advanced financial intelligence 1 · 2013. 9. 21. · 05-09-2013 side 1 advanced financial...
TRANSCRIPT
05-09-2013
Side 1
Advanced Financial Intelligence 1
05-09-2013
Martin Kallehauge, Detective Chief Inspector
Jens Kauffeld Andreasen, Detective Chief
Superintendent
State Prosecutor for Serious Economic &
International Crime, Denmark
05-09-2013
Side 2
Over-all agenda of the course
• Financial intelligence gathering
• The intelligence cycle
• Standard Operation Procedures
• Background of Financial Intelligence Units
• Function and role of the FIU
• Money Laundering and Financing of Terrorism
• Predicate Crimes
• Risk assessment in general
Objective of the course
• To promote co-operation between the FIU and the
Reporting Entities
• The principles on processing financial intelligence
into the analysis phase and further on
• Learn about background, role and function of the
FIU
• Exchange of best practices
05-09-2013
Side 3
05-09-2013
Side 4
Financial Intelligence gathering and
the intelligence cycle
Information vs Intelligence
• Information is…
• Raw data
• Intelligence is…
- A value added product derived from the
collection and processing of all relevant
information relating to the end user‟s needs,
which is immediately or potentially significant
to client decision-making process.
05-09-2013
Side 5
Intelligence definition
• A value added product
- Intelligence is not raw information, it is processed information. Intelligence goes above and beyond the available information.
• Collection and processing
- These are the processes or methodologies by which you add value to a product.
• Relevant information
- The information you use must be relevant to the task at hand. You need to be able to critically evaluate the relevance of the information collected.
05-09-2013
Side 6
Intelligence definition
• End user’s needs
- Good intelligence must be relevant to the end
user‟s needs. Why? Because the main
purpose of intelligence is to aid in decision
making.
• Decision making
- Intelligence supports end user‟s in planning
activities. As such, it must be timely.
05-09-2013
Side 7
Sources of information
• What could be a source of information relevant for
Financial Intelligence?
05-09-2013
Side 8
Sources of Information
05-09-2013
Side 9
Evaluation of information
4 x 4 System
EU standard for evaluating source
and information
05-09-2013
Side 10
Evaluation of source
A) Where there is no doubt of the authenticity, trustworthiness and
competence of the source, or if the information supplied by a source
who, in the past has proved to be reliable in all instances
B) Source from whom information received has in most instances
proved to be reliable.
C) Source from whom information received has in most instances
proved to be unreliable.
X) The reliability of the source cannot be assessed.
05-09-2013
Side 11
Evaluation of information
1) Information whose accuracy is not in doubt.
2) Information known personally to the source, but not known
personally to the official passing it on.
3) Information not known personally to the source, but
corroborated by other information already recorded.
4) Information which is not known personally to the source and
cannot be corroborated.
05-09-2013
Side 12
Evaluation of information
A1, A2, B1
and B2
Confirmed
information
All others: A3,
A4, B3, B4,
C1, C2….
Unconfirmed
information
05-09-2013
Side 13
Planning
Planning involves the
management of the
entire intelligence
effort, from identifying
the need for data, to
delivering an
intelligence product to
a consumer. 05-09-2013
Side 14
Collection
Collection is the
gathering of the raw
information that is
needed to produce the
intelligence that meets
the end user
requirements
05-09-2013
Side 15
Evaluation
The information you
collect is constantly
evaluated for
relevance and
accuracy.
05-09-2013
Side 16
Collation
Collation is the
organization of
information collected
into a format from
which it can be
retrieved and
analysed.
05-09-2013
Side 17
Analysis
Analysis is the
conversion of
information into
intelligence through
the integration and
interpretation of all
data collected.
05-09-2013
Side 18
Reporting
The intelligence
reports should be well
structured and contain
all relevant information
to meet the end user
requirements.
05-09-2013
Side 19
Dissemination
The release of the
result to the end user.
In order to be effective
the intelligence must
be timely and allow for
proactive decision-
making.
05-09-2013
Side 20
Review
At each step of the
cycle you review the
progress to ensure
that you are ready to
undertake the next
phase.
05-09-2013
Side 21
05-09-2013
Side 22
Standard Operating Procedures
Standard Operating Procedures
A Standard Operating Procedure
(SOP) is a set of written instructions
that document a routine or repetitive
activity followed by an organization.
05-09-2013
Side 23
SOP, why ?
