Money Laundering and Terrorist Financing in a Nutshell: Chapter One

Money Laundering and
Terrorist Financing in a
Nutshell
C h a p t e r 1
B a s i c K N O W - H O W

Disclaimer
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an invitation to buy or sell or a
solicitation of an offer or invitation to
buy or sell or enter into any
agreement with any respect .
This document is provided by way of
example only and is not a precedent
document. As such no reliance
should be placed on this document
or the information contained herein.
In no way, the author’s any of current
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have any involvement with its
content directly or indirectly.

Money Laundering and Terrorist Financing as Financial Crime, Link between ML And TF
Preface01
Definition, Methods, Process, Professional Money Laundering
Money Laundering (ML)02
Definition, Sources, Process, Access
Terrorist Financing (TF)03
Global Perspective, Bangladesh Perspective
Evolution of ML and TF Guidelines06
AG E N D A
Key Figures and Facts , Socioeconomic Costs
Why Money Laundering Matters?04
Policies, Procedure and Programs, Pillars of AML/CTF
AML/CTF Policy Guideline07
FICO Asia Pacific Fraud Forum Survey Result
Asian Money Laundering Scandals05

Copyright © Md. Moulude Hossain. All Rights Reserved.
Money
Laundering
Money Laundering is the process of concealing
the illicit proceeds origins of proceeds of crimes
Terrorist financing is the collection or the provision
of funds for terrorist purpose.
M o n e y L a u n d e r i n g a n d T e r r o r i s t F i n a n c i n g a r e L i n k e d
Financial Crime is an increasing concern for all financial institutions, which is developing rapidly and equally
together with technology. May be not limited to money laundering and terrorist financing, these two form of
financial crime deserve to be attended with utmost care.
The evolving challenges of Money Laundering (ML) and Terrorist Financing (TF) lead the evolution of anti-money
laundering and counter terrorist financing convention and regulations. These conventions give birth of several
international organizations to combat the impact of ML and TF.
Terrorist
Financing
$Funds are always of illicit origins
Funds can steam from both legal and illicit
sources.
Not all ML is TF
But most of TF is ML

Money Laundering - Definition
Money-laundering is the process
that disguises illegal profits without
compromising the criminals who
wish to benefit from the proceeds.
United Nations Office on Drugs and Crime
“
Money laundering involves taking proceeds obtained via
criminal activity and disguising their origin to make them
appear to have been derived from a legitimate source.
This allows criminals to realize the benefits of their crimes.
Money laundering is a type of financial crime; other
financial crimes include fraud and terrorism financing. All
financial crimes exact substantial costs to individuals and
institutions and can have potentially devastating
consequences for society.
01
03
02
The conversion or transfer of property, knowing it derived
from a criminal offense, for the purpose of concealing or
disguising illicit origin or of the assisting any person who
involve in commission of the crime to evade the legal
consequences of his actions.
Conversion
The acquisition, possession or use of property, knowing at
the time of its receipt that it was derived from a criminal
offense or from participation in a crime.
Acquisition
The concealment of disguising of the true nature, source,
location, disposition, movement, rights with respect to, or
ownership of the property knowing that it is derived from a
criminal offense.
Concealment
Broadly, the definition of Money Laundering includes but not
limited to the following three components:

