Anti-Money Laundering Terms

Launderers process criminal proceeds to hide their illegal origin. Criminals disguise the sources of funds, changing their form or moving the funds to a place less likely to attract attention. They legitimize or "launder" money to control and use it ithout attracting attention to the underlying criminal activity or to the persons involved. !ote" The items #elo are designed to clarify collo$uial and legal usage in anti-money laundering discussions. They have no standing as legal definitions and some might ell change ith conte%t. Account-a formal, continuing banking or business relationship established to provide regular services, dealings and other financial transactions. Alternative remittance systems-means of transferring funds and sometimes gold through traditional "underground" banking networks buy which trading companies accept money at one location and make it available in another. These systems are common in the Middle East (called Hawala , !frica, "outh !sia (called Hundi and !sia. A&ML'- !sset #orfeiture and Money $aundering "ection, %epartment of &ustice AML - !nti-Money $aundering. Anti-money laundering program re$uirement- "%ealers in precious metals, 'ewels and stones" shall develop and implement a written anti-money laundering program reasonably designed to prevent the dealer from being used to facilitate money laundering and the financing of terrorist activities. The program must be approved by senior management. ! dealer shall make its antimoney laundering program available to the %epartment of Treasury or its designee upon re(uest. A()C- !sia )acific Economic *ooperation AT& - +ureau of !lcohol, Tobacco and #irearms, %epartment of Treasury A(*- !sia )acific ,roup on Money $aundering +ank 'ecrecy Act-(+"! passed in -./0, was amended by the 1"! )!T234T !ct of 500-. *onsists of a number of record-keeping and reporting re(uirements designed to overcome foreign bank secrecy laws and to deter money laundering. The re(uirement to file #orm #in*E6 7800 reporting currency transactions above 9-0,000 (*T2 is a +ank "ecrecy !ct rule. +'A-+ank "ecrecy !ct +eneficial , ner- the natural person(s who ultimately owns or controls a customer and:or the person on whose behalf a transaction is being conducted and who has the authority to fund, direct or manage the account. +lack List-"ee 6on-cooperative countries or territories. +ulk cash smuggling-physical movement of currency as a means of secreting proceeds from criminal activity. Channeling account-used to receive, consolidate and retransfer laundered funds.

Concentration account-also called clearing or omnibus account. !ccount used by a financial institution for bank-to-bank or administrative transactions. The 1"! )!T234T !ct prohibits use of concentration accounts for customer business because they hide the identity of the customer. Confiscation-#orfeit funds or assets to a ,overnment regulatory agency. *onfiscation can result if the account holder commits a crime or holds fund from a money-laundering scheme. ! key !M$ tool, it assumes all assets of a money launderer are derived from money laundering. "o, in an account of 9-million, even if only 9-000 can be directly tied to money laundering, the ,overnment can confiscate all 9-million. C-&.- *ommittee on ;emispheric Money $aundering C.(-*ustomer 3dentification )rogram. CM./-*urrency and Monetary 3nstrument Transportation 2eport. Core (rinciples-2efers to the *ore )rinciples for Effective +anking "upervision issued by the +asel *ommittee on +anking "upervision, the 4b'ectives and )riciples for "ecurities 2egulation issued by the 3nternational 4rgani<ation of "ecurities *ommissions and the 3nsurance "upervisory )rinciples issued by the 3nternational !ssociation of 3nsurance "upervisors. CT/-*urrency Transaction 2eport. Currency and Monetary .nstrument Transportation /eport -(*M32 2eport to be filed with the *ommissioner of *ustoms reporting bulk movement in or out of the 1.". of monetary instruments such as currency, bank checks, travelers checks, bearer securities, money orders, negotiable instruments and similar instruments of over 9-0,000. Currency Transaction /eport-(*T2 2eport filed with #in*E6 to report cash transactions of over 9-0,000. Customer .dentification (rogram-(*3) !n !nti-Money $aundering provision re(uiring in part that companies must check their customers against lists of known money launderers, such as the 4#!*-"%6 list. Concentration account-account in which funds of one or more customers are consolidated, pooled or commingled. Correspondent Account-an account established to receive deposits from, make payments on behalf of a foreign financial institution or handle other financial transactions relates to such institution. 0)A- %rug Enforcement !dministration, %epartment of &ustice 0ealer 1in (recious Metals, 'tones and 2e els3- !ny person "engaged in the business of purchasing and selling 'ewels, precious metals, or precious stones, or 'ewelry composed of 'ewels, precious metals or precious stones" (1"! )!T234T !ct "ection -08.-=0 . *overs manufacturers, refiners, wholesalers, retailers and any other entity engaged in the business of purchasing and selling 'ewes, precious metals, precious stones or 'ewelry. and who, during the prior calendar or ta> year? (! )urchased more than 9@0,000 in 'ewels, precious metals, or precious stones, or 'ewelry composed of 'ewels, precious metals, or precious stonesA or (+ 2eceived more than 9@0,000 in gross proceeds from transactions in 'ewels, precious metals,

