Money Laundering Schemes Research Articles

Sneak Thief by Faith Harkey

Reviewed by: Sneak Thief by Faith Harkey Melanie Kirkwood Harkey, Faith Sneak Thief. Knopf, 2018 [272p] Library ed. ISBN 978-1-5247-1748-3 $19.99 Trade ed. ISBN 978-1-5247-1747-6 $16.99 E-book ed. ISBN 978-1-5247-1749-0 $10.99 Reviewed from galleys R Gr. 4-6 For twelve-year-old Hush, thieving is more than a petty crime or an attempt to [End Page 290] make ends meet for her and her emotionally abusive mom, Nina. Sure, they live in the run-down trailer park known as ’Bagoville, Georgia, but what she calls her “loco” is more than a means of survival—it’s a hardcore, ravenous addiction. After a spiraling chain of events including an unexpected friendship, her mom’s convict boyfriend trying to sell her into a money-laundering scheme, and then getting caught thieving in town, Hush is faced with a tough decision—juvie or spending the summer recovering from her loco with the town’s herbal medicine specialist, Mabel. Little does Hush know she and Mabel have more in common than a history of dealing with locos; they also share the ability to heal, albeit in different ways: it turns out that Hush has the ability to lift pain from people with her hands. With a strong shake of America’s Southern culture, this title will whisk readers away with Hush and her community as they journey towards redemption, friendship, forgiveness and healing. With the credible voice and reasoning of a preteen, Harkey tackles heavy subject matter, exploring the effects and outcomes of parental abuse and humanizing her trailer park community without shying away from the grim troubles and realities of both situations. The book never lets the elements of magical realism become overconvenient devices, and instead of a neat resolution readers are left with a satisfyingly undone lesson that’s applicable to the masses—that pain can be a teacher, and “we should heed it.” Copyright © 2018 The Board of Trustees of the University of Illinois

Is it Worth Having the Sopranos on Board? Corporate Governance Pollution and Organized Crime: The Case of Italy

We investigate how connections to organized crime manifest on firms' financial statements and analyze the impact of these connections on firm performance outcomes. Using a unique dataset that identifies Italian firms connected to organized crime, we find that connected firms have lower profitability, even though they report higher sales and lower labor cost. Connected firms also have higher bank debt, report lower cash holdings, experience quicker operating cycles, and are more likely to file for bankruptcy. Further, we find that connected firms are more tax aggressive and engage in downward earnings manipulation. To corroborate our results, we exploit an amendment to the Italian Anti-Money Laundering regulation as a shock to the extent to which criminal organizations could expropriate connected firms' resources through money laundering. Our collective evidence suggests that connections to organized crime can drain a firm's resources, possibly through money-laundering schemes, and jeopardize its existence, thereby harming its shareholders.

The Robustness of EU Financial Crimes Legislation: A Critical Review of the EU and UK Anti-Fraud and Money Laundering Scheme

The paper investigates the European Union’s (EU) fight against crime as partly one of establishing the EU as an “Area of Freedom, Security and Justice” (AFSJ) and partly one of facilitating the EU internal market. We discuss the EU law on the fight against fraud and money laundering by zooming in on some recent and pertinent legal measures such as the Fourth Money Laundering Directive and the recent proposal for a Directive on Fraud. In addition, we address the key challenges in the United Kingdom when complying with the EU guidelines and possible consequences of Brexit.

Cave Pecuniam: Lawyers as Launderers

The attorney’s trust account is an enticing prospect for criminals seeking ways to launder money acquired illegally, and the attorney whose trust account is abused in this way stands to be branded and punished as a money launderer. The overall aim of the article is to identify the dangers which money launderers pose to attorneys and to highlight the need for vigilance in the face of these dangers. It analyses the anti-money laundering reporting obligations imposed on attorneys by the Financial Intelligence Centre Act and considers impact of these obligations upon the attorney-client relationship. Some of the ways in which a law practice may become implicated in the placement, layering and integration stages of the money laundering process are discussed, and cases which deal with attorneys’ involvement in money laundering schemes are presented.