01
STRUCTURING
Often known as smurfing,
whereby cash is broken into
smaller deposits of money,
used to defeat suspicion of
money laundering.
02
BULK CASH SMUGGLING
Pysically smuggling cash to
another jurisdiction and
depositing it in a financial
institution, such as an
offshore bank
03
CASH-INTENSIVE BUSINESSES
Business typically expected to
receive a large proportion of its
revenue as cash uses its
accounts to deposit criminally
derived cash
04
TRADE-BASED LAUNDERING
Under- or over-valuing
invoices to disguise the
movement of money.
Money Laundering - Methods
05
SHELL COMPANIES & TRUSTS
Trusts and shell companies
disguise the true owners of
money. Trusts and corporate
vehicles, depending on the
jurisdiction, need not disclose
their true owner.
06
ROUND-TRIPPING
Money deposited in a
controlled foreign corporation
offshore, preferably in a tax
haven where minimal records
are kept, and then shipped
back as a foreign direct
investment.
07
BANK CAPTURE
Money launderers or
criminals buy a controlling
interest in a bank, preferably
in a jurisdiction with weak
money laundering controls,
and then move money
through the bank without
scrutiny.
08
CASINOS
An individual walks into a
casino and buys chips with
illicit cash. The individual will
then play for a relatively
short time.
09
OTHER GAMBLING
Money is spent on gambling,
preferably on high odds
games. One way to minimize
risk with this method is to bet
on every possible outcome
of some event that has many
possible outcomes,
10
BLACK SALARIES
A company may have
unregistered employees
without written contracts
and pay them cash salaries.
Dirty money might be used
to pay them.
11
TAX AMNESTIES
Those that legalize
unreported assets and cash
in tax havens.
12
TRANSACTION LAUNDERING
Merchant unknowingly
processes illicit credit card
transactions for another
business[19]. It is a growing
problem[20][21] and
recognized as distinct from
traditional money laundering

Money Laundering –
Sources, Process,
Access
Goal:
To deposit criminal proceeds into the
financial system
Common Methods:
• Currency Smuggling
• Bank Complicity
• Currency Exchanges
• Securities Brokers
• Blending of Funds
• Asset Purchase
Placement
Goal:
Conceal the criminal origin of
proceeds
Common Methods:
• Wire Transfer
• Cash converted into Monetary
Instruments
• Withdrawal of Cash
• Cash deposit in multiple bank
accounts
• Split and merge of various bank
accounts
Layering
Goal:
Create an apparent legal origin for
criminal processes
Common Methods:
• Property Dealing
• Front Companies and False Loans
• Foreign Bank Complicity
• False Import/Export Invoices
• Disguise ownership of assets
Integration
Sources of Funds
Tax Crimes, fraud,
embezzlement,
drugs, theft,
bribery,
corruption
Sources of Proceeds
For potential benefits
to commit financial
crime purpose.

Individual PML
who possesses specialised skills or
expertise in placing, moving and
laundering funds. They specialise in
the provision of ML services, which
can also be performed while
acting in a legitimate, professional
occupation.
Organizational ML Network based PML
Professional ML organization
(PMLO), which consists of two or
more individuals acting as an
autonomous, structured group that
specialises in providing services or
advice to launder money for
criminals or other OCGs.
Professional money laundering
network (PMLN), which is a
collection of associates or
contacts working together to
facilitate PML schemes and/or
subcontract their services for
specific tasks.
Professional money launderers (PMLs) that specialise in
enabling criminals to evade anti-money laundering and
counter terrorist financing safeguards and sanctions in
order to enjoy the profits from illegal activities.
Professional Money Laundering (PML)

Terrorist Financing- Definition
Receive money, service or any
other property in favour of terrorist
individual or group:
Supply money, services or any other
property to the terrorist individual or
group.
Make arrangement of money,
services or any other property to the
terrorist individual or group.
1
2
3
Terrorist Financing refers to the processing of
funds to sponsor or facilitate terrorist activity. A
terrorist group builds and maintains an
infrastructure to facilitate the development of
sources of funding for their own requirements
and possibly to launder the funds used in
terrorist activity.
If any person or entity knowingly,
from legal or illegal sources, directly
or indirectly with intention to receive
money, services or any other
property, supply or make
arrangement: which has reasonable
ground to believe that may be used
in full or partially in terrorist activities
(as described in section 6 of ATA
2009) or may be used by terrorist
individual or entities for same reason.
- Anti Terrorism Act 2009, Bangladesh

Terrorist Financing- Sources, Process, Access
Fund raising from
legitimate and
illicit sources for
the purpose of
financing
terrorism.
Raise Move Store Spend
Fund moved to
terrorists
organizations
using formal and
informal methods
Funds streams
and stored in
different
variations for the
purpose of use
Terrorist operators
get access to the
fund and sped to
execute different
terrorist activities
PLACEMENT LAYERING INTEGRATION
Sources:
Donation
Self funding
Criminal
Activities
Undisclosed
Sources
Spending:
Terrorist
Movement,
Buying arms,
explosives,
bribery etc.