precious stones, and 'ewelry composed of 'ewels, precious metals, or precious stones. The term BBdealerCC does not include? (! ! retailer, i.e., a person engaged in the business of sales to the public of 'ewels, precious metals, or precious stones, or 'ewelry composed thereof, other than a retailer that, during the prior calendar or ta> year, purchased more than 9@0,000 in 'ewels, precious metals, precious stones, or 'ewelry composed of 'ewels, precious metals, or precious stones, from persons other than dealers (such as members of the general public or persons engaged in other businesses A or (+ ! person who engages in transactions in 'ewels, precious metals, or precious stones for purposes of fabricating finished goods that contain minor amounts of, or the value of which is not significantly attributable to, such precious metals, precious stones, or 'ewels. 0epartment of -omeland 'ecurity- (%;" The new cabinet-level #ederal ,overnment %epartment created to coordinate the anti-terrorist activities of 55 ,overnment agencies. These include the *oast ,uard, *ustoms and 3mmigration, #+3, Treasury, #EM! etc. 0esignated non-financial #usinesses and professions? -. 5. 8. =. @. *asinos 2eal estate agents %ealers in precious metals %ealers in precious stones $awyers, notaries, other independent legal professionals and accountants (within professional firms D. Trust *ompany "ervice )roviders that? !ct as a formation agent of legal persons !ct as a director or secretary of a company, partner, or similar position in relation to other legal persons. )rovide a registered officeA business address or accommodation, correspondence or administrative address for a company, a partnership or any other legal person or arrangement. !ct as a trustee of an e>press trust. !ct as a nominee shareholder for another person. %esignated Threshold-!mount above which transaction might be sub'ect to analysis as moneylaundering or terrorist finance. #or instance, the #!T# sets 9-@,000 or euros as the level at which cash transactions in precious metals or stones should be reported. The 1.". sets this level at 9-0,000. 0-'-%epartment of ;omeland "ecurity. )gmont *roup-!n unofficial forum for #inancial 3ntelligence 1nits to establish standards and mechanisms for cooperation and establish protocols for e>changing information. )scalation-Ehen an employee reports suspicious activity to the !M$ *ompliance 4fficer, a senior manager or enforcement agency )%tradition-)ersons are surrendered by one country to another according to terms of bilateral treaties. 4ften, an accused or convicted person is returned to the country in which he or she is a national. &AT&-*A&.-or &AT& -#inancial !ction Task #orce on Money $aundering.

&+A/-#oreign +ank and #inancial !ccounts 2eport &ederal receiver-appointed by the court to collect, marshal and take custody, control and possession of laundered assets. &inancial Action Task &orce on Money Laundering-(#!T#-,!#3-or #!T# 3nternational antimoney laundering organi<ation with legal, financial and law enforcement e>pertise. Monitors !M$ policies in different countries, sets !M$ standards, etc.http?::www-.oecd.org:fatf: &inancial Crimes )nforcement !et ork-(#in*E6 -bureau in the 1.". %epartment of the Treasury formed in -..0 to oversee, centrali<e and coordinate financial intelligence gathering, regulatory compliance, government initiatives, criminal prosecution and enforcement having to do with laundering and associated foreign financial transactions and relationships, information on currency flows and financial criminal activities. The main 1.". body to to prevent and detect money laundering. &inC)!-#inancial *rimes Enforcement 6etwork. &inancial institutions- any person or entity who conducts as a business one or more of the following activities or operations for or on behalf of a customer? -. 5. 8. =. @. D. /. !cceptance of deposits and other repayable funds from the public. $ending. #inancial leasing. The transfer of money or value. 3ssuing and managing means of payment (e.g. credit cards, checks #inancial guarantees and commitments. Trading in? money market instruments foreign e>change e>change, interest rate and inde> instruments transferable securities commodity futures trading )articipation in securities issues and the provision of financial services related to such issues. 3ndividual and collective portfolio management. "afekeeping and administration of cash or li(uid securities on behalf of other persons. 3nvesting, administering or managing funds or money on behalf of other persons. 1nderwriting and placement of life insurance and other investment related insurance. Money and currency changing.