• Ensure uniform handling of reports/cases
• Increase efficiency
• Reduce the risk of errors
• Valuable when training staff
• Can encourage regular evaluation of work activity
05-09-2013
Side 24
SOP, how ?
Name the SOP using descriptive
action words.
Example:
Receiving and Evaluating STRs
05-09-2013
Side 25
SOP, how ?
Write the scope of the SOP. To do
this, answer these questions:
• Which specific tasks within an
operation will be covered?
• Which are not covered?
• Who is the SOP written for
05-09-2013
Side 26
SOP, how ?
Develop an overall task description,
including:
• The number of people required
for the task,
• Their skill levels
• Description of how the result
should be.
05-09-2013
Side 27
Example of overall Task
Description
05-09-2013
Side 28
SOP, how ?
Describe each task in detail, include
the following:
• Specific order in which activities
are done
• Time limits
• References to other associated
SOPs
05-09-2013
Side 29
SOP, how ?
Involve relevant staff.
“Successful SOP development
and implementation typically
requires that all people who are
affected by a SOP are involved in
a team-based SOP
development.”
05-09-2013
Side 30
SOP, how ?
Set up a system to monitor
and evaluate the SOP
regularly.
“The minute you write and implement
a SOP it is time to evaluate and
update it. Even new SOPs frequently
need to be tweaked once or twice
before they operate smoothly.”
05-09-2013
Side 31
05-09-2013
Side 32
Financial Intelligence Units
Role and Function
FIU role & function
• Content
- Background
- FATF
- FIU function
- FIU cooperation
- Reporting entities
- FIU channels of communication
- International develpment
- Links for further information
05-09-2013
Side 33
Background
• UN 1988 Convention on Psychotropic Substances
• FATF
- International cooperation against money
laundering and financing of terrorism
- Established in 1989 by the G-7 countries
- FATF has 34 member states and 2 intl.
organisations: - Argentina, Australia, Austria, Belgium, Brazil, Canada,
China, Denmark, European Commission, Finland,
France, Germany, Greece, Gulf Cooperation Council,
Hong Kong China, Iceland, Ireland, Italy, Japan,
Luxembourg, Mexico, Netherlands, India, New
Zealand, Norway, Portugal, Russia, Switzerland,
Singapore, Spain, Sweden, South Africa, South Korea,
Turkey, United Kingdom and United States of America
05-09-2013
Side 34
FATF
• FATF includes all bigger financial centres in
Europe, North- and South America and Asia
• More than 180 jurisdictions are connected to the
FATF network
• Decisions are based on consensus
• 5 FATF Regional Style Body (FRSB), e.g.
ESAAMLG
• Secretariat in Paris
05-09-2013
Side 35
FATF – Aim and tasks
• Trend and policymaker on AML/CFT in general
and by setting international standards
• Evaluation of member countries complying with
the standards – political commitment to comply
• Global spreading of standards through associated
members and observers
• Identification, monitoring and dialog with high risc
countries
• Typology reports, methods and trends, guidance
reports, interpretive notes to the reccomendations
05-09-2013
Side 36
FATF reccomendations
FATF 40 recommendations of 2012 covering:
- Money Laundering
- Financing of Terrorism
- Spread of weapons of mass destruction
- Tax evasion is now a predicate offence
- Report suspicious transaction to the FIU
05-09-2013
Side 37
FATF Recommendations
• R 29: Receive, analyse and disseminate of STR
and other information regarding potential money
laundering or terrorist financing
05-09-2013
Side 38
05-09-2013
Side 39
FATF Reccomendations
• R31: Countries should ensure that policy makers,
the FIU, law enforcement and supervisors have
effective mechanisms in place which enable them
to co-operate, and where appropriate co-ordinate
domestically with each other concerning the
development and implementation of policies and
activities to combat money laundering and
terrorist financing.