Copyright © Md. Moulude Hossain. All Rights Reserved.Copyright © Md. Moulude Hossain. All Rights Reserved.
Trillion Annually in
Money-Laundering
Transactions in
20091
$ 1.6 2.7%
Money Laundering
Transactions are 2.7%
of GDP Worldwide in
20091
0.2% $25.3 BILLION 53%
Global AML seizes
less than 0.2% of
laundered
money2
The cost of AML
compliance across
U.S. financial services
firms per year4
The cost of regulatory
compliance is rising
53% annually3
1. UNODC report: Estimating illicit financial flows resulting from drug trafficking and other transnational organized crimes, October 2011
2. “Why the World is so Bad at Tracking Dirty Money.” Bloomberg 2015
3. Global Anti-Money-Laundering Survey, KPMG, 2014
4. riskscreen.com/kyc360/news/anti-money-laundering-compliance-costs-u-s-financial-services-firms-25-billion-annually-study/
Why Money Laundering Matters: Key Figures and Facts

Social Costs of Money LaunderingWhy Money Laundering Matters: Socioeconomic Costs
Money laundering is a crime
which brings about adverse
effects in a long time by
destroying the balance in
financial markets and volatility
funds in banks and financial
institutions and by influencing
political and economic officials
and authorities.
”
Undermining the Integrity of Financial Markets
Economic Distortion and Instability
Loss of Control of Economic Policy
Increase in social deviations
Risks to Privatization Efforts
Increase cost for law enforcement and health care
Reputation Risk and Loss of Revenue
Undermining the Legitimate Private Sector
01
03
04
05
06
07
08
02

91% 33% 22% 20%
Asia Pacific banks think the
industry is still at risk of
inadvertently facilitating next
money laundering scandal.
Respondents think that
beyond banking biggest
laundering risks
Is cryptocurrenancy.
laundering risks
Is shadow banking.
laundering risks
Is property transaction.
Recent Asian money laundering scandals continue to shake up the
financial world, and the ripple effect is still keenly felt across the region.
Silicon Valley analytics firm FICO recently conducted a survey with
regional banks and found that more than 90 percent of them fear they or
their peers, may risk inadvertently facilitating the next money laundering
scandal.
Asian Money Laundering
Scandals: Banks Fear A
Large Breach
FICO Asia Pacific Fraud Forum Survey Result
Thinks LACK OF RESOURCES is the
key reason why banks remain
exposed.
Thinks LACK OF EXPERTISE is the key
reason why banks remain exposed.
Thinks POLITICAL CONSTRAINTS
IMPOSED BY GOVERNMENT is the
key reason why banks remain
exposed.

Evolution of AML and CTF Guidelines – Global Perspective
This is a sample text and here you need to add your own text that describes your own concept in your way and that fit best
for your topic and make it simple as much as you can that is better
1988
1989
Vienna Convention
UN Convention Against Illicit Traffic in Narcotic
Drugs and Psychotropic Substances
FATF (Money Laundering)
The Financial Action Task Force (on Money
Laundering) (FATF), founded on the initiative of
the G7 to develop policies to combat money
laundering. In 2001 its mandate expanded to
include terrorism financing.

