Sanctions and Money

Laundering
What is Money Laundering ?
All
• Procedures
• Methods and
• Transactions
Designed to change the identity of the source of illegally obtained
money so that it appears to have come from a legitimate source
What illegal activities ?
• Drug Trafficking
• Human trafficking
• Prostitution
• Bribery
• Tax Evasion
• Kidnapping
• Illegal arms sales
• Illegal Trade of cultural property
Stages in Money Laundering
• Placement
Illegal proceeds from illicit activities are placed in to the financial system. In most cases
money from illicit sources are co-mingled with money from legitimate business. During this
stage, money launderers are most vulnerable of being caught as transactions are high
amount cash based. Placement serve the purpose of relieving the criminal of holding and
guarding large amounts of cash and placing it into legitimate financial system.
• Layering
Various layers of multiple transactions, wire transfers to conceal the origin of the illegal
proceeds and to complicate the tracing of funds. It is done by layering of complex multiple
financial transactions, international movement of funds, converting cash into monetary
instruments, purchase of assets, loan back arrangements etc.
• Integration
Integration of funds in to financial system through legitimate foam. In this stage, money
comes back to owner or criminal from the sources appearing to be legitimate and is
integrated into the financial system. The money appears to be from normal business or
trade earnings.
Example
• Placement – A drug dealer will deposit the illegal money in smaller
amounts, likely below the AML reporting requirement.
• Layering – The money may be moved around by wire transfer to
different countries, be converted into certificates of Deposit and used
as collateral for a loan.
• Integration – The loan proceeds could then be transferred to the drug
trafficker without a direct connection.
Effects of Money Laundering
Money Laundering has serious economic and social consequences.
Economic
• Loss of Revenue for the Government
due to unanticipated cross border asset
transfer.
• Reputational Risk for financial
institutions.
• It adversely affect currencies and
interest rates due to increased volatility
of international capital flows.
• An economy affected by money
laundering will not attract foreign as
well as domestic investment
Social
• Organized crime can infiltrate
financial institutions, acquire control
of large sectors of the economy
through investments or by offering
bribes to public officials and
governments.
• The economic and political influence
of criminal organizations can
weaken the social fabric, collective
ethical standards and the
democratic institutions of society.
Regulatory requirements of businesses within
the regulated sector
• Reporting
• Record Keeping
• Establishing internal control mechanisms
• Undertaking risk based assesments
Penalties for Money Laundering and terrorist
financing
• Money Laundering – Individual fine 3 mil and up to 20 years of
imprisonment
• Failure to implement regulatory control by regulated businesses –Fine
up to $ 400,000
• Failure to report and tipping off – Fine up to 1 million and
imprisonment up to 12 years
Know Your Customer
Businesses in the regulated sector are prohibited from forming a
business relationship or engaging in one off transaction unless it takes
the necessary steps to establish the identity of other part and verify
that identity
Biggest Anti-Money Laundering (AML)
Fines
• Standard Chartered fined $1.1 billion
• Deutsche Bank fined $630 million
• JP Morgan Chase fined $920 million
• HSBC fined $1.9 billion
• BNP Paribas fined $9 billion
• Commerzbank fined $1.45 billion
• ING fined $1.18 billion
• UBS fined $4.2 billion
Sanctions
What Is a Sanctions List?
• A sanctions list comprises individuals and entities specifically singled out
by a sanctions regime.
• All governments and intergovernmental organizations (IGOs) can issue
sanctions and make a legally-binding list (depending on the jurisdiction).
• The purpose of a sanction is to punish, influence, and even retaliate.
• Being on a sanctions list means consequences such as frozen assets, trade
restrictions, and travel bans.
• For businesses and organizations operating in the global economy, where
access to currencies (e.g., dollars, euros, sterling) and the SWIFT cross-
border payments system are essential, there are sanctions lists where
failure to comply can create serious disruptions to operations and
significant financial penalties.
Most Common Sanctions lists
• The OFAC Sanctions Lists (US)
• The UN Sanctions Lists (UN)
• The EU Consolidated List of Sanctions (EU)
• The HM Treasury Sanctions List (UK)
Compliance with sanctions lists is also about being a business and
organization that's a responsible and ethical global actor.
Who Appears on Sanctions Lists?

• Terrorists
• Money Launderers
• Drug Lords
• Human Traffickers
• Arms Dealers
• Politicians (at all levels)
• Cyber Criminals
Types of Sanctions
There are several types of sanctions.
• Economic sanctions – typically a ban on trade, possibly limited to certain sectors such
as weapons, or with certain exceptions (such as food and medicine)
• Diplomatic sanctions – the reduction or removal of diplomatic ties, such as embassies.
• Military sanctions – military intervention
• Sport sanctions – preventing one country's people and teams from competing in
international events.
• Sanctions on the environment – since the declaration of the
United Nations Conference on the Human Environment, international environmental
protection efforts have been increased gradually.
• Economic sanctions are distinguished from trade sanctions, which are applied for purely
economic reasons, and typically take the form of tariffs or similar measures, rather than bans
on trade.