FATF Reccomendations
• R 32: Countries should maintain comprehensive
statistics concerning
- Effectiveness and efficiency of the system
- STRs received and disseminated
- AML/CFT investigations
- Prosecutions and convictions
- Seized and confiscated assets
- Mutual Legal Assistance and other
international requests 05-09-2013
Side 40
05-09-2013
Side 41
FIU Legal frame
• Legal frame of the FIU varies by jurisdiction
• The FIU might be established
- Independently
- Within the Central Bank
- Within a Ministry
- Within a Judicial authority
- Within a Law Enforcent Authority
FIU core function
• Central function to receive, register and
disseminate STRs
• Timely registration of STRs, etc. and requests
• Analysis of STRs and other information
• Access to financial, administrative and law
enforcement information
• Cooperation with LEA, Supervisory authorities,
Customs and Tax authorities, etc. 05-09-2013
Side 42
FIU core function
• Exchange of information within the frame of the
jurisdiction
• International operational cooperation
• Participation in various international fora
05-09-2013
Side 43
FATF FIU core function
Strengthening the FIU (R 29)
• Operational independence
• Authority and capacity to carry out its
functions freely
• Adequate resources
• Financial human and technical
• Acces to relevant information
• Widest possible range of fiancial,
administrative and law enforcement
information
• Operational and strategic analysis
• Operational analysis - to identify specific
targets and determine links between target
persons and predicate crimes
• Strategic analysis – to identify ML and TF
related trends and patterns
05-09-2013
Side 44
The reporting entities
• Businesses in the ”Financial sector” and others
- Banks & saving banks
- Mortgage-credit institutions
- Life insurance companies & pension funds
- Electronic money institutions
- Remittance companies
- Currency exchange businesses
05-09-2013
Side 45
The reporting entities
• Other reporting businesses
- Lawyers
- Accounntants
- Real estate agents
- Service providers
- Dealers in precious metals and dealers in
precious stones
- Etc.
05-09-2013
Page 46
FIU cooperation with the Reporting
Entities
• How can the FIU cooperate with the industry ?
- DK FIU gives lectures to the industry
- DK FIU holds annual meetings with the
Bankers Association on general cooperation
and development
- DK FIU holds annual meetings with
compliance units from the biggest banks –
top 10
- DK FIU holds regional meetings with smaller
banks and saving banks
- DK FIU holds regularly meetings with the
biggest money remittance companies and
currency exchange companies 05-09-2013
Side 47
FIU cooperation with the Reporting
Entities
- DK FIU holds regularly meetings with
Association for Real Estate Agents,
Accountants Association, Bar Association
and others
- ”Hotline” for the industry 24/7
- Possibility for informal discussions before
decission on reporting
- Feed back on trends
- Feed back on quality of reports
- Feed back on convictions and aquittels
- Meetings and training on IT-topics for
reporting
05-09-2013
Side 48
Ex. of indicators
• Few examples of indicators of possible ML
- The most important is that you see a relation
to a customer as being more or less non-
typical
- Reluctance to provide information
- Large cash amounts
- Geographical relations (Tax heavens, off-
shore jurisdicitions, drug producing countries,
UN-sanction countries, etc.
- Non-typical payments
- Etc.
05-09-2013
Side 49
Report types
• STR (Suspicious Transaction Report)
• CTR (Currency Transaction Report)
• UTR (Unusual Transaction Report)
• CBR (Cross Border Report)
• Dissemination from Public Authorities (Customs,
Tax, others)
05-09-2013
Side 50
FIU cooperation with the
supervisory
Cooperation with the Supervisory Authority
- Inspections (FIU DK do not participate in
inspections)
- Annual statistics
- Specific statistics by branch
- Threat analysis to streamline the AML
supervision and inspections
- Dissemination of concrete cases for
consideration
05-09-2013
Side 51
FIU cooperation with other
authorities (LEAs)
• Customs
- Keep information on import & export
- Declarations on goods and cash
- Company information
- Reports from on-site inspections
• Border police/Immigration
- Information on passengerstream
- Cross border cash transport
• Tax authority
- Annual account on companies
- Tax return on persons
- Financial information 05-09-2013
Side 52
FIU cooperation with Law
Enforcement Agencies
• Police
• Gathering information on the suspect
- Criminal record
- Pending cases
- Known from internal records
- Local knowledge
• Dissemination for investigation
- Feed back
05-09-2013
Side 53
FIU international communication
• Channels of communication
- Egmont Secure Web (Egmont Group)
- Bilateral
- Interpol (Only FIUs in LEAs)
- Other regional organisations
05-09-2013
Side 54
International development
• European Union
- Revision of the 3rd. AMF/CFT Directive
began in 2012 and will be finalised in 2013
- Revised national legislation in the EU
Memberstates are expected to be
implemented in 2013 and 2014
05-09-2013
Side 55
FATF
Electronic payments requirements for financial
sector
• Required information ”Throughout the payment
chain”:
- required accurate originator information
(name, address and account number) on
funds
- required beneficiary information
• Monitor lack of required originator and/or
beneficiary information and take appropriate
measures
• Screening and freezing
- Terrorist lists covering individuals and entities 05-09-2013
Side 56
Occasional customers
Customer Due Diligence
• Occasional customer threshold USD/EUR 15,000
• The CDD measures:
• Identifying the customer and verifying identity
using reliable independent source documents,
data or information
• Conducting ongoing due diligence on the
business relationship and scrutiny of transactions
undertaken throughout the course of that
relationship to ensure that the transactions being
conducted are consistent with the institution‟s
knowledge of the customer, their business and
risk profile, including, where necessary, the
source of funds (KYC)
05-09-2013
Side 57
Occasional customer identification
cont.
