A how-to guide for the discovery and prevention of the illegal transfer of money Written for the private sector where most money laundering takes place this book clearly explains shows business professionals how to deter, detect, and resolve financial fraud cases internally.

Preface xi Acknowledgments xix CHAPTER 1 Understanding the Process of Money Laundering 1 What Is Money Laundering? 1 Money Laundering Defined 2 Why Do People Launder Money? 4 The Money Laundering Cycle 6 Money Laundering Is a Criminal Business 10 Money Laundering Is Global 11 Money Launderers Adapt Technology 13 The Role of Technology 14 The Role of Banks 15 The Role of Nations 17 Regional Hotspots 18 The Birth of the Financial Action Task Force (FATF) 20 Conclusion 22 CHAPTER 2 Motivations for Getting Involved 23 Involvement Is Personal 23 People Weigh the Odds of Success 24 Where Do Laundered Funds Come From? 26 The Impact of Corruption 27 Why Is Corruption Increasing? 28 Corruption Always Begins Small 30 Bribery and Corruption of Your Employees 31 Bribery and Corruption by Your Employees 33 Evolution of Government Attitudes 34 Official Corruption Impacts Individual Corruption 35 Tax Evasion as a Gateway to Money Laundering 36 Moving from Taxes to Criminal Activity 37 The Rise of Regional and Multinational AML Organizations 38 The Connection between Fraud and Money Laundering 40 Money Laundering as a Do-It-Yourself Activity 42 The Service Providers: Bankers, Accountants, and Lawyers 42 Conclusion 45 CHAPTER 3 Mechanisms for Moving Money 47 Money Laundering Requires Movement through the System 47 Broken Windows Encourage Other Crimes 48 Look Local, Think Global 49 Expanding International Requirements 51 Financial Havens Are Expanding 52 Money Laundering Is a Growth Industry 53 Law Enforcement Gets a Big Boost 54 Profit Drives Criminal Activity 56 Structuring the Scheme to Succeed 57 Why Use a Bank, When You Can Own One? 58 Learning from the Big Fraud Schemes 59 Confronting the Inevitable 60 Balancing Security and Cost 61 Effective Fraud Prevention Strategies 62 The Fraud Triangle 63 Where to Start 64 Mitigating Improper Behavior 67 Conclusion 68 CHAPTER 4 Going Global 71 Taking Money around the World 71 Moving the Money Offshore 72 Avoiding Detection 74 Historical Basis for Money Laundering 75 Role of Private Banking 76 Enhanced Regulations 77 The Black Market Peso Exchange 79 Increasing Cooperation in Regulation 80 Regional Distinctions 81 Global Efforts 83 The Law Enforcement Focus 84 Conclusion 87 CHAPTER 5 Technology and Tomorrow 89 The Impact of Technology 89 The Next Phase of Money Laundering 91 Everything Old Becomes New Again 92 Being Anybody You Want to Be 93 Welcome to the Future 94 So What Is the AML Response? 94 Evolution of AML Controls 96 Adjusting to Rapidly Increasing Scale 97 A Highly Flexible Methodology Results in Processes that Are Difficult to Stop 99 AML Is a Process, Not a Destination 100 All Countries’ Regulatory Programs Are Not Equal 101 Technology and Offshore Havens Intersect 103 The Cost vs. the Benefit 104 Consider the Pace of Change and Progress 105 Conclusion 106 CHAPTER 6 Discovery and Prevention 109 Early Warning Is Essential to AML 109 Proactive Means Active 110 By the Numbers 111 Paradigm Shift 112 Testing Your Own AML Systems 114 Expanding the Business Comparison 115 The Regulatory Framework 116 High-Risk Areas 117 Money Laundering Meets Terror Financing 119 Hiding in Plain Sight 121 Criminalizing the Concealment Activities 122 Creating Financial Fronts 124 Keeping the Money Moving 125 Keeping the Tax Man Happy 126 Conclusion 128 CHAPTER 7 Terror Financing 131 Terrorists Use Money Laundering Techniques 131 Similarities and Distinctions 132 Application of the Methodology to Terror Financing 133 Global Impact of Financial Crimes 135 Alternative Laundering Mechanisms 137 Regulatory Responses 139 Conclusion 141 CHAPTER 8 Identifying Risk Exposures 143 AML Exposures: Assessing Financial Institution Risk 143 Language, Culture, and Ethnicity 144 The Legal Landscape 145 Geography: Distance Matters 147 The Goal of the Launderer Is to Hide 147 The United States Takes a Different Approach 149 Laundering Groups Seek to Evade Detection 151 A Fractured Enforcement and Regulatory Picture 152 The Regulatory Position on Cyber Risks 152 Simple Fraud, Still Successful 154 Conclusion 158 CHAPTER 9 Investigating Money Movement 159 Money Laundering Is Now Transnational Organized Crime 159 Succeeding in the Investigative Process 160 Government Access to Information 161 Mining Data for Money Laundering 163 Some Products Help the Perpetrators 164 Investigating Virtual Payment Technologies 165 Looking to the Future Investigative Issues 167 Putting an Investigative Plan in Motion 169 People Are Essential to Proof 170 Finding Money Laundering Abroad 172 Money Laundering Exposure during the Financial Industry Consolidation 173 Conclusion 177 CHAPTER 10 Reporting and Recovery 179 Reporting to Law Enforcement 179 Honest People Act Differently 180 Anticipating Challenges with Cyber Recoveries 181 Building Appropriate Controls into Online Payment Systems 183 Global Coordination on Future Issues 185 Weighing Access vs. Privacy 185 Compliance Issues 187 Putting Recovery Plans into Action 188 Conclusion 191 CHAPTER 11 Conclusion 193 About the Author 197 Index 199

MONEY LAUNDERING PREVENTION DETERRING, DETECTING, AND RESOLVING FINANCIAL FRAUD Traditionally, anti-money laundering (AML) efforts have been a governmental role, but over the past forty years, this responsibility has shifted as more emphasis and responsibility has been placed on the private sector. In addition, the range of private-sector businesses that must be wary of laundering efforts continues to increase: today, launderers attempt to move money through banks, brokerage houses, insurance companies, charities, multinational service companies, manufacturers, and any type of company imaginable. An invaluable reference for regulators, investigators, and practitioners, this book examines money laundering in its current modern setting, broadening the conversation from its traditional narcotics trafficking context into terror financing and even white-collar crime. Renowned fraud investigator Jonathan Turner sheds light on how conventional money laundering tools highlight the business aspects of these cases, and thus can be applied successfully in white-collar crime matters, even when there is no connection to narcotics trafficking or terror financing. This book explores the evolving incentives to launder money, the adapting technologies that help hide the movement of funds, and the huge financial gains that can be obtained by providing laundering services. It begins with a discussion of the money laundering process, including what it means and how itcame about, examining the inherent challenges between governments and financial institutions. It is estimated that money laundering and its associated criminal proceeds are estimated to equal six to eight percent of the world's economy. It's no surprise, then, that despite the anti-money laundering programs required by the USA Patriot Act and other modern regulations, money laundering techniques attract a wide variety of participants—from traditional criminals to modern fraudsters. Find out how your organization can successfully and efficiently deter, detect, and resolve financial fraud cases through the practical guidance found in Money Laundering Prevention.