The Robustness of EU Financial Crimes Legislation: A Critical Review of the EU and UK Anti-Fraud and Money Laundering Scheme

In this paper we set out to chart the European Union’s (EU) genesis of fighting crime as partly one of establishing the EU as an “Area of Freedom, Security and Justice” (AFSJ) and partly one of facilitating the EU internal market creation and the establishment of a global market place. We provide an overview of the current complexities facing the EU in its current struggles for a reformation and against statist approaches by focusing on the law on financial crimes and its contemporary challanges. When viewed in an historical perspective the EU’s tactic in the fight against financial crimes appears to depart from the classic internal market-based formula of the removal of obstacles for market creation and thereby ventures into the EU criminal law domain with all of its inherent complexities, without an adequately matured legal framework to endorse its policies from within. Second, to the extent that the EU adopts the market theory template in the EU policy area of ‘Freedom, Security and Justice’, there are global elements to the EU’s sanction policies. These features confirm a hybridity in which legal sources are interacting within the AFSJ field. We aim to critically assess the current state of play of the regulation of financial crimes in the contemporary EU. Furthermore, the paper focuses on recent developments in the area of financial crimes by looking at the framework for EU anti-fraud legislation: OLAF, the proposed EU Public prosecutor, the function of Eurojust and the proposed Directive of the European Parliament and of the Council on the fight against fraud to the Union's financial interests by means of criminal law. Specifically, we discuss the way the Fourth Anti-Money Laundering Directive came about and if, as claimed by the EU itself, it equips the EU with the right legal toolkit for fighting money laundering and terror financing. We also set out to scrutinize the constitutional implications of an increased powers vested in the EU Agencies in this area as powerful players for EU enforcement and we discuss the question of accountability as well as the problem of a human rights deficit in this area. We end however on a happier note by looking at the judiciaries concern to maintain individual data protection and the EU Court of Justice as a guarantee of proportionality and reasonableness in European legislative action.

Сучасні схеми відмивання злочинних коштів у світі та в Україні

Протидія відмиванню коштів, отриманих злочинним шляхом, та фінансуваннютероризму потребує вдосконалення класифікації типових та неординарних схем таметодів їх виявлення і попередження. Злочинці постійно удосконалюють свою май-стерність у відмиванні грошей, продовжується глобалізація таких процесів. Поряд збанками, що традиційно використовуються для відмивання грошей (як жертви абояк організатори-співучасники), набувають популярності системи електронних гро-шей. Виникають нові для України злочинні схеми, пов’язані з фінансуванням теро-ризму та приховуванням доходів, отриманих від корупційних схем. Відзначаєтьсянизька ефективність розкриття та покарання таких злочинів, незважаючи на те, щоНаціональний банк підвищив вимогливість до банків щодо функціонування службифінансового моніторингу. Пропонується запровадити в Україні порядок оприлюднен-ня інформації про розкриті правоохоронними органами схеми відмивання грошей(основні параметри), а також розробити інструментарії контрзаходів, спрямованих,з одного боку, на попередження таких схем, а з іншого – на їх своєчасне виявленняна рівні фінансових установ. Доцільно створити єдину базу даних про учасників та-ких схем, доступну для зацікавлених державних органів, а також типові параметрипідозрілостіосіб та операцій з відмивання грошей.

Trade in Human Beings: Evidence of Money Laundering From Sex Trafficking in India and the UK

The lack of data on the economic value-added of sex trafficking is largely explained by the fact that trafficking for sexual exploitation is usually part of the non-observed economy. In fact, the very notion of economic “value-added” may seem inappropriate when applied to sex trafficking and is sometimes rejected by anti-prostitution groups. The legality or illegality of sex trafficking is irrelevant, as both legal and illegal production should be included in the systems of national accounts. By excluding illegal or underground activities, national accounts would simply exclude monetary transactions that actually take place and hence would provide a distorted picture of reality. In view of these facts, the basic structure of criminal organizations involved in cross-border trafficking business and principles of distributing the proceeds between the various levels in these organizations based on the empirical data obtained through the field survey in India and the UK was revealed. The survey comprised 124 respondents from India and the UK, using multi-stage stratified sampling technique. The study also showed the various investment practices, typical money-laundering schemes for proceeds generated from sex trafficking in India and the UK.