• European Union
• All money transfers exceeding EUR 1,000
- required accurate originator information
(name, address and account number) on
funds
- required beneficiary information
• Denmark:
- Customer identification required in all
transactions exceeding EUR 1,000
- Challenge that no national Identity Card is
issued by the authorities
05-09-2013
Side 58
International cooperation on
money laundering
• Interpol (www.interpol.int)
• Egmont Secure Web (www.egmontgroup.org)
• FATF (www.fatf-gafi.org)
• ESAAMLG http://www.fatf-gafi.org/
• World Bank (www.worldbank.org)
• IMF (www.imf.org)
• IMoLIN (www.imolin.org)
05-09-2013
Side 59
05-09-2013
Side 60
Money Laundering and
Financing of Terrorisme
05-09-2013
Side 61
Money Laundering
• To alter the identity of the proceeds of crime so
that they may gain the appearance of lawful funds
or assets
• Three phases of money laundering:
- Placement
- Concealment
- Integration
05-09-2013
Side 62
Money laundering
Placement: The physical placement of the proceeds in the financial system
Concealment: Separation of the proceeds from their illegal origin through financial processes – to alter the identity and achieve anonymity. F.e. purchase of real estate and goods
Integration: Return to the perpetrator‟s assets in a converted form – appear now to be lawful
05-09-2013
Side 63
Placement-Concealment-
Integration - example 1
Placement
• Cash is deposited into a bank
Concealment
• International electronic transfers
Integration
• Repatriation as payments for fictitious loans
05-09-2013
Side 64
05-09-2013
Side 65
Financing of terrorism
• Direct or indirect financial support to terrorists or
terrorist organisations, including the collection or
procurement of funds.
• Three phases of financing of terrorism:
- Collection
- Concealment/passing on
- Use
05-09-2013
Side 66
Collection-concealment/passing
on-use
Collection
• Collection of contributions with the aim to support terrorist organisations. Illegal for both the collector and the constributor
Concealment
• Transfer or transport the collected funds to the terror organisation or persons connected thereto
use
• Use of the collected funds for terrorist activities
05-09-2013
Side 67
Money laundering and financing of
terrorism
Prevention
Reporting
Repression
05-09-2013
Side 68
Prevention – AML/CFT
• Customer due diligence, KYC policies
• ID of third parties introducers
• Financial institution secrecy and confidentiality
• Record keeping and wire transfer rules
• Monitoring of transactions and relations
• STR‟s and CTR‟s
05-09-2013
Side 69
Prevention - AML/CFT
• Internal controls, compliance and audit
• The supervisory and oversight system
• Dissuasive penalties for non-compliance
05-09-2013
Side 70
Reporting – AML/CFT
• Reporting of suspicious transactions to the
Financial Intelligence Unit – in Ethiopia the
Financial Intelligence Center – cfr. Art. 17, par. 1
of the Ethiopian AML proclamation
• In Ethiopia also reporting of large cash
transactions are obliged – cfr. Art. 18 of the
Ethiopian AML proclamation
05-09-2013
Side 71
When to report? – Art. 17, par. 1 of
Ethiopian ML Act
• Suspicious financial transaction:
- (When reporting entity) . . Suspect or have
reasonable grounds to suspect that funds or
property are the proceeds of crime,
- or are related or linked to,
- or are to be used for financing of terrorism
- shall be required to submit promptly reports
setting forth their suspicions to the Center
05-09-2013
Side 72
Repression AML/CFT
• DK definition:
• For the purposes of this Act "money laundering"
shall mean,
• 1) unlawfully to accept or acquire for oneself or
others a share in profits, which are obtained by a
punishable violation of the law,
• 2) unlawfully to conceal, keep, transport, assist in
disposal or in a similar manner subsequently
serve to ensure, for the benefit of another person,
the profits of a punishable violation of the law, or
• 3) attempting or participating in such actions.
