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A Global Problem
The reason for selection of this topic is “ Terrorism
Financing & Money Laundering has become a
global problem and being a student of the world’s
premier accounting body-ICAI, this topic appealed
to me since we as Future Accounting & Finance
Professionals would help & assist the businesses
in the prevention of ML & financing towards
terrorist activities by creating awareness through
preparation of AML manuals & white papers AND
Compliance Audits”.
“There’s no question that globalization has been a
principal vehicle that has allowed terrorists to
finance and support their activities all over the
world.”
7
What is Terrorist Financing?
• Terrorist financing provides funds for terrorist activity.
• The main purpose of terrorist activity is to intimidate a
population or compel a government to do something.
• Terrorist activity is undertaken for political, religious or
ideological purposes.
• After the terrorist attacks of September 11, 2001, the
United States and its allies launched a global war on
terror focused on five fronts: diplomatic, financial,
military, intelligence, and law enforcement.
Money Laundering and Terrorist Financing:
Differences and Similarities
• Terrorist financing funds are used for a “purpose”, to further a cause or send a
message while money laundering crimes help conceal the profits of illicit activities.
• Money laundering crimes typically derive from criminal activity such as drug
trafficking, fraud or arms smuggling but Terrorist funds are sometimes not derived
through illegal means. Generally, they are used for mundane expenses such as food
and rent. Hence, funds are not only for the terrorist act, themselves.
• Both terrorists and money launderers use the same methods to move their money,
such as structuring payments to avoid reporting requirements, underground banking,
such as the ancient system of Hawala. The table below gives a quick synopsis:
What are the key stages of the
Money Laundering Cycle?
Placement
– This stage refers to physical disposal of criminal
proceeds into the financial system
Layering
– This stage involves layering Of transactions to confuse
the audit trail and distance the original source of
funds (e.g. successive transactions, international
transfers, early termination products, tax haven ‘A criminal’s
companies, genuine businesses). objective in
laundering illicit
proceeds is to : Get
Integration
it out; cover it up;
– This refers to re-injection of funds back into the real bring it back.’
economy as “clean and respectable money”
Stages Of Money Laundering
Cycle-A Graphical Illustration
Placement Integration
Layering
Techniques Of Money Laundering
Placement Layering Integration
• Smurfing • Tax Havens & Offshore • Use of haven bank
Banks credit cards
• Shipping Money
• Receiving as consulting
Abroad • Bank Secrecy Law as a
or directors fee
• Placement through layering tool
• Arrangement of
Banks • Corporations & Shell corporate loans
• Use of “Pass Through” Companies as a layering • Proceeds of gambling
or “Payable Through” tool
• Real estate
Accounts • Use of trusts transactions
• Electronic Wire • Use of walking accounts • Stock Purchase
Transfers • Establishing self owned • Use of business
• Insurance Products bank • International
• Investment Related • Use of intermediaries importing and
exporting
Transactions
• Use of free trade zones
Possible warning signs of
money laundering activity
• Unusually large deposits of cash made by an individual or
company whose affairs would normally generate deposits by
cheque or bankers’ draft
• If lenders feel that a country’s AML controls are defective this could
affect availability and cost of lending to that country
• Countries do not want to give out the message that crime pays
ID-Identity
• verifying the customer’s identity
• determining exactly who the customer is, whose identity needs to be verified; and
• appropriately verifying that customer’s identity
The time is now, it’s still not too late to change the old ways.
“YOU”