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Unformatted text preview: Forensic and Investigative Accounting Forensic Chapter 7 Money Laundering and Transnational Financial Flows
© 2007 CCH. All rights Reserved. 4025 W. Peterson Ave. Chicago, IL 60646-6085 1 800 248 3248 www.CCHGroup.com Definition
A definition of money laundering that covers definition money both legal and illegal contexts is to take money that comes from one source, hide that source, and make the funds available in another setting so that the funds can be used without incurring legal restrictions or penalties. penalties. Chapter 7 Forensic and Investigative Accounting 2 Steps in Money Laundering
The traditional money laundering process can be The divided into three steps: divided 1. Money is deposited in a bank or financial Money institution. institution. 2. A set of complex transfers is made to disguise set the original source for the money and to hide the audit trail. (This step is called layering the transactions.) transactions 3. The money is integrated back into the The legitimate money supply. legitimate
Chapter 7 Forensic and Investigative Accounting 3 Cybercash Creates New Laundering Cybercash Opportunities Opportunities
Using the Internet, it will be possible for Using anyone to transfer large sums of money from one location to another without using a bank and with the transfers being totally anonymous. Chapter 7 Forensic and Investigative Accounting 4 Cybercash Creates New Laundering Cybercash Opportunities Opportunities
Today, cybercash transactions are beginning Today, to take place without the need for third parties and the consequential scrutiny that might otherwise exist. Furthermore, cybercash transfers can be structured so that they originate in a jurisdiction where such activities are not considered illegal. considered
Chapter 7 Forensic and Investigative Accounting 5 Possible Users of Money Laundering Possible Practices Practices
Grant recipients Criminals Political asylum seekers Chapter 7 Forensic and Investigative Accounting 6 Correspondent Banking
Correspondent banking takes place when one bank provides services to another bank to move funds, exchange currencies, and access investment services such as money market accounts, overnight investment accounts, CDs, trading accounts, and computer software for making wire transfers and instant updates on account balances. account Chapter 7 Forensic and Investigative Accounting 7 Correspondent Banking
A payable-through account enables the payable-through respondent bank’s clients within the country where the bank is registered to write checks that are drawn directly on the respondent bank’s correspondent account in the United States. States. Chapter 7 Forensic and Investigative Accounting 8 Tools Banks Use to Identify Tools Money Launderers Money
Monitoring software Currency Transaction Reports (CTRs) Suspicious Activity Reports (SARs) Chapter 7 Forensic and Investigative Accounting 9 Due Diligence Laws for Banks
Laws and regulations require that a bank Laws perform due diligence in its relationships with other banks and important clients as well as continually monitor account transactions. Within banks, due diligence must co-exist with the client’s need for privacy and the secrecy laws existing in many foreign jurisdictions that prevent access to bank documents. documents.
Chapter 7 Forensic and Investigative Accounting 10 Shell Banks
Shell banks are generally high-risk banks that Shell exist without any physical presence in any legal jurisdiction. These banks have a banking license in a specific country, but they are not likely to have a staff and may be operated as part of another business or operated out of an individual’s personal residence. individual’s Chapter 7 Forensic and Investigative Accounting 11 Offshore Banks
An offshore banking license prevents the An organization from transacting banking activities with any citizens of the licensing jurisdiction or transacting business with the currency of the licensing jurisdiction. These bank operations solely exist within international financial transactions. international Chapter 7 Forensic and Investigative Accounting 12 Cash-Oriented Businesses
Currency exchanges Online auctions Casinos Purchasing departments Chapter 7 Forensic and Investigative Accounting 13 Audit Trail
Churning Laundering cycles 1. Illegal cash 2. Deposited into bank 3. Purchase asset 4. Sell asset 5. Documented legal cash Chapter 7 Forensic and Investigative Accounting 14 Finding Money Laundering Schemes
Web logs – Tracing IP addresses – HTTP common logfile format Wire transfers Bank reports Chapter 7 Forensic and Investigative Accounting 15 Guarding Against Money Laundering
Individual due diligence. – Business associations. – Employment. Company due diligence in verification Company procedures. procedures. – Corporate ownership and governance. – Bearer shares. Trust due diligence. – Trust deeds. – Beneficiaries. Chapter 7 Forensic and Investigative Accounting 16 Accountant’s Role as Gateway Keeper
AICPA Auditing Standards Governing AICPA Money Laundering. Money – SAS No. 54, Illegal Acts by Clients. – SAS No. 82, Consideration of Fraud in a SAS Financial Statement Audit (now replaced by SAS No. 99). by Lack of Reporting Requirement. Chapter 7 Forensic and Investigative Accounting 17 USA Patriot Act of 2001
International Money Laundering Abatement International and Financial Anti-Terrorism Act of 2001 (MLAA). (MLAA). Payable-through accounts. Enhancements and restrictions under MLAA. Reporting requirements under MLAA. Chapter 7 Forensic and Investigative Accounting 18 ...
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