Prevention of Money Laundering Seminar on Financial Services Sofia, 14-16 September 2005 Jaakko Christensen Senior Detective Superintendent NBI-Finland

Prevention of Money Laundering

Seminar on Financial ServicesSofia, 14-16 September 2005

Jaakko ChristensenSenior Detective Superintendent

NBI-Finland

Criminalising Money Laundering

Preventing and investigating money laundering

Case Examples


UN Vienna Convention 1988• Conversion or transfer of property, knowing that such

property is derived from any (drug) offence or offences... or from an act of participation in such offence or offences, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such an offence of offences to evade the legal consequences of his actions


UN Vienna Convention 1988• Concealment or disguise of the true nature, source,

location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from (a drug) offence or offences… or from an act of participation in such an offence or offences

• Bulgarian Law on Measures Against Money Launderings applies


Council Of Europe Strasbourg Convention 1990

• Main principle and wording as in Vienna Convention

• Not limited to drug offences• May be punishable also when committed

negligently (person ought to have known)


UN Convention Against Transnational Organized Crime (UNTOC-Palermo 2000 – 09/2003)

• main principle and wording as in Vienna Convention• not limited to drug offences, article also on measures

aimed at combating money laundering e.g. the establishment of a financial intelligence unit (FIU)

• Commission proposed to Council to ratify UNTOC on behalf of Community


Some variables in criminalisation• Intentionally / negligently• Punishable separately / included into predicate

offence• Attempt criminalised / not criminalised• Criminalisation of failure to report suspicious

transaction• Related issues: Smurfing and tipping off


Financial Action Task Force FATF• G-7 countries established in 1989

• Tasked to take global measures against money laundering

• 1990, FATF 40 recommendations with an aim to enhance international co-operation in the fight against money laundering

• Significant impact on national laws of FATF members but also to wider scope of countries


Financial Action Task Force FATF

Revised 40 Recommendations• Revised in June 2003 to take into account new trends and

threats in the area of money laundering and terrorist financing

• Set out the legal, institutional and implementation framework for AML/CFT efforts

• Minimal standards/best practices for universal application subject to the local risk, vulnerabilities and legal framework of the country



9 Special Recommendations1. Take immediate steps to ratify and implement the

relevant UN instruments – UN Convention for the Suppression of the Financing of Terrorism and Resolution 1373.

2. Criminalise the financing of terrorism, terrorist acts and terrorist organisations.



9 Special Recommendations3. Freeze and confiscate terrorist assets.

4. Require financial institutions and other entities subject to AML obligations to report suspicous transactions linked to terrorism.

5. Provide the widest possible range of assistance to other countries’ law enforcement and regulatory authorities for terrorist financing investigations.



9 Special Recommendations6. Impose AML controls on alternative remittance systems.

7. Require customer identification measures on international and domestic wire transfers (cross-border transfers; including originator information).



9 Special Recommendations8. Ensure that entities, in particular non-profit

organisations, cannot be misused to finance terrorism.

9. Measures in place to detect the physical cross-border transportation of currency and bearer negotiable instruments, including a declaration system or other disclosure obligation.

Preventing and investigating money launderingCoE Convention on the Laundering, Search, Seizure

and Confiscation of the Proceeds from Crime and on the Financing of Terrorism 2005 - CETS 198

• Widens 1990 convention to take into account that terrorism can be financed not only through money laundering from criminal activity, but also through legitimate activities

• First international treaty covering both the prevention and the control of money laundering and the financing of terrorism

Preventing and investigating money launderingCoE Convention on the Laundering, Search, Seizure

and Confiscation of the Proceeds from Crime and on the Financing of Terrorism 2005 - CETS 198

• Quick access to financial information or information on assets held by criminal organisations, including terrorist groups, is the key to successful preventive and repressive measures

• The convention includes a mechanism to ensure the proper implementation


European Union ML directive 1991 (2001)• Credit and financial institutions obligated to

– identify customer, – exercise due diligence– report suspicious transactions

• Authority responsible for the prevention of ml• Council Decision 2000 concerning arrangements for cooperation

between financial intelligence units of the Member States in respect of exchanging information

• Bulgaria complies with acquis (CION 10/2004 Regular Report on Progress Towards Accession)


European Union 3rd ML directive 2005 • Directive on the prevention of the use of the

financial system for the purposes of money laundering or terrorist financing

• Adopted June 2005 by the Council of Economic and Finance Ministers

• Replaces the 2001 Directive


European Union 3rd ML directive 2005 • Applies to financial and other key services sectors • Providers of goods, when payments are made in

cash in excess of €15.000. • Measures to establish customers’ identities, report

suspicions and set up preventive systems within their organisations


European Union 3rd ML directive 2005 • Builds on existing EU legislation and incorporates

into EU law the June 2003 revision of the 40 Recommendations of the Financial Action Task Force (FATF)

• The Directive is applicable to the financial sector as well as lawyers, notaries, accountants, real estate agents, casinos, trust and company service providers.


European Union 3rd ML directive 2005 • Those subject to the Directive must:

– identify and verify the identity of their customer and of its beneficial owner, and to monitor their business relationship with the customer;


European Union 3rd ML directive 2005 – report suspicions of money laundering or terrorist

financing to the public authorities -usually, the national financial intelligence unit; and

– take supporting measures, such as ensuring proper training of personnel and the establishment of appropriate internal preventive policies and procedures.


