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Chapter 2: Money Laundering - Coggle Diagram
Chapter 2: Money Laundering
Definition:
the process by which criminals attempt to conceal the true origin and ownership of the proceeds generated by illegal means, allowing them to maintain control over the process & ultimately providing legitimate cover for their source of income.
Money Laundering involves 3 stages:
1. Placement:
where cash obtained through criminal activity is first placed into the financial system.
2. Layering:
where the illegal cash is disguised by passing it through complex transactions making it difficult to trace.
3. Integration:
where the illegal obtained funds are moved back into the legitimate economy and is now 'clean'.
Offences
Offences
Acquiring, possession or use of criminal property
Concealing or disguising or transferring criminal property or removing it from the country.
Entering into, becoming involved in which is known to be suspected to facilitate the acquisition of criminal property or behalf of another person.
Failure to report knowledge or suspicion of money laundering.
Tipping off (of a client suspicion relating to money laundering or disclose information that may prejudice an investigation.)
Anti- Money Laundering Program
should incorporate:
money laundering & terrorist financing risk assessment.
Implementation of system, policies, control and procedures that effectively manage the risk that the firm is exposed to in relation to money laundering activities & ensure compliance with legislation.
compliance with customer due diligence, enhanced due diligence and simplified due diligence requirements.
Enhance record keeping and data protection systems, polices and procedures.
Internal Control Effectiveness
The firm must establish & maintain written policies, control and procedures to effectively manage & mitigate the money laundering
1. Officer responsible for compliance
Firm must appoint:
1. Money Laundering Compliance Principal (MLPC)
this person must be on the BOD or member of senior management
2. Money Laundering Reporting Officer (MLRO)
to receive internal suspicious activity reports and assess whether a suspicious activity report should be made to the appropriate regulatory body.
7. Employees
- Skills:
firm must assess the skills, knowledge, conduct and integrity of employees involved in the identification, prevention or detection of money laundering , both before and during the course of their appointment
staff straining
: on how to recognise & handle transaction and activities which may related to money laundering
Independent Audit Function
Establish independent audit function to asses the adequacy & effectiveness of the firm's anti-money laundering controls and procedures.
6. Customer Due Diligence
- Know your client:
verifying their identity by obtaining documents from reliable source
Nature of client's business
3. Enhance Due Diligence
4. Enhanced record keeping
Kept comprehensive records to show that they have complied with money laundering regulation, protect themselves if there is an investigation into one of their clients
-Records must be kept 5 years after the relationship has ended.
5. Reporting Procedures
if there is suspicion of money laundering, need to report
8. Monitoring of policies & procedures
MLRO a& appropriate senior management should monitor the effectiveness of policies, procedures and processes so that improvement can be made when inefficiencies are found.
senior management should encourage employee to send feedback on the policies & procedures in place
if there's changes, it should be informed.