<i>Cave Pecuniam:</i> Lawyers as Launderers

The attorney’s trust account is an enticing prospect for criminals seeking ways to launder money acquired illegally, and the attorney whose trust account is abused in this way stands to be branded and punished as a money launderer. The overall aim of the article is to identify the dangers which money launderers pose to attorneys and to highlight the need for vigilance in the face of these dangers. It analyses the anti-money laundering reporting obligations imposed on attorneys by the Financial Intelligence Centre Act and considers impact of these obligations upon the attorney-client relationship. Some of the ways in which a law practice may become implicated in the placement, layering and integration stages of the money laundering process are discussed, and cases which deal with attorneys’ involvement in money laundering schemes are presented.

Money Laundering Detection Framework to Link the Disparate and Evolving Schemes

Money launderers hide traces of their transactions with the involvement of entities that participate in sophisticated schemes. Money laundering detection requires unraveling concealed connections among multiple but seemingly unrelated human money laundering networks, ties among actors of those schemes, and amounts of funds transferred among those entities. The link among small networks, either financial or social, is the primary factor that facilitates money laundering. Hence, the analysis of relations among money laundering networks is required to present the full structure of complex schemes. We propose a framework that uses sequence matching, case-based analysis, social network analysis, and complex event processing to detect money laundering. Our framework captures an ongoing single scheme as an event, and associations among such ongoing sequence of events to capture complex relationships among evolving money laundering schemes. The framework can detect associated multiple money laundering networks even in the absence of some evidence. We validated the accuracy of detecting evolving money laundering schemes using a multi-phases test methodology. Our test used data generated from real-life cases, and extrapolated to generate more data from real-life schemes generator that we implemented.

Mapping “infected” real estate property

PurposeIn 2009, the research team of Unger and Nelen was requested to study the scale of entwinement between money laundering activities and the Dutch real estate sector. For this, the team developed a data mining framework to detect real estate property at risk of being part of a money laundering scheme. Part of this study involved a criminological testing of the developed framework which resulted in the statement that improvements and alterations are necessary to increase the framework's validity and reliability. This paper aims to review this framework and generate refinements.Design/methodology/approachThis paper is concerned with a review – on the basis of data mining theory – with respect to the original framework in order to generate refinements for a future model.FindingsIn general, three major shortcomings were identified, being: the use of unspecified detection clusters; the theoretical nature of some of the risk indicators in combination with data integrity issues; and the use of speculative/arbitrary risk indicators.Originality/valueAddressing these shortcomings in a future data mining framework will very likely increase its effectiveness and so, increase the ability of law enforcement agencies to counter money laundering activities more effectively and efficiently.

Organized crime, money laundering and legal economy: theory and simulations

This paper proposes a dynamic model to simulate the relationships between the profits of organized crime, money laundering and legal investments. We develop a macro framework in which organized crime can increase its possibilities to invest in the legal sector by resorting to effective but costly money laundering schemes. The model explores the conditions under which the effectiveness of money laundering causes a positive trend in the legal assets owned by the criminal organizations. We use the model to simulate the total amount of legal wealth generated by organized crime through drug trafficking in different world regions, with particular attention to Europe.