European Union 3rd ML directive 2005 • The Directive introduces risk based assessment and

additional requirements and safeguards for situations of higher risk ”enhanced customer due diligence” (e.g. correspondent banks situated outside the EU) but also gives possibility for ”simplified due dilligence”

• Member States have agreed to implement the Directive within two years after its publication (2006-2007)

Preventing and investigating money launderingOverview of International Cooperation

– Council of Europe, Moneyval

– Egmont Group of Financial Intelligence Units

– Financial Action Task Force

– IMF

– World Bank

– United Nations / UNODC / UNCTC

– Interpol

– Europol

International co-operation

Council of Europe, Moneyval– Select Committee of Experts on the Evaluation of

Anti-Money Laundering Measures– tasked to take measures against money laundering

in a similar manner as the FATF– significant impact on national laws of CoE

members and of countries willing to become members

International co-operationEgmont Group

• “central, national agency responsible for receiving (and as permitted, requesting) analysing and disseminating to the competent authority, disclosures of financial information concerning suspected proceeds of crime or required by national legislation or regulation in order to combat money laundering”

• 101 members meeting the definition (doubled in 5 years)

• two purposes in definition:– to distinguish FIUs from other agencies in the anti-money

laundering effort– to avoid emphasising any particular type of structure (police,

judicial, administrative or regulatory).

International co-operation

Financial Action Task Force FATF• G-7 countries established in 1989

• tasked to take global measures against money laundering

• 1990, FATF 40 recommendations with an aim to enhance international co-operation in the fight against money laundering

• significant impact on national laws of FATF 31 members but also to wider scope of countries

International co-operationInternational Monetary Fund and World Bank

– Since 1999 IMF and WB run joint program called the Financial Sector Assessment Program (FSAP)

– WB and IMF collaborative framework with FATF for conducting comprehensive AML/CFT assessments of countries’ compliance with the FATF 40+9 using single common global methodology for AML/CFT assessments and mutual evaluations

– WB and IMF have agreed to step up the delivery of technical assistance to those countries whose financial systems are most at risk

– ROSC Report on the Observance of Standards and Codes (Bulgaria prepared in August 1999 and reissued in March 2000)

International co-operationUnited Nations UNODC

– United Nations Office on Drugs and Crime

– GPML – model laws, TA and research

– IMoLIN International Money Laundering Information Network - Internet-based network assisting governments, organizations and individuals in the fight against money laundering

– AMLID - Database that analyses jurisdictions' national anti-money laundering legislation intended as a tool for practitioners to assist them in their international cooperation and exchange of information efforts

International co-operationUnited Nations UNCTC

– Counter-Terrorism Committee

– 28.09.2001 Security Council Resolution 1373 (2001) which includes provisions on CFT

– UNSCR 1373 also established the Counter-Terrorism Committee made up of all 15 members of the Security Council

– UNCTC monitors the implementation of resolution 1373 and tries to increase the capability of States to fight terrorism

International co-operationInterpol

• Financial Crimes – support to investigations

Europol• Maastricht Treaty on European Union February 1992• Based in The Hague, The Netherlands• Limited operations 1994, Europol Drugs Unit (EDU) • Full activities 1999 - extension of mandate (Tampere

8/1999) to cover money laundering from all serious crimes

Foundation of AML/CFT Structure

Financial Services Providers

Financial Regulators & Central Bank

Financial Services Sector

Financial Intelligence Unit

Law Enforcement & Security Services

Public Prosecution

Judiciary

Preventing and investigating money launderingFinancial Intelligence Unit -FIU

• “central, national agency responsible for receiving (and as permitted, requesting) analysing and disseminating to the competent authority, disclosures of financial information concerning suspected proceeds of crime or required by national legislation or regulation in order to combat money laundering”

• police/law enforcement unit (FIN, SWE, N, DK, UK)

• administrative unit (BG, USA, B, NL)

BASIC FIU CONCEPTBASIC FIU CONCEPT

FOREIGN FIU

INFORMATIONFROM OTHERDATA BASES

PROSECUTORIALAUTHORITIES

LAWENFORCEMENT

FINANCIAL INSTITUTION

FIU

Information received and analyzed by FIUs.Information disseminated by FIUs.

3 Stages of Money Laundering

• Placement

• Layering

• Integration


• Placement

• Layering

• Integration

• Placing money into financial system– Conversion of currency or

denominations

– Depositing cash into an account or multiple accounts

– Smurfing

– Conversion into checks, gold


• Placement

• Layering

• Integration

• Creating layers to cover trail– Transactions between financial

institutions, both domestic and foreign

– Splitting funds up and bringing them together again

– Loans, deposits, securities

– Front/shell companies


• Placement

• Layering

• Integration

• Integrating into legal economy– Real estate

– Vehicles

– Luxury goods

– Precious metals and stones

– Art, antiques, etc.

“MONEY REMAINS DIRTY-

IT ONLY APPEARS CLEAN”

Case examples

“Any act or attempted act to conceal or disguise the identity of illegally obtained

proceeds so that they appear to have originated from legitimate sources.”

Interpol definition of money laundering

Documents

Prevention of Money Laundering Seminar on Financial Services Sofia, 14-16 September 2005 Jaakko Christensen Senior Detective Superintendent NBI-Finland