7. .. -0. --. -5. -8.

&inancial .ntelligence 4nit- (#31 ! centrali<ed ,overnment agency that collects, records, analy<es, disseminates and sometimes investigates suspicious financial activity and "!2Cs. The 1nited "tatesC #31 is #in*E6. &.4-financial intelligence unit. &oreign +ank and &inancial Accounts /eport-(#+!2 2eport filed with #in*E6 for foreign accounts of over 9-0,000 held by 1.". companies or individuals. &orfeiture-"ee *onfiscation. &ront company-!n entity used to hide the beneficial owner.

&'&- #inancial "tability #orum *A&.-,roupe dC!ction #inanciere sur le blanchiment de capitau>. 6ame in #rance for #inancial !ction Task #orce. *atekeepers-professionals such as lawyers, accountants, investment advisors that can block or e>pedite funds from entering the banking system. 3n certain cases, they can use their own accounts to effect entry and thereby hide the identity of the beneficial owner. The #!T# recommendations encourage countries to apply their !M$ re(uirements for financial institutions to gatekeepers. *CC- ,ulf *ooperation *ouncil *eographic targeting order-.&CA-;igh 3ntensity Money $aundering and 2elated #inancial *rime !rea -a ala-"ee alternative remittance system. -undi-"ee alternative remittance system. 2oint and Travel /ule-2e(uires certain information to be recorded for wire transfers of 98,000 or more. 3ncludes? name, address or transmitter and recipient, amount, identity of recipientCs financial institution, account number .))(A- 3nternational Emergency Economic )owers !ct .&.- 3nternational financial 3nstitution .M&- 3nternational Monetary #und .!L- +ureau for 3nternational 6arcotics and $aw Enforcement !ffairs, %epartment of "tate .ntegration-Mentioned in the 1"! )!T234T !ct as the third and final stage of money laundering in which funds introduced into the financial system are invested or applied. The stages are )lacement, $ayering and 3ntegration. .nter#ank account-an account held by one financial institution at another, primarily for facilitating customer transactions. $aundered funds deposited into a foreign bank can be sei<ed and forfeited from the foreign bankCs interbank account in the 1.".. .nternational Money Laundering A#atement and Anti-Terrorist &inancing Act of 5667 -Title 333 of the 1"! )!T234T !ct. This section covers many of the !ctCs !M$ provisions. 2e el- &ewel means an organic substance with gem (uality market-recogni<ed beauty, rarity, and value, and includes pearl, amber, and coral. 89C- Fnow your customer, in re. due diligence. #rom a policy standpoint, the practices applied to determine the identity of a customer, to define an accountCs normal business and to identify behavior that deviates from this norm.

89)-Fnow your employee. 1nderstanding an employees background, conflicts of interest and susceptibility to money laundering complicity. Large Currency Transaction &orm-#orm =/7., on which cash transactions over 9-0,000 must be reported. $ayering-in the 1"! )!T234T !ct, the stage of laundering in which the origin and trail of funds introduced into the financial system are hidden by creating layers of transactions. The stages are )lacement, $ayering and 3ntegration. Legal persons-bodies corporate, foundations, anstalt, partnerships, associations, or any similar bodies that can establish a permanent customer relationship with a financial institution or otherwise own property. Long arm :urisdiction-describes a countryCs e>traterritorial reach. #or inistance, under the 1"! )!T234T !ct, the 1" can convict non-residents of crimes in which they participated while outside the 1". MLAT-Mutual $egal !ssistance Treaty MLCA- Money $aundering *ontrol !ct of -.7D MLCC-Money $aundering *oordination *enter, 1.". *ustoms "ervice, %epartment of the Trreasury ML'A- Money $aundering "uppression !ct of -..=. Money Laundering-There is no single definition. 3n general, hiding the e>istence, origin, use, movement or disposition of illegally derived funds to make them appear legitimate. The 1"! )!T234T !ct mentions three stages of the process--placement, layering and integration. Money Laundering Control Act of 7;<=-(M$*!- Title -7, 1" *ode "ection -.@D Makes money laundering a crime with up to 50 years in prison. "ets a threshold of 9-0,000. M'+-Money "ervice +usiness. Money 'ervice +usiness-(M"+ *ertain non-bank financial services companies, including currency dealers or e>changers, check cashers and travelers check issuers. Mutual Legal Assistance Treaty- +ilateral treaty to permit cooperation between countries to conduct investigations, gather evidence and secure witnesses. !CCTCs-6on-cooperative countries or territories. !&T+-6on-financial trades and businesses !on-cooperative countries or territories-(6**T *ountries designated by the #!T# as consistently ignoring money laundering or unwilling to pass or enforce laws to prevent money laundering. The "black list" is revised annually.