Banking, insurance

Selecting an Agent or Broker Perhaps as important as the question of which insurance coverages a bank should purchase is the decision made by the bank in selecting the agent or broker and insurer to meet its insurance and loss protection needs. Bankers are well aware of the Bank Secrecy Act handbook Know Your Customer rules, designed to mitigate the potential of the bank being defrauded in check fraud and money laundering schemes. The Office of the Comptroller of the Currency (OCC) acknowledges that firm Know Your Customer policies are a bank's most effective weapon against being used unwittingly to launder money. While the OCC is not involved in the process of assisting a bank in selecting an agent or broker or insurer, the value of knowing the parties the bank is dealing with in this arena is of critical importance as well. Fortunately, many commonsense criteria apply to the decision process associated with Knowing Your Agent or Broker and Insurer. The bank should examine a potential agent or broker with certain characteristics in mind. Their integrity should be unquestioned, while knowledge of the banking business is a prerequisite. At the same time, they must be experienced specifically in insurance coverage for banks; therefore they need access to the specialized financial services insurance markets. These are specialists focused to meet the loss protection needs of financial institutions. Last but certainly not least is how responsive the agent or broker to the needs of the insured. What type of customer service can the bank expect? Selecting an Insurer Similarly, when selecting an insurer, price is only one component of the decision making process. Many of the same attributes required of the agent or broker, may also be applied to the insurer as well. Of equal or greater importance, banks need to consider whether the insurer specializes in products for financial institutions, and can meet all of the bank's bonding, property and casualty insurance, and loss protection needs. Issues a bank may wish to consider in analyzing how a potential insurer may successfully meet its specific needs include the following: Does the insurer have a track record of underwriting and claims handling partnership with financial service firms with positive results? Does the insurer provide value-added services, such as educational materials for bank employees and directors, including loss control or risk management advice? Is there local representation that includes underwriting, and claims settling authority? How timely and responsive is the company's underwriting service? What's their turnaround time on quotations? What's their reputation for timely and responsive, and, most importantly, fair claims handling service? What do you really know about the insurer? What's their financial condition? Do they have a stable, consistent presence in the marketplace? By the same token, do they have underwriters who are experienced with a long-term presence and understanding of the financial services arena? Is the integrity of the company unquestioned? You need to be confident that confidential information that is disclosed to the underwriter will be kept in confidence. Where your operations are multistate, is the underwriter able to deliver the same coverage and service in every state you need? Are they licensed to write business in your state? An unlicensed insurer is not subject to the jurisdiction of your state insurance department, and no protection is afforded under the state guarantee fund. What to Insure Traditional banking exposures to loss are well documented and covered by basic insurance programs. Fire, theft, slip and fall, robbery, extortion demand, shareholder suits against board of directors are commonplace exposures to the financial services firm. Today's banker also needs to be cognizant of new exposures resulting from extraordinary events, new business opportunities, changes in law and regulations, and advancements in technology. …

Knowledge‐based anti‐money laundering: a software agent bank application

PurposeCriminal elements in today's technology‐driven society are using every means available at their disposal to launder the proceeds from their illegal activities. While many anti‐money laundering (AML) solutions have been in place for some time within the financial community, they face the challenge to adapt to the ever‐changing risk and methods in relation to money laundering (ML). This research seeks to focus on ML control and prevention, which aim to automate the monitoring and diagnosing of ML schemes in order to report suspicious activities to banks.Design/methodology/approachThe research adopted the technology of intelligent agents to provide a more adaptive, flexible, and knowledge‐based solution for AML.FindingsBased on the analysis of monitoring, diagnosing, and reporting of ML activities occurring in electronic transactions, several types of intelligent agents are proposed and a multi‐agent framework is presented for AML. Furthermore, business knowledge such as business rules and strategies are extracted from AML practice, and applied to the design of individual agents to make them act autonomously and collaboratively to fulfil the goal of ML detection.Practical implicationsThe proposed multi‐agent framework is a stand‐alone system, which can be integrated by banks to combat ML. Although it is a uni‐bank framework at present, it can be extended to multi‐bank application in the future.Originality/valueThe research explores the approach of applying an intelligent agent for knowledge‐based AML in an electronic transaction environment for banks. By separating business logic from the business model, such a business‐rules approach can enhance the flexibility and adaptability of the agent‐based AML system.