05-09-2013
Side 73
Repression AML/CFT • For the purposes of this Act (DK AML/CFT),
"financing of terrorism" shall mean financing
of terrorism as defined in section 114b of the
Danish Criminal Code with regard to actions
covered by section 114 of that Act.
• §114b
- Any person who
- 1) directly or indirectly provides financial
support to;
- 2) directly or indirectly procures or collects
means to; or
- 3) directly or indirectly places money, other
assets or financial or other similar means at
the disposal of:
- a person, a group or an association, which
commits or intends to commit acts of terrorism
as included under Section 114 or 114 a of this
Act, shall be liable to imprisonment for any
term not exceeding ten years.
05-09-2013
Side 74
Repression – AML/CFT
• Money laundering, Art. 29of the AML
proclamation:
• ”Converts or transfers the property ofr the
purpose of concealing or disguising the illicit origin
of the property . . .
• Conceals or disguises the true nature, source,
location, disposition, movement or ownership . .
• Acquires, possesses or uses the property
05-09-2013
Side 75
Repression – AML/CFT
• Financing of terrorism Art. 31 of the AML
proclamation:
• . ., directly or indirectly, willfylly, provides or
collecs funds, or atempts to do so, with the
intention that they should be used or with the
knowledge that the are to be used in fuld or in part
- To carry out a terrorist act, or
- By a terrorist,or
- By a terrorist organization
05-09-2013
Side 76
Money laundering – special topics
• All predicate offences are covered in Ethiopia
• What if the predicate crime is committed abroad?
• Self-laundering or not?
• International co-operation – dual criminality in
mutual legal assistance
- International cooperation is important in the
FIU work of veryfying:
- the origin of transfer/investment or
- the destination of transfer/investment
05-09-2013
Side 77
The French case – lessons to
learn
• The importance of STR‟s
• The links between organised and economic crime
• Different money laundering operations
• The importance of international co-operation
- Germany: Extradition
- France: Indictment, co-operation with judge
- USA: The plea bargaining concept
05-09-2013
Side 79
05-09-2013
Side 80
Transaction
Account Holder
740.000 EUR
Transaction order
by phone
STR
Owner
Profit
Surprise visit
STR and
action required?
Seizure
DK Bank
Hamburg
City Bank
HongKong
Taxation authorities CID Police
HamburgMoney Laundering
Secretariat
Germany
Denmark
DK Bank
Denmark
740.000 EURDE CitizenRestaurant
Hamburg
The German case – lessons to
learn
• Foreign branches of financial institutions –
reporting of STR‟s
• Laundering of proceeds from tax evasion
• Co-operation with tax authorities
05-09-2013
Side 81
Financing of terrorism – special
topics
• What is a terror organisation?
- The foundation and structure of the
organisation?
- The organisations‟ own decription of its‟
purpose through a charter or similar
- Does the organisation consist of different
wings, f.e. military and civil wings?
- What are the relations between the different
wings – same persons in both?
05-09-2013
Side 82
Financing of terrorism – special
topics
• § 114 DK
• (1) Any person who, by acting with the intent to
frighten a population to a serious degree or to
unlawfully coerce Danish or foreign public
authorities or an international organisation to carry
out or omit to carry out an act or to destabilise or
destroy a country‟s or aninternational
organisation‟s fundamental political, constitutional,
financial or social structures, commits one or more
of the following acts, when the act due to its
nature or the context, in which it is committed, can
inflict a country or an international organisation
serious damage, shall be guilty of terrorism and
liable to imprisonment for any term extending to
life imprisonment
05-09-2013
Side 83
Financing of terrorism – special
topics
• What activities are terrorism?
- The act of terrorism as such, article3 of the
Anti-Terrorism Proclamation: ”Whosoever or a
group intending to advane a political, religious or
ideological cause by coercing the government,
intimidating the public or section of the public, or
destabilizing or destroying the fundamental political,
constitutional or economic og social institutions of the
country …”
- Are the actions committed against the civil
population?
- Armed conflicts not as such terrorism!
05-09-2013
Side 84
05-09-2013
Side 85
The Al-Aqsa case – lessons to
learn
• What is a terror organisation - documentation
• Links between military and civil wings – evidence
needed!
