Money Laundering and

Terrorist Financing in a
Nutshell
Basic KNOW-HOW

C h a p t e r 1
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AGENDA 01 Preface
Money Laundering and Terrorist Financing as Financial Crime, Link between ML And TF

02 Money Laundering (ML)

Definition, Methods, Process, Professional Money Laundering

03 Terrorist Financing (TF)

Definition, Sources, Process, Access

04 Why Money Laundering Matters?

Key Figures and Facts , Socioeconomic Costs

05 Asian Money Laundering Scandals

FICO Asia Pacific Fraud Forum Survey Result

06 Evolution of ML and TF Guidelines

Global Perspective, Bangladesh Perspective

07 AML/CTF Policy Guideline

Policies, Procedure and Programs, Pillars of AML/CTF
Financial Crime is an increasing concern for all financial institutions, which is developing rapidly and equally
together with technology. May be not limited to money laundering and terrorist financing, these two form of
financial crime deserve to be attended with utmost care.

The evolving challenges of Money Laundering (ML) and Terrorist Financing (TF) lead the evolution of anti-money
laundering and counter terrorist financing convention and regulations. These conventions give birth of several
international organizations to combat the impact of ML and TF.

Money Terrorist
Laundering Financing

Money Laundering is the process of concealing Terrorist financing is the collection or the provision
the illicit proceeds origins of proceeds of crimes of funds for terrorist purpose.

Funds can steam from both legal and illicit

Funds are always of illicit origins $ sources.

Not all ML is TF

But most of TF is ML

M o n e y L a u n d e r i n g a n d T e r r o r i s t F i n a n c i n g a r e L i n k e d

Copyright © Md. Moulude Hossain. All Rights Reserved.


Broadly, the definition of Money Laundering includes but not
limited to the following three components:
Conversion
The conversion or transfer of property, knowing it derived
from a criminal offense, for the purpose of concealing or
01 disguising illicit origin or of the assisting any person who
involve in commission of the crime to evade the legal
consequences of his actions.
02
Concealment
The concealment of disguising of the true nature, source,
location, disposition, movement, rights with respect to, or
ownership of the property knowing that it is derived from a
criminal offense.
Acquisition
03 The acquisition, possession or use of property, knowing at
the time of its receipt that it was derived from a criminal
offense or from participation in a crime.
Money Laundering - Definition
Money laundering involves taking proceeds obtained via
criminal activity and disguising their origin to make them
appear to have been derived from a legitimate source.
This allows criminals to realize the benefits of their crimes.
Money laundering is a type of financial crime; other
financial crimes include fraud and terrorism financing. All
financial crimes exact substantial costs to individuals and
institutions and can have potentially devastating
consequences for society.
“
Money-laundering is the process
that disguises illegal profits without
compromising the criminals who
wish to benefit from the proceeds.
United Nations Office on Drugs and Crime
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01
STRUCTURING
Often known as smurfing,
whereby cash is broken into
smaller deposits of money,
used to defeat suspicion of
money laundering.
07
BANK CAPTURE
Money launderers or
criminals buy a controlling
interest in a bank, preferably
in a jurisdiction with weak
money laundering controls,
and then move money
through the bank without
scrutiny.
02 03 04 05 06
BULK CASH SMUGGLING CASH-INTENSIVE BUSINESSES TRADE-BASED LAUNDERING SHELL COMPANIES & TRUSTS ROUND-TRIPPING
Pysically smuggling cash to Business typically expected to Under- or over-valuing Trusts and shell companies Money deposited in a
another jurisdiction and receive a large proportion of its invoices to disguise the disguise the true owners of controlled foreign corporation
depositing it in a financial revenue as cash uses its movement of money. money. Trusts and corporate offshore, preferably in a tax
institution, such as an accounts to deposit criminally vehicles, depending on the haven where minimal records
offshore bank derived cash jurisdiction, need not disclose are kept, and then shipped
their true owner. back as a foreign direct
investment.
Money Laundering - Methods
08 09 10 11 12
CASINOS OTHER GAMBLING BLACK SALARIES TAX AMNESTIES TRANSACTION LAUNDERING
An individual walks into a Money is spent on gambling, A company may have Those that legalize Merchant unknowingly
casino and buys chips with preferably on high odds unregistered employees unreported assets and cash processes illicit credit card
illicit cash. The individual will games. One way to minimize without written contracts in tax havens. transactions for another
then play for a relatively risk with this method is to bet and pay them cash salaries. business[19]. It is a growing
short time. on every possible outcome Dirty money might be used problem[20][21] and
of some event that has many to pay them. recognized as distinct from
possible outcomes, traditional money laundering
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 Money Laundering –
Sources, Process,
Access

Placement Layering Integration

Goal:
Goal: Goal:
Sources of Funds Conceal the criminal origin of
To deposit criminal proceeds into the Create an apparent legal origin for Sources of Proceeds
Tax Crimes, fraud, proceeds
financial system criminal processes For potential benefits
embezzlement,
Common Methods: to commit financial
drugs, theft, Common Methods: Common Methods:
• Wire Transfer crime purpose.
bribery, • Currency Smuggling • Property Dealing
• Cash converted into Monetary
• Bank Complicity • Front Companies and False Loans
corruption Instruments
• Currency Exchanges • Foreign Bank Complicity
• Withdrawal of Cash
• Securities Brokers • False Import/Export Invoices
• Cash deposit in multiple bank
• Blending of Funds • Disguise ownership of assets
accounts
• Asset Purchase
• Split and merge of various bank
accounts

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Professional Money Laundering (PML)
Professional money launderers (PMLs) that specialise in
enabling criminals to evade anti-money laundering and
counter terrorist financing safeguards and sanctions in
order to enjoy the profits from illegal activities.

