Regulating and Prosecuting Global Money Laundering By: Aida Kebere.

Regulating and Prosecuting Global Money Laundering

By: Aida Kebere

What is Money Laundering?

Money Laundering is the process of making illegally-gained proceeds( i.e. “ dirty money “) appear legal (i.e. “clean).

How does money laundering work?

1. Placement: refers to the initial point of entry for the funds derived form the criminal activities.

2. Layering : refers to the creation of complex networks of transactions which attempt to obscure the link between the initial entry point and the end of the laundering cycle.

3. Integration: refers to the return of funds to the legitimate economy for later extraction

Crimes Associated With Money Laundering

1. Drug trafficking 7. Foreign official corruption

2. Terrorist financing 8. Exchange control violation

3. Financial fraud 9. Illegal gambling

4. Computer Crimes 10. Bribery of public officials

5. Alien smuggling 11. Misappropriation, theft

6. Illegal arms sales 12 Embezzlement of public fund

Who may be Potentially Exposed?

Banks

Financial institutions

International Business Operations

Companies

Investors

Corporate executives

Individuals

The Financial Action Task Force (FATF)

FATF is an inter-governmental body established in 1989 by the Minister of its Member jurisdictions.

Sets international standards , promote effective implementation of legal, regulatory and operational measures.

FATF currently has 34 members jurisdictions and 2 regional organizations.

U.S. AML Laws and Regulations

Bank Secrecy Act of 1970 (BSA)

The Uniting and strengthening America by Providing Tools required to intercept and Obstruct Terrorism Act of 2001 ( commonly referred to as USA Patriot Act).

Money Laundering Control Act of 1986 (MLCA)

Anti-Drug Abuse Act of 1988 Act of 1992

Money Laundering Suppression Act of 1994 (MLSA)

Money Laundering and Financial Crimes Strategy Act of 1998

Anti Money Laundering Statutes

1. Comprehensive oversight, monitoring, and reporting framework designed to limit money laundering activity, focused primarily on financial institutions.

2. The criminalization of money laundering activities by any individual or corporation

The Statute of the Money Laundering Act

The statute allows for a broad jurisdictional hook

The Statute can reach any U.S. citizen anywhere in world, if part of the conduct takes place in the U.S.

Transactions value exceeds $10,000

Key U.S. Regulatory Authorities

1. Financial Crimes Enforcement Network (FinCEN)

2. Self-Regulatory Organizations (SROs)

3. Financial Industry Regulatory Authority (FINRA)

4. Department of Justice (DOJ)

Anti-money laundering (“AML”) programs

- Information sharing, Risk Assessments

-Customer Acceptance and Maintenance Program

-Large Currency Monitoring and Currency Transaction Report Filling Program

- Monitoring, investigating and Suspicious Activity Filling Program

- Sanction Program , Information Sharing, Training ,Record keeping and Retention Programs

HSBC’s Case

HSBC’s U.S branch failed to monitor transactions with branches in other countries for money- laundering violations.

It accepted $15 billion without further inquiry

HSBC was fined by both the U.S. and British regulators.

HSBC to pay $1.9 BILLION U.S. fines

HSBC has also shouldered significant remediation costs

Policy Proposal

Strengthen and refine the Anti-Money Laundering regulatory regimes for all financial institutions

Improve the effectiveness of the AML controls through greater guidance, communication and information sharing

Re-evaluate some of the existing procedures

Improving compliances systems

Impact of proposal

Pros Cons

- Will comply with regulation - Costly to continuously

- Mitigate risks revamp the procedures

- Won’t have to pay fines - you can’t deal with certain

- Build strong brand in the industry parameters

- - have to alienate certain

industries due to sanctions