!on-financial trades and #usinesses-(6#T+ businesses sub'ect to the +ank "ecrecy !ct that are not financial institutions, eg. dealers in precious metals and stones, real estate agents, lawyersand car dealers. ,A'- 4rgani<ation of !merican "tates ,)C0- 4rgani<ation for Economic *ooperation and %evelopment ,&AC -4ffice of #oreign !ssets *ontrol, %epartment of the Treasury ,&C- 4ffshore financial *enter ,ffice of &oreign Assets Control-! department of 1.". Treasury that enforces trade and antimoney laundering sanctions. )ublishes the 4#!* list of known money launderers. 3t is illegal to do business with individuals or companies on 4#!*Cs lists. ,ffshore #anking license-license to conduct banking activities, but prohibiting the licensee from banking with citi<ens or currency of the country granting that issued the license. ,*+'- 4ffshore ,roup of +anking "upervisors (AC'-)atriot !ct *ommunications "ystem (atriot Act Communications 'ystem-()!*" ! means to communicate with #in*E6, including electronic filing of "!2Cs and *T2Cs to #in*E6. (aya#le-through account-correspondent account opened at a depository institution by a foreign financial institution to engage, either directly or through a sub-account, in banking activities. )ayable through accounts can hide the identity of a customer. ()(-)olitically E>posed )erson. (hysical presence-a place of business that? -. is maintained by a foreign bank. 5. is located at a fi>ed address (not electronic in a couuntry in which the foreign bank operates. 8. employs - or more individuals full time. =. maintains operating records. @. is sub'ect to inspection by the banking authority which licensed the foreign bank. (lacement-Mentioned in the 1"! )!T234T !ct as the initial money laundering stage in which criminally derived funds are introduced into the financial system. The stages are )lacement, $ayering and 3ntegration. (olitically )%posed (erson-()E) 3ndividual entrusted with prominent public functions in a foreign country. +usiness relationships with family members or close associates of )E)Cs involve reputation risks similar to those with )E)Cs themselves. The risk is hiding graft or illegally derived funds. (recious Metal-%efined in the proposed regulations of the 1"! )!T234T !ct to include ,old, iridium, osmium, palladium, platinum, rhodium, ruthenium, or silver, having a level of purity of @00

