Western Union Confidential ©2009 Western Union Holdings, Inc. All Rights Reserved.

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What is AML?What is AML?

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What it’s all aboutWhat it’s all about

Well-financed and technologically advanced criminal organisations are moving large amounts of money. Increasingly this appears to be done easily and quickly. In addition, it often involves moving large amounts of funds from one jurisdiction to another.

Following the trail of money launderers today requires the ability to track money. But perhaps more importantly, it requires financial institutions to work in concert with other nations to prevent criminals from using international financial avenues to hide illicit proceeds. During this presentation we will consider these issues and:

– Discuss what money laundering is and how it is performed– Define the consequences and scope of money laundering– The Stages of Money Laundering– Where Money Laundering Occurs

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What Is Money Laundering?What Is Money Laundering?

Money laundering is the process of concealing the source of illegally-obtained money by disguising it in order to make it appear legitimate.

– Money laundering is an attempt to conceal the source of illegal proceeds.

– Money laundering is a crime.

In order to protect yourself and your business, and to support national and international efforts against financial crime, it is important that you know how money laundering schemes operate, what laws and regulations apply to your business, and how they impact what you do.

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What Is Terrorist Financing?What Is Terrorist Financing?

Terrorists, like most criminals, conceal or attempt to conceal, their activities to avoid detection.

Money laundering can provide terrorists with the funds to carry out their terrorist activities.

Wire transfers are a fast and efficient way of moving funds, and can be used for terrorist purposes.

Complex wire transfer schemes can be used to create a deliberately confusing audit trails to disguise the source and destination of funds intended for terrorist use.

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Consequences of Money Laundering and Consequences of Money Laundering and Terrorist FinancingTerrorist Financing

Money laundering and terrorist financing are two types of financial crime that can have devastating effects. Criminals or terrorists may be able to:

– Exploit loopholes or other weaknesses in the legitimate financial system;

– Launder illegally obtained funds and support terrorist activity unless proper safeguards are in place.

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How Widespread is Money Laundering?How Widespread is Money Laundering?

How much is involved?

– While it is impossible to reliably determine the exact amount of money laundered, the International Monetary Fund stated in 1996 that the aggregate size of money laundering in the world could be somewhere between two to five percent of the world’s gross domestic product.

What is the scope?

– Using the 1996 statistics would indicate that money laundering ranges somewhere between USD 590 billion and USD 1.5 trillion annually.

– Even the lower figure is approximately the equivalent to the value of the total output of an economy the size of Spain

– The higher figure would be more than the total output of an economy the size of the United Kingdom.

– Of the worldwide total, it is estimated that USD 200 billion is laundered in the Asia-Pacific region.

To give you an idea how much money is involved internationally, the two primary international electronic funds transfer systems handle over USD 6 trillion in wire transfers each day!

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Money Laundering IssuesMoney Laundering Issues

Drug Trade

– The United Nations International Drug Control Programme (UNDCP) estimates that the illegal drug trade generates retail sales of about US $400 billion a year.

– The International Narcotics Control Board (INCB), which monitors compliance with anti-drug treaties, reported that from September 1996 to August 1997 measures in Mexico led to the arrest of over 11,000 persons. What is perhaps even more alarming is that those arrested included high-ranking government and military officials .

Organised Crime

– The privatization of State-owned enterprises and deregulation of the banking system made the laundering of drug profits much easier in countries of the former Soviet Union. In 1996, an expert on Russian affairs testified before a U.S. Congressional Committee that foreign and domestic criminal organisations were purchasing privatised property to launder and hide illegal profits.

Globally

– Not only organised crime syndicates, but private individuals are using the wave of globalisation to take advantage of open borders, offshore banking, electronic financial transfers and cyber banking to launder millions of dollars in illegal profits each day.

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Stages of Money LaunderingStages of Money Laundering

Placement is the attempt to introduce funds into the financial system without attracting attention. When illegal funds are placed into a financial institution, they become more liquid. For example, if cash is converted into a bank deposit, it is easier to transfer and manipulate.

Layering involves funds being moved around to attempt to break the investigative trail. This “movement” often involves a complex series of transactions in an attempt to create confusion and complicate the paper trail. For example, funds may be sent through a variety of Agents, accounts, individuals, and countries in order to disguise their origins.

Integration is the ultimate goal of the money laundering process. Once the funds have been placed into the financial system and concealed through the layering stage, additional transactions are used to create the appearance of legality. These transactions are an attempt to provide a plausible explanation for the source of the funds and distance them from their origins. The funds are then available to criminals to control as apparently legitimate.

Laundering money is done in a variety of ways. Although money laundering often involves many complex methods, for the purposes of analysis, it is typically described as involving three independent steps.

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Where Does Money Laundering Occur?Where Does Money Laundering Occur?

Money laundering almost always accompanies all profit-generating crime, so it can occur virtually anywhere in the world. Since money launderers’ objective is to put the funds back into the hands of those who generated it, they look for weak controls to lessen the chances of being discovered. This includes:

– Businesses– Financial institutions– Governments

Money laundering activity is often conducted geographically depending upon the stage being used.

– In the placement stage, funds are often processed relatively close to the area in which they were created.

– In the layering stage, offshore financial centres or world banking centres may be used because they provide a large business infrastructure which may allow bank accounts at various locations so money can be moved without leaving traces of their source or ultimate destination.

– In the integration stage, launderers often choose to invest the funds in still other locations.