers/currency smuggling 4. Currency conversion 5. Trade based ML/FT 6. Use of offshore banks/businesses 7. Use of nominees, trusts, family members or third parties etc. 8. Identify fraud/false identification 9. Use of "gatekeeper" professional services 13

15 Case study to illustrate methods used - Wachovia Bank Wire transfers, travellers cheques, cash shipments total amount of $378.4 billion 1/3 of Mexico's gross national product USA - Wachovia Bank Through Wachovia Bank accounts traffickers purchased a plane to ship cocaine back to Mexico Mexico - Casas De Cambio (CDC) Drug Trafficking Cartel Purchasing goods to support their operation globally violence along the US- Mexico border drug war Drug traffickers 14

16 Case study cont... Wachovia was put under immediate investigation for failing to maintain an effective anti-money laundering programme In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act. It paid federal authorities over $160m. "Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations, federal prosecutor The conclusion to the case - demonstrating the role of the "legal" banking sector in swilling hundreds of billions of dollars the blood money from the murderous drug trade around their global operations. It's simple: if you don't see the correlation between the money laundering by banks and the 30,000 people killed in Mexico, you're missing the point." 15

17 The NZ connection... shell companies set up under New Zealand's lax company laws to launder money. Four NZ companies "filtered" $50m in drug money through banks in Latvia and on to Wachovia. Each of the companies had just one director Stella Port-Louis, 32, of the Seychelles, until recently a director of around 300 NZ companies. 16

18 So, what can we do about it? Financial crime doesn't stop at borders ML/TF is a global problem and as such should be tackled with a globalised policy Various organisation that play important role for global action against ML/TF are: Financial Action Task Force (FATF) formed in 1989 by G-7 countries. Now includes over 180 jurisdictions. World Bank works closely with IMF to support its members as part of its financial development support strategy Internationally Monetary Fund (IMF) sharing information, developing common approach and desirable standards Mutual evaluation of NZ was made in 2009 NZ needs to play catch up... Introducing Anti Money Laundering and Countering Financing of Terrorism Act

19 So, what can we do about it? New legislation Who? Why? What? Phase I - Financial Institutions and Casinos Phase II will extend to a wider range of entities Strong AML/CFT regimes enhance Financial Sectors integrity and stability, which in turn facilitate counter integration into the global financial system Complete a risk assessment Implement an AML/CFT programme Customer due diligence (including PEPs) Transaction monitoring and ongoing CDD Suspicious transaction reporting Training staff When?. Phase I - by 2013 Phase II - TBC 18

20 Thank you Presentation by Michal Amzallag

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