• Proces of validation of convictions from other
jurisdictions
• The mental element is difficult to tackle
05-09-2013
Side 86
05-09-2013
Side 87
Predicate Crimes
Types of crimes / Predicate crimes
• Fraud
• Corruption/kick back
• Drug trafficking
• Trafficking of human beings
• Cybercrime
• Fiscal crimes (Tax and duties)
• And other crimes
05-09-2013
Side 88
Fraud
• Definition of fraud:
- In the broadest sense, fraud is an intentional
deception made for personal gain and to
damage another individual (by causing loss)
- The specific legal definition varies by legal
jurisdiction
05-09-2013
Side 89
White-collar crime
• “White-collar crime”
- A crime committed by a person of
respectability and high social status in the
course of his occupation
- White-collar crimes can be described as
illegal acts such as deceit, concealment, or
breach of trust which are not dependent upon
the use or threat of physical force or violence
05-09-2013
Side 90
Blue-collar crime
• ”Blue-collar crime”
- Offender employed in relatively unskilled
environments
- Offender has fewer "situations" to exploit
- Tends to be more obvious and thus attracts
more active police attention (e.g. for crimes
such as vandalism or shoplifting, where
physical property is involved)
05-09-2013
Side 91
Different victims
• Different types of fraud victims
- Fraud against individuals
- Fraud against the treasury – the public
- International organisations
- Fraud against businesses
05-09-2013
Side 92
Public-corporate crime
• Public-corporate crime
- Negotiation of contracts between a public -
and a private corporation, usually at a
relatively senior level on both sides
- A possible opportunity for crime can be
exploited
05-09-2013
Side 93
Occupational fraud
• Occupational fraud in the private and public
industry
- Committed by owners and executives
- Commited by employees
- Control is difficult and expensive
- Average loss is 5 percent of companys
annual revenue
- Detection through internal tip offs
- Detection through money laundering reports
to the FIU
05-09-2013
Side 94
Consumer fraud
Upcoming crimes:
• Internet Fraud has risen fast in few years
• West African scam or ”Nigeria letters” (419 fraud)
• Phishing/hacking
• Dating sites – dating fraud
• Receiving ”overpayment” for assets – by
”Mistake”. Ask victim to transfer overpayment
• Identity theft – for obtaining loan, passport, etc.
• Copied credit cards 05-09-2013
Side 95
Corruption
05-09-2013
Side 96
Corruption
• ”Transparency International”
- International organisation
- Monitor the perception/development in
corruption
• Corruption is the abuse of entrusted power for
personal gain
- It hurts everyone whose life, livelihood or
happiness depends on the integrity of people
in a position of authority
05-09-2013
Side 97
Corruption
• Danish situation
• Code of Conduct in the Public Sector
• Describes: Fundamental values and principles for
public administration” as:
- The public sector is based on values such as
openness, democracy, the rule of law, inte-
grity, independence, impartiality and loyalty.
The public sector is, at the same time, expec-
ted to perform tasks in a flexible and efficient
manner, and to deliver high-standard
services
05-09-2013
Side 98
Corruption
• Danish code of conduct
• Acceptance of gifts, etc.
- The question of whether public employees
are allowed to accept gifts or other benefits
that are offered to them in connection with
their work is regulated by general admini-
strative law principles and by the Criminal
Code. Special rules may, furthermore, have
been established, which apply to the indivi-
dual workplace. The principles governing the
acceptance of gifts or other benefits are
closely linked to the rules governing impar-
tiality. In both cases, the objective is to pre-
vent situations that might raise doubt about
the impartiality of public employees. This is,
consequently, a matter of protecting the
individual employee himself 05-09-2013
Side 99
Corruption
• Employees should in general be extremely reluctant to accept
gifts in connection with their work.
• An employee who has been offered a gift by a person or an
enterprise should therefore abstain from accepting the gift if it
has any bearing on the person in question‟s employment in the
public sector. This is also the case even if the donor has not or
has not had any matter attended to by the authority.
• Employees may, however, accept minor gifts in connection
with events of a personal nature, for example special
birthdays, anniversaries or when taking permanent leave of
the workplace. Simi-larly, it is possible at Christmas or the New
• Year to accept minor occasional gifts, for example from
“business connections”.
• Employees may, furthermore, accept minor gifts of gratitude in
cases where it may seem impolite and be a disappointment to
the donor if the gift is returned.
• Employees may accept customary gifts in connection with
official visits from or to other countries.
