money laundering and corruption , what is money laundering , suspicious transaction means such transaction: , what are some of the challenges , why and how to combat money laundering , money laundering , money laundering process , mlpa-2012 , incentives to launder

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Money Laundering and
Corruption

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Objectives
• Define money laundering
• Overview of MLA-2012
• How AML supports anti-corruption

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3
What is Money Laundering?
• Money laundering is the process by which the
proceeds of the crime, and the true ownership of
those proceeds, are concealed or made opaque so
that the proceeds appear to come from a legitimate
source.
• Generally money laundering is the process by which
one conceals the existence, illegal source, or illegal
application of income to make it appear legitimate. In
other words, it is the process used by criminals
through which they make “dirty” money appear
“clean” or the profits of criminal activities are made to
appear legitimate.

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Money Laundering
• Money laundering generally refers to ‘washing’ of
the proceeds or profits generated from:
(i) Drug trafficking
(ii) People smuggling
(iii) Arms, antique, gold smuggling
(iv) Prostitution rings
(v) Financial frauds
(vi) Corruption, or
(vii) Illegal sale of wild life products and other specified
predicate offences

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5
Money Laundering
• Money launderers are big time criminals who operate
through international networks without disclosing their
identity.
• The money laundered every year could be in the
range of $600 bio to $2 trio. This gives money
launderers enormous financial power to engage or
coerce or bribe people to work for them
• Generally, money launderers use professionals to
create legal structure/ entities which act as ‘front’
and use them for laundering of funds

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Money Laundering Process
• Money Laundering consists of three stages:
1.The first stage involves the Placement of
proceeds derived from illegal activities – the
movement of proceeds, frequently currency, from
the scene of the crime to a place, or into a form,
less suspicious and more convenient for the
criminal.
2. The second stage is called Layering. It involves
the separation of proceeds from illegal source
through the use of complex transactions designed
to obscure the audit trail and hide the proceeds.
The criminals frequently use shell corporations,
offshore banks or countries with loose regulation
and secrecy laws for this purpose.

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Money Laundering Process
3. The third stage is called Integration. It represents
the conversion of illegal proceeds into apparently
legitimate business earnings through normal financial
or commercial operations. Integration creates the
illusion of a legitimate source for criminally derived
funds and involves techniques as numerous and
creative as those used by legitimate businesses. For
e.g false invoices for goods exported, domestic loan
against a foreign deposit, purchasing of property and
co-mingling of money in bank accounts.

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What is Money Laundering ?
Important: All money laundering transactions need not go through this three-stage process.
Money Laundering is the process by which illegal funds and
assets are converted into legitimate funds and assets.
Placement: Illegal funds or assets
are first brought into the financial
system
Layering: Use of multiple
accounts, banks, intermediaries,
corporations, trusts, countries to
disguise the origin.
Integration: Laundered funds are
made available as apparently
legitimate funds.
Investments
Purchases

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2.
PLACEMENT
3.
LAYERING
4.
INTEGRATION
• The last stage in the laundering
process.
• Occurs when the laundered
proceeds are distributed back to
the criminal.
• Creates appearance of
legitimate wealth.
• Involves distancing the money
from its criminal source:
• movements of $ into
different accounts
• movements of money to
different countries
• Increasingly difficult to detect
• Initial introduction of criminal
proceeds into the stream of
commerce
• Most vulnerable stage of money
laundering process
1.
Predicate Crimes
• Corruption and Bribery
• Fraud
• Organized crime
• Drug and human trafficking
• Environmental crime
• Terrorism
• Other serious crimes…
Money Laundering Cycle

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Money is laundered through…
Banks
Financial services
Brokerage firms
Other Examples: Insurance companies,
Money remitters,
Cash intensive businesses,
Brokerage firms,
Realtors
Crooked LAWYERS and ACCOUNTANTS

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Simple Bribe and Money Laundering Transaction
Company A
• Needs to generate
$1 million for bribe to
Finance Minister.
• Uses invoices from
company in Country
2
Country 1
Country 2
Company Bank Account
Country 3
Company owned by Minister’s cousin
Country 4
$500,000 - Purchase
of Real Estate
$500,000 - Purchase
of Bearer Share

