Anti-Money Laundering Combating Terrorist Financing Legal Professionals Training

Anti-Money Laundering Combating Terrorist Financing Legal Professionals Training.

What is Money Laundering? Money laundering involves three distinct stages: the placement stage , the layering stage , and the integration stage . The placement stage is the stage at which funds from illegal activity, or funds intended to support illegal activity, are first introduced into the financial system. The layering stage involves further disguising and distancing the funds from their illegal source using a series of parties and/or transactions designed to conceal the source of the funds. The integration phase of money laundering results in the illicit funds being considered “laundered” and integrated into the financial system so that the criminal may expend “clean” funds. These stages are illustrated in the following diagram:.

Source is always illegal Process to make illegal funds appear legitimate Proceeds of crime – benefit from illegality.

A RISK BASED APPROACH. A lawyer’s duties are subject to a risk-based approach, which is an important principle within EU AML legislation, determining the scope and extent of the activities required. Essentially, a risk-based approach means that lawyers should identify, assess and understand the ML/TF risks to which they are exposed and – based on the risks identified and their extent - take the required AML/CFT measures effectively and efficiently to mitigate and manage the risks. More briefly, there should be a targeted approach focused on where the risk lies. Such an approach enables: the allocation of resources to where the risks are higher the minimizing of compliance costs and burdens on clients greater flexibility to respond to emerging risks as ML/TF methods change.

RISK BASED APPROACH AML/CFT. 1. Risk Identification and Assessment This entails identifying the inherent ML/TF risks facing a firm, given its customers, products and services offered, countries of operation and the use of publicly available information regarding ML/TF risks and sector specific typologies ..

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Client Risk. An understanding of the clients / counterparties is key in building an AML/CFT risk framework. Certain customer types may pose higher ML/TF risks than others. Categories of clients whose activities may indicate a higher risk include:.

Transaction/Service Risk. The broad range of services offered by the legal sector can enable criminals to manage all their financial and business affairs in one place, via a reputable and respectable channel. Thus, as part of their risk assessment process law profesionals must assess the ML/TF risk associated with each of the services they offer. Consideration must be given to the following:.

R egion. HIDTA. Jurisdiction. HIFCA. Geographic Risk.

Assigning a Risk Rating. After completing the risk assessment, the firm should be in a position to provide itself with an overall risk rating, that is, classifying the firm as low, medium or high risk, considering the above risk categories i.e., client, service and geographic risk. A risk rating must also be assigned to each client / counterparty at the beginning of every new client relationship. In assigning risk levels, you must bear in mind the following: Low Risk- indicates normal/expected activity and therefore represents the baseline risk of money laundering. Basic due diligence measures must be performed. Medium Risk- additional scrutiny is required as there is some level of risk to money laundering. Due diligence measures performed depend on the area of risk. High Risk- the risk is significant and therefore more stringent measures are required to reduce the risk of ML/TF. Enhanced due diligence must be performed and rigorous transaction monitoring.

Internal AML/CFT Policies, Procedures and Controls.

Role and responsibilities of the Compliance Officer.

Risk-Based (KYC). The means and mechanisms of laundering funds change. Accordingly institutions should be aware of emerging trends which create a greater risk for money laundering. Primary concern should be for determining the legitimacy of the source of funds entering the business system and the real owners of these funds. Risks may be categorized as high or low depending on the circumstances. Reporting entities are required to implement enhanced due diligence for transactions involving high risk activities..

Customer Due Diligence Know your Customer. A sound CDD programme is one of the best ways of mitigating AML/CFT risk. Knowledge is what the entire AML/CFT programme is built on. Attorneys have a statutory obligation to perform CDD when there is doubt about the veracity or adequacy of previously obtained customer identification data including identifying and verifying the identity of customers, when: establishing business relations; carrying out occasional transactions above $25,000 or that are wire transfers; on funds transfers and related messages that are sent; when funds are transferred and do not contain complete originator information; there is a suspicion of money laundering or terrorist financing. CDD for Politically Exposed Persons Reporting entities shall document money laundering and terrorist financing policies and procedures and appropriate risk management systems; create policies and procedures that deal with politically exposed persons; configure information technology systems to identify politically exposed persons; ensure that transactions relating to politically exposed persons are authorized by senior management; ensure that source of funds and source of wealth are determined for politically exposed persons; enhance customer due diligence that must be performed on an on-going basis on all accounts held by politically exposed persons..

Recognition of Suspicious Customers/Transactions A suspicious transaction will often be one which is inconsistent with a customer’s known legitimate business or activities. Against such patterns of legitimate business, suspicious transactions should be recognizable as falling into one or more of the following categories illustrated on the diagram:.

Record Keeping and Data protection requirements. All practices must be able to demonstrate to their supervisor that they have adopted a risk-based approach to the management of AML/TF risk within their businesses. In practice this means retaining documents and records to demonstrate this. Retaining accurate and comprehensive records is also important for facilitating cooperation with law enforcement and potentially defending yourself against criminal prosecution..

Quiz. 1. Why is it so important to know that your client is the person they claim to be? A) Because it is the law B) Because the relationship is based on the integrity of the representations C) Because identity theft is quite common.

Quiz. 4. Which of the following is not considered law subject to penalties, but for advice and direction which if ignored, may lead to sanctions under applicable law? A) Laws B) Regulations C) Guidelines.

Quiz. 8. To be labeled a PEP, one must be a Member of Parliament: A) True B) False.

THANK YOU!. GLP Compliance and Risk Management Team Europe.