• If the individual authority has established special guidelines for
the possibility of employees to accept gifts, these guidelines
must be observed. 05-09-2013
Side 100
Corruption
• Standard:
- United Nations Convention against
Corruption (UNCAC)
- Ratified by Ethiopia 2007, Denmark 2006
• Forms of corruption:
- Passive vs. active bribery
- Extortion
- Nepotism
• Corruption may facilitate
- Organised crime
- Drug trafficking
- Money laundering
- Human trafficking 05-09-2013
Side 101
Corruption Impact
• Impact of corruption, examples:
- A large corporation/organisation that secures
a contract by buying an unfair advantage in a
competitive market through illegal kickbacks
to corrupt government officials, at the
expense of the honest companies who don‟t
- Post-disaster donations to organisations or
through government agencies never reach
the victims, but are instead redirected into the
bank accounts of criminals 05-09-2013
Side 102
Consequences
• Consequences of corruption:
- Corruption is both a cause of poverty, and a
barrier to overcoming it. It is one of the most
serious obstacles to reducing poverty
- Corruption undermines democracy and the
rule of law
- Corruption distorts national and international
trade
- Corruption jeopardises sound governance
and ethics in the private sector
05-09-2013
Side 103
Drugs
• Illicit drug business is currently estimated by the
United Nations at $320 billion per year
• Organized crime causes public safety issues
besides threatening the national security of some
countries
• Uncontrolled money laundering can destabilize
financial institutions, financial sectors and, in
certain cases, entire economies
05-09-2013
Side 104
Drugs cont.
• Standards:
- United Nations Convention against Illicit
Traffic in Narcotic Drugs and Psychotropic
Substances (Vienna Convention, 1988)
- The International Convention against
Transnational Organized Crime (the Palermo
Convention, 2000)
05-09-2013
Side 105
Drugs cont.
• Drugs crime are usually not reported to LEA –
there are no ”Victims” as in other crimes
• Trade agreement between seller and buyer in an
unregulated market
• Usually settled in cash
• Cross border movements of cash
• Transfers to drugs producing, transit countries or
convenient jurisdictions 05-09-2013
Side 106
Trafficking of humans
• Human trafficking is the acquisition of people by
improper means such as force, fraud or
deception, with the aim of exploiting them
• Trafficking in human beings violates the rights and
affects the lives of countless people in the world
• Women, men and children are being traded as a
commodity, across borders or in their own
countries, and trapped into exploitation and abuse
• Smuggling migrants involves the procurement for
financial or other material benefit of illegal entry of
a person into a State of which that person is not a
national or resident
05-09-2013
Side 107
Trafficking of humans
• Specific explotation:
- Trafficking in persons for sexual exploitation
- Trafficking for forced labour
- Trafficking in organs
- Used as drug couriers
• The has links to corruption
05-09-2013
Side 108
Trafficking of humans
• Some red flags for reporting entities:
- mobile number, address, etc.used to open
multiple accounts in different names
- frequent money transfer to “risk” countries
- concentration of “risk” nationalities among the
opening of accounts
- money rapidly withdrawn from accounts
- third party cash deposits are made at various
bank branches
- transactions undertaken that appear
inconsistent with customer profile
- small amounts sent to different recipients
05-09-2013
Side 109
Trafficking of humans
- small amounts sent with high frequency to
unconnected persons
- frequent transfers to “risk” countries
- multiple customers conducting international
funds transfers to the same overseas
beneficiary
• Proceeds likely integrated through:
- Investment in real estate, restaurants or clubs
05-09-2013
Side 110
Trafficking of humans
• Standards:
- Protocol to prevent, suppress and punish
trafficking in persons, especially women and
children (Supplementing the UN Palermo
Convention)
- Protocol against the Smuggling of Migrants
by Land, Sea and Air (Supplementing the UN
Palermo Convention)
05-09-2013
Side 111
Cybercrime
• Broad definition of cybercrime
- Computer crime refers to any crime that
involves a computer and a network
• In relation to money laundering the crime often
has a fraudulent content
- Phishing/hacking
- Dating sites – dating fraud
- Receiving ”overpayment” for assets – by
”Mistake”
- Identity theft – obtain loan, passport, etc.
- Copied credit cards
05-09-2013
Side 112
Fiscal crimes (Tax and duties)
• Crimes against the States income or budget
• Fiscal crimes involve activities such as:
- Direct and indirect tax evasion
- Excise duty fraud
- VAT fraud
• Money Laundering activities:
- Transfer to tax heaven jurisdictions
- Cross border movements of cash
- Buying high value assets
05-09-2013
Side 113
Predicate crimes
• Other predicate crimes can generate criminal
outcome for money laundering
05-09-2013
Side 114
05-09-2013
Side 115
Risk Assessment and
Risk Based Approach Customer due diligence (CDD) as an example
05-09-2013
Side 116
Risk Assessment and
Risk Based Approach
• Central element of FAFT 40 Recommendations
• On different levels
- National
- Financial Institutions And Designated non-
financial bodies and professions (DNFBPs)
National level - obligations
• Take appropriate steps to identify and assess ML
and TF risks in order to:
- Inform changes to AML/CFT regime
- Assist in allocation and prioritisation of
resources
- Make information available for risk
assessments conducted by Financial
Institutions and DNFBP
• When higher risks are identified they shall be
addressed by the AML/CTF regime
05-09-2013
Side 117
National level - obligations cont.