Individual PML Organizational ML Network based PML

who possesses specialised skills or
expertise in placing, moving and
laundering funds. They specialise in
the provision of ML services, which
can also be performed while
acting in a legitimate, professional
occupation.
Professional ML organization
(PMLO), which consists of two or
more individuals acting as an
autonomous, structured group that
specialises in providing services or
advice to launder money for
criminals or other OCGs.
Professional money laundering
network (PMLN), which is a
collection of associates or
contacts working together to
facilitate PML schemes and/or
subcontract their services for
specific tasks.

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Terrorist Financing refers to the processing of
funds to sponsor or facilitate terrorist activity. A
terrorist group builds and maintains an
Terrorist Financing- Definition
infrastructure to facilitate the development of
sources of funding for their own requirements
and possibly to launder the funds used in
terrorist activity.
Receive money, service or any
1 other property in favour of terrorist
individual or group:
If any person or entity knowingly,
from legal or illegal sources, directly
or indirectly with intention to receive
money, services or any other Supply money, services or any other
property, supply or make 2 property to the terrorist individual or
group.
arrangement: which has reasonable
ground to believe that may be used
in full or partially in terrorist activities
(as described in section 6 of ATA Make arrangement of money,
2009) or may be used by terrorist 3 services or any other property to the
terrorist individual or group.
individual or entities for same reason.

- Anti Terrorism Act 2009, Bangladesh Copyright © Md. Moulude Hossain. All Rights Reserved.
 Terrorist Financing- Sources, Process, Access

Raise Move Store Spend

Sources: Spending:
Donation Terrorist
Self funding Movement,
Criminal PLACEMENT LAYERING INTEGRATION
Buying arms,
Activities explosives,
Undisclosed bribery etc.
Sources
Fund raising from
Fund moved to Funds streams Terrorist operators
legitimate and
terrorists and stored in get access to the
illicit sources for
organizations different fund and sped to
the purpose of
using formal and variations for the execute different
financing
informal methods purpose of use terrorist activities
terrorism.

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Why Money Laundering Matters: Key Figures and Facts

Trillion Annually in Money Laundering

$ 1.6 Money-Laundering
Transactions in
20091
2.7% Transactions are 2.7%
of GDP Worldwide in
20091

0.2% $25.3 BILLION 53%

Global AML seizes The cost of AML The cost of regulatory
less than 0.2% of compliance across compliance is rising
laundered U.S. financial services 53% annually3
money2 firms per year4

1. UNODC report: Estimating illicit financial flows resulting from drug trafficking and other transnational organized crimes, October 2011
2. “Why the World is so Bad at Tracking Dirty Money.” Bloomberg 2015
3. Global Anti-Money-Laundering Survey, KPMG, 2014 Copyright
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Md.Moulude
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4. riskscreen.com/kyc360/news/anti-money-laundering-compliance-costs-u-s-financial-services-firms-25-billion-annually-study/
 Social Costs
Why Money Laundering Matters: of Money Laundering
Socioeconomic Costs

01 Undermining the Integrity of Financial Markets

Money laundering is a crime

02 Undermining the Legitimate Private Sector
which brings about adverse
effects in a long time by 03 Economic Distortion and Instability
destroying the balance in
financial markets and volatility 04 Loss of Control of Economic Policy
funds in banks and financial
institutions and by influencing 05 Increase in social deviations
political and economic officials
and authorities. 06 Risks to Privatization Efforts

”
07 Increase cost for law enforcement and health care

08 Reputation Risk and Loss of Revenue

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Md.Moulude
Moulude Hossain.
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Asian Money Laundering Recent Asian money laundering scandals continue to shake up the
financial world, and the ripple effect is still keenly felt across the region.

Scandals: Banks Fear A Silicon Valley analytics firm FICO recently conducted a survey with
regional banks and found that more than 90 percent of them fear they or

Large Breach their peers, may risk inadvertently facilitating the next money laundering
scandal.

FICO Asia Pacific Fraud Forum Survey Result

91% 33% 22% 20%

Asia Pacific banks think the Respondents think that Respondents think that Respondents think that
industry is still at risk of beyond banking biggest beyond banking biggest beyond banking biggest
inadvertently facilitating next laundering risks laundering risks laundering risks
money laundering scandal. Is cryptocurrenancy. Is shadow banking. Is property transaction.