Exposure of financial institutions to criminal liability

PurposeSince, at least 9/11 financial institutions and financial intermediaries are considered to be at the forefront in the international attempt to halt illicit money transfer. Most financial institutions if involved at all play an unknowing or lax, but major role in dictating money laundering schemes. The purpose of this paper is to argue that to avoid sanctions including criminal liability, financial institutions and financial intermediaries must be better prepared and willing to assess prototypical money laundering typologies. To do otherwise will invite civil and criminal liability.Design/methodology/approachThis paper examines legislative pronouncements in general and US caselaw in particular in order to assess compliance and liability: real or imagined.FindingsThere appears to be considerable agreement concerning at least one goal of terrorists attacks and that is to disrupt directly and indirectly economic global stability. Further, those charged with the task of identifying terrorist assets in a financial system and developing a profile of terrorist financial transactions has, at least according to unclassified documents, proved to be futile. Closer international investigation and co‐operation appears to be more a slogan than a reality.Originality/valueReviews examples of blatant illegal acts of money laundering within the banking community and examines the exploding real estate market and its transmigration into the world of laundering illicit money.

Evolution of methods of money laundering in Latin America

Introduces the measures taken in South America’s Spanish, Portuguese and French speaking countries, and in the Spanish‐speaking Caribbean, to create a framework for combating money laundering; despite this, the outcome has been poor in terms of money laundering cases prosecuted, and the black economy in the four main drug producing countries is estimated as worth around US$13 billion a year. Gives a table of 39 money laundering schemes, indicating the effectiveness of each, and outlines trends in avoidance: avoiding the use of cash, development in methods of risk and control, and techniques based on penetration or control, like the “black market peso exchange” between the USA and Colombia. Moves on to improvements made by financial institutions and authorities against money laundering, based on three elements: expanding the application of “know your customer”, analysing use of services by customers, and establishing a reliable monitoring system for suspicious transactions.

The prosecution of lawyers for money laundering offences

Explains why and how lawyers become involved in money laundering schemes. Describes three recent cases of UK solicitors convicted for money laundering ‐ Denis Jebb, Louis Glatt and Noel Horner ‐ and notes that US lawyers are convicted more often than in the UK; this is possibly because in the USA there are more sting operations, phone intercepts, use of accomplice evidence, and a different exercise of prosecutorial discretion. Moves on to the services that lawyers provide launderers: advice, use of client accounts, purchase or sale of property, creation of corporate vehicles and trusts, lawyer ‐ client privilege, guarantees, introductions, powers of attorney, and false legal documentation. Discusses next the low level of disclosures by solicitors in the UK of suspicious transactions; reasons may be the general culture of non‐suspicion, the duty of client confidentiality, and confusion over laundering and tax evasion. Outlines new UK money laundering offences, which are likely to lead to an increase in the numbers of solicitor prosecutions.

Money laundering trends in South Africa

Reports a study by the Centre for the Study of Economic Crime at Rand Afrikaans University into the characteristics of money laundering schemes in South Africa; these were discussed at a workshop on December 5 2001. Outlines the 1998 Proceeds of Crime Act (POCA), the 1992 Drugs and Drug Trafficking Act and their general money laundering provisions, including negligence and intent, defence and penalties; also the racketeering provisions of POCA. Moves on to the reporting of suspicious transactions, where the POCA provisions will be repealed by the new Financial Intelligence Centre Act (FICA); this covers general obligations, secrecy and confidentiality, penalties, preventing tipping‐off, and reporting statistics. Gives examples of the schemes themselves, which fall into broad themes: purchase of goods and properties, abuse of businesses and financial institutions, cash and currency, and the informal sector; case studies include S v Dustigar, Motsepe v Commissioner of Inland Revenue, S v Van Zyl, S v Caswell, and Director of Public Prosecutions: Cape of Good Hope v Bathgate.

The InternationalNon Bis In IdemPrinciple: Resolving Some of the Unanswered Questions

Can a person who has agreed to an out-of-court settlement for a certain offence in country A still be prosecuted for the same offence in country B? What if a person is found guilty of theft in country C and is subsequently prosecuted in respect of the same facts, but under the charge of swindling in country D? Suppose two persons are suspected of having set up a money-laundering scheme, which involves financial transactions in several countries. Can the offenders still be prosecuted in one country concerned, after they have been acquitted for moneylaundering in one of the other countries?