• Continuously monitor and update the risk
assessment.
• FIUs has to conduct strategic analysis in order to:
- Identify and ML and TF trends and patterns
• The strategic analysis is used for risk
assessments within the national AML/CTF regime
05-09-2013
Side 118
Financial Institutions and DNFBPs
• Take appropriate steps to identify and assess ML
and TF risks related to:
- Customers
- Countries or geographic areas
- Products, services, transactions or delivery
channels
• Should be able to document the assessment and
continuously monitor and update.
• The required extent depends on size and nature
of the Financial Institution or DNFBP. 05-09-2013
Side 119
Financial Institutions and DNFBPs
• Policies, controls and policies in order to:
- Effectively manage and mitigate the risks
identified.
• If higher risk are identified they are required to
take enhanced measures to manage and mitigate
the risks.
05-09-2013
Side 120
Customer Due Diligence (CDD)
• CDD comprise the information about a client that
enables a Financial Institution or DNFBP to asses
the extent to which that a client exposes it to a
range of risks, including Money Laundering.
05-09-2013
Side 121
CDD Information
CDD Information comprises:
• Who is the client?
• What are the geographical locations of the client‟s
- residence
- assets, and
- business interests?
• What is the nature of the client‟s business
interests/occupation?
05-09-2013
Side 122
CDD Information cont.
• What is the commercial rationale for the
relationship between the client and the
organisation (what is the client seeking to
achieve)?
• What is the client‟s source of funds?
• What is the client‟s source of wealth?
05-09-2013
Side 123
CDD Information cont.
• What has been the historical pattern of the client‟s
relationship activity with the business, and has it
been consistent with what was expected at the
outset of the relationship?
• Is the current or proposed activity consistent with
the client‟s profile and commercial objectives?
05-09-2013
Side 124
Risk-rating clients
• the product offering of the firm and the product
taken up by a customer.
• geographic risk (e.g. whether the country is
renowned for narcotics production and/or
distribution)
• the customer type (e.g. salaried, sole proprietor,
specific professions).
05-09-2013
Side 125
Risk-rating clients cont.
• whether the customer is resident or non-resident.
• any adverse information gleaned from name
screening.
• the delivery channels offered (e.g. no face-to-face
interaction)
• the various segments a customer may be aligned
to in the firm (e.g. large multinational corporates,
small to medium enterprises) 05-09-2013
Side 126
Risk-rating clients cont.
• the type of business of a customer (e.g. cash
intensive), and.
• the length of time the customer„s business has
been in operation.
05-09-2013
Side 127
Mandatory high risk clients
• Political Exposed Persons (PEPs)
• Correspondent banking
05-09-2013
Side 128
05-09-2013
Side 129
Money Laundering and
Terrorist Financing
Indicators
05-09-2013
Side 130
Structure of the Danish indicators
• General indicators
- The Customer‟s behaviour, situation, etc. - Reluctance to provide information
- Matters related to identification, etc.
- Indications of acting on behalf of a third party
- Appearance
- Knowledge of the customer‟s situation
- The customer‟s behaviour or situation otherwise
- Geographical relation
- Large cash amounts
- Atypical payments
- Atypical movements on accounts
05-09-2013
Side 131
Structure of the Danish indicators
cont.
• Currency Exchange
• Transfer And Remittance of Money
• Payment Patterns, Commodity Trade And
Accounts
• Real Estate Business and Mortgage
• Stock Market Transactions and Investments
• Advising
05-09-2013
Side 132
Structure of the Danish indicators
cont.
• Founding, Purchase or Administration og Legal
Persons
• Insurance
• Collections, Associations And “Collection
Accounts”
Example of Danish Trend and
Pattern
• Organised Tax Fraud in the Service Sector
- Newly established companies with large
deposits
- Large cash withdrawals from business
account
- Currency purchases with large cash amounts
- Acting as instructed by third person
- Unwilling to provide information
05-09-2013
Side 133