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What is Money Laundering - An Introduction

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Proximal Consulting, the global KYC enhanced due diligence experts, provide an introduction to money laundering presentation.

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What is Money Laundering - An Introduction

  1. 1. www.proximalconsulting.com WHAT IS MONEY LAUNDERING? AN INTRODUCTION Global KYC Enhanced Due Diligence Experts Established since 1999
  2. 2. www.proximalconsulting.com Money Laundering: A Definition Money laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of criminal activities. If successful, the money can lose its criminal identity and appear legitimate.
  3. 3. $2 Trillion The True Scale Of Global Money Laundering? UNODC Website 2017
  4. 4. www.proximalconsulting.com Estimated Scale of the Illicit Narcotics Industry: $400 Billion (per annum)* ….with 400 million regular customers it is bigger than the world’s oil and gas industry *Economic and Social Consequences of DrugAbuse and IllicitTrafficking Report by the United Nations
  5. 5. www.proximalconsulting.com Money launderers will pay up to 30% of the total of their “dirty money” to “facilitate” its laundering
  6. 6. www.proximalconsulting.com “The problem is that this is a phenomenon that respects no borders. The organized crime groups and terrorist organizations are far more attuned to the realities of the globalist century than western governments are”. Senior law enforcement official commenting after 9/11
  7. 7. www.proximalconsulting.com • Place money in the financial system, without arousing suspicion • Move the money around, often in a series of complex transactions crossing multiple jurisdictions, so it becomes difficult to identify its original source • Move the money back into the financial and business system, so that it appears as legitimate funds or assets What a money launderer wants to achieve…
  8. 8. www.proximalconsulting.com The Money Laundering Process Placement Integration Layering
  9. 9. www.proximalconsulting.com The Convergence Theory or Why the Traditional Money Laundering Model Just Won’t do • Globalization of markets & financial flows • The dizzying rise of the Internet - a single unregulated market • Competition, consolidation & collaboration • Corporates/staff have to deliver (sales targets – bonuses) • Technological advances • Criminalization of politics • Offshore Financial Centres (OFCs) - economic salvation found in offering “anonymous” legal entities
  10. 10. www.proximalconsulting.com Beyond Traditional Laundering Methods • Correspondent banking • Securities • Credit cards • Stock exchanges • Professional advisors • “Illegal” businesses • Real estate • Car dealerships • White goods retailers • Hotels • Supermarket chains • Clinics • Construction companies • Football teams
  11. 11. www.proximalconsulting.com The Difference Between Money Laundering & Terrorist Funding / Financing
  12. 12. www.proximalconsulting.com What is Terrorist Financing? Terrorist Financing is the processing of funds from any source (including legitimate ones) to finance terrorist activities or those who encourage, plan or engage in terrorism
  13. 13. www.proximalconsulting.com Terrorist Financing Differs From Money Laundering • It is much more difficult to detect as funds may be clean and we are looking for future activity • The amounts required to finance a terrorist outrage are relatively small • But both often display similar transactional features centering on concealment
  14. 14. www.proximalconsulting.com “While the 9/11 hijackers were not experts on the use of the US financial system, nothing they did would have led the banks to suspect criminal behaviour, let alone a terrorist plot to commit mass murder…no financial institution filed a Suspicious Activity Report with respect to any of the transactions of any of the 19 hijackers before 9/11. Nor should SARs have been filed” 9/11 Commission Report
  15. 15. www.proximalconsulting.com Terrorist Attack Estimated cost London transport system (2005) GBP 8 000 Madrid train bombings (2004) USD 10 000 Istanbul truck bomb attacks (2003) USD 40 000 Jakarta Hotel bombing (2003) USD 30 000 Bali bombings (2002) USD 50 000 USS Cole attack (2000) USD 10 000 East Africa embassy bombings (1998) USD 50 000 Terror Comes Cheap….
  16. 16. www.proximalconsulting.com The Organized Crime - Terrorist Continuum Organized Crime Terrorism “Huge geopolitical plates which are slowly starting to shift and grind together”
  17. 17. www.proximalconsulting.com “Both criminal organizations and terrorist groups continue to develop international networks and establish alliances of convenience” – Financial Action Task Force March 2008
  18. 18. www.proximalconsulting.com Credible Evidence that the Nexus Exists & is Thriving Terrorist groups fundraising raising through: • Drug trafficking • Credit card fraud • Cheque fraud • Extortion • Multiple types of criminal activity combined e.g. cigarette smuggling, credit card fraud, insurance fraud
  19. 19. www.proximalconsulting.com Current Money Laundering Trends • Use of the formal financial sector • Trade sector – transferring value and goods through seemingly legitimate trade flows • Cash couriers (the “cash in the suitcase” concept is still here) • Alternative Remittance Systems • Mortgage fraud • Real estate sector • Prepaid cards • Electronic purses • Mobile phone payments • Digital precious metals
  20. 20. www.proximalconsulting.com “The adaptability and opportunism shown by terrorist organisations suggests that all the methods that exist to move money around the globe are to some extent at risk” FATF March 2008
  21. 21. www.proximalconsulting.com Remember You May Only See A Small Part of the Whole Picture It is very unlikely that you will see every stage of the money laundering process - you will probably only see a small part of the picture
  22. 22. www.proximalconsulting.com Source of Diagram: USTreasury
  23. 23. www.proximalconsulting.com AML: Anti Money Laundering ATF: Anti-Terrorist Financing CFT: Combating the financing of terrorism KYC: Know your customer Money Laundering Terminology OFC: Offshore financial centers BO: Beneficial owner IBC: International business company PEP: Politically exposed person
  24. 24. Proximal Consulting have unrivalled experience in providing KYC enhanced due diligence background reports on individuals and companies on a global basis. We also offer a complementary range of services including AML training, country risk reports and bespoke investigations. Our enhanced due diligence reports are tailor-made to our clients' specifications. They are totally different from the usual database-led reports that often fail to meet enhanced due diligence requirements. Our reports present clear, accurate and confidential findings which enable our clients to make informed business decisions and to fulfil their AML obligations. We work with a variety of global clients including regulatory agencies, law firms, individual companies, private banks, trust companies and other firms in the financial sector. Phone +44 (0) 1672 516725 Offices Poughcombe Barns Ogbourne St Andrew Wiltshire SN8 1SE UK Rue Du Rhone 14 1204-Genève Switzerland Email enq@proximalconsulting.com Website www.proximalconsulting.com All slide content and design is copyright 2017 Proximal Consulting. No part of the site may be reused without written permission from Proximal Consulting. If you wish to use any content, or would like Proximal Consulting to expand or clarify content, please contact us. PROXIMAL CONSULTING and the related logo are trademarksof Proximal Consulting Limited.

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