or more parts per thousandA and an alloy containing @00 or more parts per thousand, in the aggregate, of two or more of the metals listed (above . (recious 'tone-%efined in proposed regulations of the 1"! )atriot !ct "to include inorganic substances that have a market-recogni<ed gem level of (uality, beauty, and rarity and value, and includes diamond, corundum (including rubies and sapphires , beryl (including emeralds and a(uamarines , chrysoberyl, spinel, topa<, <ircon, tourmaline, garnet, crystalline and cryptocrystalline (uart<, olivine peridot, 'adeite 'ade, nephrite 'ade, spodumene, feldspar, tur(uoise, lapis la<uli, and opal.. ...precious stones of industrial (uality are not covered by the !ct. (redicate ,ffences-*rimes underlying money laundering or terrorist finance activity. 3nitially, these were drug-related offences, which continue to be the primary predicate offences. Most countries have broadened the definition of predicate offences to include any serious crime. (rivate +anking Account-"pecial accounts for high-net worth individuals in which an individual "private banker" coordinates the financial institutionCs services with the customerCs re(uirements. !ccounts generally re(uire a minimum balance of 1"9- million. Transactions tend to be marked with confidentiality, comple> beneficial ownership arrangements, offshore investment vehicles, ta> shelters, and credit e>tension services. )rivate banking is viewed by many governments as vulnerable to money laundering. /ed &lag-!n alert that signals possible money-laundering or terrorist financing. 2ed flags re(uire investigation and possibly filing an "!2. /epatriation of assets-3f funds or assets are transferred out of 1.". 'urisdiction by a suspected launderer, #in*E6 may obtain a subpoena for their return to the 1.". /isk Matri%-*hart to assess customer risk based on pre-defined varables, such as location, nature of business, etc. 'afe har#or-protects persons or agencies disclosing or reporting suspicious activity in good faith from civil liability to person that was reported. 'A/-"uspicious !ctivity 2eport. 'A/-'&-The form used to report suspicious activity. 3ncludes transactions involving proceeds derived from illegal activity or from a plan to violate federal regulations, to avoid reporting re(uirements and to facilitate criminal activity. '0! List-"pecifically %esignated 6ationals and +locked )ersons $ist. $ist of individuals and companies known by 1.". Treasury to be money launderers. 'hell +ank-a bank incorporated in a 'urisdiction in which it has no physical presence and which is unaffiliated with a regulated group. 'murfing-1sing structured transactions or multiple small bank accounts to evade reporting re(uirements. 'T/-suspicious transaction reports.

'tructured transaction-!ttempt to evade cash or other reporting re(uirements by a composite of small transactions or by other devices. 'u#stitute property-3f funds or assets are transferred out of 1.". 'urisdiction by a suspected launderer, #in*E6 may obtain a subpoena to sei<e property of e(uivalent value from the suspected launderer. 'uspicion-doubt based on some foundation e>tending beyond speculation but not necessarily sufficient to constitute a belief. 'uspicious Activity-relates to funds from illegal activity, hiding the source of funds, or circumventing reporting re(uirements or activity inconsistent with a customerCs business or industry practice. 'uspicious Activity /eport-("!2 2eport filed with #in*E6 to report suspected money laundering activity. #inancial institutions are re(uired to file "!2Cs within 80 days of detection of suspicious activity if the suspect is known, D0 days if not known. %ealers in precious metals and stones are not re(uired to file "!2Cs but are encouraged to do so. 'uspicious Transaction /eport-("T2 Term used in Europe and by the #!T# for "uspicious !ctivity 2eport. Terrorist financing-#unding sources and infrastructure used by terrorist groups. *haracteri<ed by hiding sources and divorcing them from the terrorist activity they support. "tate-supported fincing is becoming less common. Much activity is through charities. "muggling, kidnapping, credit card fraud and other illegal activities are also used. Title ...-Fnown formally as the 3nternational Money $aundering !batement and !nti-Terrorism !ct of 500-. 2efers to the anti-money laundering portion of the 1"! )atriot !ct of 500-. Treasury 0epartment-!nti-money laundering responsibility and decision-making authority rests with the "ecretary of the Treasury. Treasury is the center of the 1.". anti-money laundering effort. )olicymakers at the Treasury make all substantive policy decisions involved in rulemaking. The rules are developed with input from all interested parts of the #ederal ,overnment enforcement and coordination are centrali<ed at the Treasury %epartment. Typology-! term used by the #!T# to describe money laundering and terrorist finance methods and techni(ues. 4.!. 'ecurity Council /esolution 7>?> (500- -2e(uires members to free<e terrorist assets and calls for members to assist one another in investigations and to not support terrorist acts or provide safe havens. 4'A (AT/.,T ACT -as an acronym, stands for "1niting and "trengthening !merica by providing !ppropriate Tools 2e(uired to 3ntercept and 4bstruct Terrorism" (4ctober 5@, 500@ienna Convention-Made money laundering an international offense in -.77 for which signatories agreed to e>tradition. Aillful #lindness-%eliberate avoidance of knowledge of the facts. )ermitting illegal activity knowing it was taking place. The standard of what constitutes knowledge is a legal definition. 3n the 1", this generally means knowing or suspecting. The fringe (uestion is whether a party should have known, given the facts or circumstances, or whether knowledge was deliberately

avoided. ! person found willfully blind is treated under the law as though he or she had had actual knowledge. Aofs#erg *roup-$eading international banks formulating !M$ guidelines, procedures and preventive measures.