Course Agenda

01 Understanding Money Laundering

02 Introducing Anti-Money Laundering

03 Learning important AML Concepts

What is Money
Laundering?
 USA

Germany

FATF
 Key Elements of Money Laundering

Funds or assets from

a criminal activity

Actions to disguise
the illegal origin
What are Predicate
Offenses?
The 3 Stages of
Money Laundering
 The 3 Stages of Money Laundering

01 02

Placement Layering
03

Integration
Stage 1: Placement

Credit
card Gam-
repay- bling
ments

Bank
Smurfs
deposits
 Stage 2: Layering

Shell Offshore
companies banks

Complex Stock
transactions dealing
Stage 3: Integration

Luxury Real
cars estate

Boats
and Art
jets
3 Examples of
Money Laundering
 Placement
Example Direct cash payments to the
business
No. 1
Layering
Cash Transactions are “slipped”
Business into the books

Scheme
Integration
Extraction of the money
through daily profits
 Placement
Example Money is converted to
casino chips in a casino
No. 2
Layering
Casino Using the chips for
Scheme gambling

Integration
Cash-out the chips for
money
 Placement
Example Cash being distributed
through a network of people
No. 3
Layering
Smurfing Money is deposited back
Scheme into bank accounts

Integration
Money can be extracted as
it is moved into accounts
What is Anti-Money
Laundering?
The Importance of
Anti-Money
Laundering
 Economic
Consequences
 Business
Consequences
 Social
Consequences
Consequences for
Non-Compliance
Risks and Treats from Money Laundering for Organizations

1 2 3

Regulatory Reputational Legal

Civil and criminal
High regulatory Loss of customers,
lawsuits and potential
fines for FI and non- suppliers, talent,
imprisonment of senior
FI organizations brand value, etc.
management
Risk-Based
Approach
 Risk-Based Approach

Define Mitigating Move on to next

Identify High Risk
Measures Risk Category
 Benefits of the Risk-Based Approach

Efficient use of resources

Focus more resources on high risk areas
Focus less resources on low risk areas
Avoid consequenes of inappropriate de-risking
AML Risk
Assessment
 Risk Assessment Factors

The nature, scale, diversity and

complexity of their business

The distribution channels

An organizations target
markets

The internal audit and

regulatory findings

The number of customers

already identified as high risk

The volume and size of its

business activities

The jurisdictions the

organization is exposed to
 What else to consider?

Complement information
with relevant internal and
external sources

Obtain senior
management approval

Make sure risk

assessment is in line with
internal policies,
procedures, and controls
AML Compliance
Program
 How to build an effective AML Program?

3
Organizational
2 measures
AML Risk
1 Assessment
Organizational
environment
The 4 Pillars of an effective AML Program

Policies, Procedures, 1
Controls

Compliance AML 2
Function

Independent Audit 3

Employee Training 4
Program
 The 3 Lines of Defense

1st Line of 2nd Line of 3rd Line of

Defense Defense Defense

RISK
• Financial Conrol
• Management Controls • Internal Audit
• Complinace
• Business Controls
• Risk Management
• Internal Controls
• Security
Customer Due
Diligence
 Types/Levels of Customer Due Diligence

Enhanced
Customer Due
Regular
Diligence
Customer Due
Simplified
Diligence
Customer Due
Diligence
Know Your
Customer (KYC),
KYCC, and KYB
 • Know Your Customer, or KYC, procedures are
a critical function to assess customer risk.
Know
• KYC is commonly a legal requirement that
Your many organizations need to comply with in
terms of Anti-Money Laundering laws.
Customer
• Effective KYC involves knowing a customer’s
identity, their financial activities and the risk
(KYC) they pose.
• Know Your Customer involves the
identification and verification of new and
existing customers based on applicable anti-
money laundering laws and regulations,
which vary in each jurisdiction.
 • KYCC is a process that identifies a customer's
customer activities and nature.
Know
• This includes the identification of those
Your people, assessing their associated risk levels
and associated activities the customer's
Customers’ customer business is involved in.
Customer • KYCC is a derivative of the standard KYC
process, that was necessitated from the
growing risk of fraud originating from
(KYCC) fraudulent individuals or companies, that
might otherwise be hiding in second-tier
business relationships.
 • KYB is an extension of KYC and can be
implemented to reduce money laundering
Know risks as well.
Your • KYB is a set of practices to verify a business. It
includes verification of registration
Business credentials, location, the Ultimate Beneficial
Owners of that business, and other relevant
information.
(KYB)
• In addition, the business is screened against
blacklists and grey lists to check that it was
involved in any sort of criminal activity.
• KYB is significant in identifying fake business
entities and shell companies. It is also crucial
for efficient KYC and AML compliance.
Enhanced Due
Diligence
 Customer
Risk
Factors

1 Foreign Clients 6 Exceeding

Thresholds

Asset-Holding Cash-Intensive
2 5
Vehicles Businesses

3 Politically Exposed 4 Bearer Shares

Persons (PEPs)
 Levels of Blacklisted
3 4
Corruption Countries

2 Economic 5 Terrorist Support

Sanctions or Financing

1 Money Launde- 6 Non-FATF

ring Prevention Members

Geographi-
cal Risk
Factors
Politically Exposed
Persons (PEPs)
 Dealing with Politically Exposed Persons (PEPs)

4
1 Apply ongoing enhanced due
diligence
Identifying Politically
Exposed Persons

3
2 Establish source of
wealth / source of funds
Obtain senior
management approval