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MLPA-2012
Money Laundering means:
As per stipulations contained in Section 2 (V) of the Money
Laundering Prevention Act, 2012 (Act No.05 of 2012) in
Bangladesh “Money Laundering” means: (i) knowingly moving,
converting, or transferring proceeds of crime or property
involved in an offence for the following purposes:-
(1) concealing or disguising the illicit nature, source, location,
ownership or control of the proceeds of crime; or
(2) assisting any person involved in the commission of the
predicate offence to evade the legal consequences of such
offence;

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• (ii) smuggling money or property earned through legal or
illegal means to a foreign country;
• (iii) knowingly transferring or remitting the proceeds of
crime to a foreign country or remitting or bringing them
into Bangladesh from a foreign country with the intention
of hiding or disguising its illegal source; or
• (iv) concluding or attempting to conclude financial
transactions in such a manner so as to reporting
requirement under this Act may be avoided;
• (v) converting or moving or transferring property with the
intention to instigate or assist for committing a predicate
offence;

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• (vi) acquiring, possessing or using any
property, knowing that such property is the
proceeds of a predicate offence;
• (vii) performing such activities so as to the
illegal source of the proceeds of crime may
be concealed or disguised;
• (viii) participating in, associating with,
conspiring, attempting, abetting, instigate
or counsel to commit any offences
mentioned above;

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Suspicious transaction means such
transaction:
• i. which deviates from usual transaction;
• ii. of which there is ground to suspect that ,
(1) the property is the proceeds of an offence
(2) it is financing to any terrorist activity , a
terrorist group or an individual terrorist
• iii. which is for the purposes of this Act, any
other transaction or attempt of transaction
delineated in the instructions issued by
Bangladesh Bank from time to time;

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WHY AND HOW TO COMBAT MONEY LAUNDERING
• Money laundering has potentially devastating economic,
security, and social consequences. Money laundering is a
process vital to making crime worthwhile. It provides the fuel for
drug dealers, smugglers, terrorists, illegal arms dealers, corrupt
public officials, and others to operate and expand their criminal
enterprises. Money laundering diminishes government tax
revenue and therefore, indirectly harms honest taxpayers. It also
makes government tax collection more difficult. In order to
combat Money Laundering Bank should at all times pay
particular attention to the fundamental principle of good
business practice-„know your customer‟ (KYC). Having a sound
knowledge of a customer‟s business and pattern of financial
transactions and commitments is one of the best methods by
which Bank and its Officials will recognize attempts at money
laundering.

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GUIDELINE ON KNOW YOUR CUSTOMER (KYC)
PROCEDURES
• - Helps detect suspicious activity in a timely manner,
- Promotes compliance with all banking laws,
• - Promotes safe and sound banking practices,
• - Minimize the risk that the bank will be used for illicit
activities,
• - Reduces the risk of government seizure and
forfeiture of a customers loan collateral when the
customer is involved in criminal activity, and
• - Protects the banks reputation.

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What Are The Benefits Of Money
Laundering Laws?
• Money Laundering is a separate offense which carries
additional jail time. Allows for seizure and confiscation of
proceeds of crime.
• Allows law enforcement access to bank and other financial
institution records.
• Requires financial institutions to file suspicious and sometimes
cash transaction reports, and to identify the beneficial owners of
legal entities.
• Requires establishment of Financial Intelligence Units which
receive reports from financial institutions and can provide new
channels for international exchange of information.

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Incentives to Launder
• Large amount of proceeds from corruption
that need to be hidden
• Low confidence in the security of assets in
country
• Asset disclosure requirements
• Political instability or possible regime
change
• Greater risk for corruptors and corruptees of
investigation and prosecution

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What are some of the
Challenges?
• Developing political will at senior levels of
government.
• Tighter AML can be costly and reduce resources
from other needs.
• Building capacity in developing countries for
investigation and prosecution.
• Knowing your client is not always easy. Knowing
your client’s client is difficult to impossible.
• Coordination among countries law enforcement,
financial intelligence units, regulators, and
judiciaries.
• Application of AML regime in a cash based
economy.

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Thank You.