1994
IAIS (Insurance)
IAIS represents insurance regulators and
supervisors of some 180 jurisdictions in more
than 130 countries, constituting 97% of the
world's insurance premiums.
1990
Strasbourg Convention
EU Convention on Laundering, Search,
Seizure and Confiscation of the Proceeds
from Crime.
1995
Egmont Group FIU
Development of a financial intelligence units
(FIU) network, a group of FIUs at the Egmont
Arenberg Palace in Brussels.

1997
APG (Money Laundering)
An autonomous and collaborative
international organization founded in
Bangkok, Thailand to provide support for AML
and CTF initiatives by member countries.
1999
Terrorist Financing Convention
Formerly known as (International Convention for
the Suppression of the Financing of Terrorism) is a
United Nations treaty designed to criminalize acts
of financing acts of terrorism. Effective from 2002.
2001
UN Palermo Convention
UN Convention Against
Transnational Organized Crime

2005
UN Merida Convention
UN Convention Against
Corruption
2005
EU Warsaw Convention
Council of Europe Convention on
Laundering, Search, Seizure and
Confiscation of the Proceeds from Crime
and on the Financing of Terrorism.
2012 FATF Revised Standards
The FATF Revised Standards comprise the Recommendations
adopted on 16 February 2012 and updated regularly since.

The first anti-money laundering
legislation in Bangladesh was the
Money Laundering Prevention Act,
2002 and establishment of 'Anti
Money Laundering Department'
Evolution of AML and CTF Guidelines – Bangladesh Perspective
2002
2008
Money Laundering Prevention Act
(2002) replaced by the Money
Laundering Prevention Ordinance
2008
2009
Money Laundering Prevention
Ordinance (2008) repealed by
the Money Laundering Prevention
Act, 2009
2012
Money Laundering Prevention Act,
2012 and Anti Money Laundering
Department transformed as the
Bangladesh Financial Intelligence
Unit (BFIU)
2013
BFIU has also achieved the
membership of Egmont
Group

AML/CTF Policy Guideline: Policies, Procedure and Programs
AML/CTF Policies, Procedures and Programs are the starting point fro reporting entities to comply with
local laws and regulations as well as institutional risk mitigation process.
AML/CTF policy is the highest level of institutional
commitment to mitigate AML/CTF risks and comply with
the laws and regulations
AML/CTF Policies
A detail document that specify AML measures to comply
with AML/CTF policies, laws, regulations and best practices.
Categorizes as Institutional & Operational Procedures.
AML/CTF Procedures
A working document for relevant staffs with detailed
checklist of each component of AML/CTF procedures to
undertake reporting entities day to day activities.
AML/CTF Programs
AML/CTF Policy
Guideline
AML/CTF
Policies
AML/CTF
Procedures
AML/CTF
Programs

Copyright © Md. Moulude Hossain. All Rights Reserved.Copyright © Md. Moulude Hossain. All Rights Reserved.
Thedesignationofan
individualresponsiblefor
day-to-daycompliance
Trainingforappropriate
personnel
Independenttestingof
BSA/AMLcompliance
Risk-basedprocedures
forcustomerdue
diligence
Asystemofinternal
controlstoensure
ongoingcompliance
AML/CTF Policy Guideline:
Pillars of AML/CTF
The U.S. Department of the Treasury’s
Financial Crimes Enforcement Network
issued a final rule in 2016 that imposed
new requirements for identifying and
verifying beneficial owners of legal-
entity customers. This new rule,
amending the Bank Secrecy Act,
became effective in July 2016, and all
federally insured credit unions must
comply fully by May 11, 2018.
This revised rule adds a fifth core element to
the original four core elements of an
effective BSA and anti-money laundering
compliance program. These core elements
are often referred to as the “pillars.
1 2 3 4 5

Anti Money Laundering
and Counter Terrorist
Financing in a Nutshell
C h a p t e r 2
H o w t o C o m b a t M L a n d T F
Coming Up N EX T

Money Laundering and Terrorist Financing in a Nutshell: Chapter One

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