Thinks POLITICAL CONSTRAINTS

Thinks LACK OF RESOURCES is the
Thinks LACK OF EXPERTISE is the key IMPOSED BY GOVERNMENT is the
key reason why banks remain
reason why banks remain exposed. key reason why banks remain
exposed.
exposed.
Copyright © Md. Moulude Hossain. All Rights Reserved.
Evolution of AML and CTF Guidelines – Global Perspective
This is a sample text and here you need to add your own text that describes your own concept in your way and that fit best
for your topic and make it simple as much as you can that is better

1988
Vienna Convention
UN Convention Against Illicit Traffic in Narcotic
Drugs and Psychotropic Substances

1989
FATF (Money Laundering)
The Financial Action Task Force (on Money
Laundering) (FATF), founded on the initiative of
the G7 to develop policies to combat money
laundering. In 2001 its mandate expanded to
include terrorism financing.

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 1990
Strasbourg Convention
EU Convention on Laundering, Search,
Seizure and Confiscation of the Proceeds
from Crime.

1994
IAIS (Insurance)
IAIS represents insurance regulators and
supervisors of some 180 jurisdictions in more
than 130 countries, constituting 97% of the
world's insurance premiums.

1995
Egmont Group FIU
Development of a financial intelligence units
(FIU) network, a group of FIUs at the Egmont
Arenberg Palace in Brussels.

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 1997
APG (Money Laundering)
An autonomous and collaborative
international organization founded in
Bangkok, Thailand to provide support for AML
and CTF initiatives by member countries.

1999
Terrorist Financing Convention
Formerly known as (International Convention for
the Suppression of the Financing of Terrorism) is a
United Nations treaty designed to criminalize acts
of financing acts of terrorism. Effective from 2002.

2001
UN Palermo Convention
UN Convention Against
Transnational Organized Crime

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 2005
EU Warsaw Convention
Council of Europe Convention on
Laundering, Search, Seizure and
Confiscation of the Proceeds from Crime
and on the Financing of Terrorism.

2005
UN Merida Convention
UN Convention Against
Corruption

2012 FATF Revised Standards

The FATF Revised Standards comprise the Recommendations
adopted on 16 February 2012 and updated regularly since.

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Evolution of AML and CTF Guidelines – Bangladesh Perspective

Money Laundering Prevention Act Money Laundering Prevention Act,

(2002) replaced by the Money 2012 and Anti Money Laundering
Laundering Prevention Ordinance Department transformed as the
2008 Bangladesh Financial Intelligence
Unit (BFIU)

2002 2009 2013

2008 2012

The first anti-money laundering Money Laundering Prevention

legislation in Bangladesh was the
Money Laundering Prevention Act,
2002 and establishment of 'Anti
Money Laundering Department'
BFIU has also achieved the
Ordinance (2008) repealed by
membership of Egmont
the Money Laundering Prevention
Group
Act, 2009
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AML/CTF Policy Guideline: Policies, Procedure and Programs

AML/CTF Policies, Procedures and Programs are the starting point fro reporting entities to comply with
local laws and regulations as well as institutional risk mitigation process.

AML/CTF Policies

AML/CTF policy is the highest level of institutional AML/CTF

commitment to mitigate AML/CTF risks and comply with Policies
the laws and regulations

AML/CTF Procedures
AML/CTF
A detail document that specify AML measures to comply Procedures AML/CTF Policy
with AML/CTF policies, laws, regulations and best practices. Guideline
Categorizes as Institutional & Operational Procedures.

AML/CTF Programs
AML/CTF
A working document for relevant staffs with detailed Programs
checklist of each component of AML/CTF procedures to
undertake reporting entities day to day activities.

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AML/CTF Policy Guideline:
Pillars of AML/CTF This revised rule adds a fifth core element to
the original four core elements of an
effective BSA and anti-money laundering
compliance program. These core elements
are often referred to as the “pillars.
The U.S. Department of the Treasury’s
Financial Crimes Enforcement Network
issued a final rule in 2016 that imposed
new requirements for identifying and
1 2 3 4 5
verifying beneficial owners of legal-
entity customers. This new rule,
amending the Bank Secrecy Act,
became effective in July 2016, and all

individual responsible for

day-to-day compliance
federally insured credit unions must

Training for appropriate

Independent testing of

Risk-based procedures
BSA/AML compliance
The designation of an
ongoing compliance
comply fully by May 11, 2018.

A system of internal

for customer due

controls to ensure

personnel

diligence
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References
1. Money Laundering Prevention Act, 2012 [Act no 5 of 2012], Bangladesh Bank.
2. Anti Money Laundering and Counter Financing of Terrorism Compliances, Md. Masud
Rana (2018)
3. UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances
(1988) (Vienna Convention);
4. International Convention for the Suppression of Financing of Terrorism (1999) (SFT
Convention);
5. Convention against Transnational Organised Crime (2000) (Palermo Convention);
6. Convention on Corruption (2003) (Merida Convention);
7. FATF Forty Recommendations on Money Laundering (2003) (FATF 40
Recommendations); and
8. FATF Nine Special Recommendations on Terrorist Financing (2001) (FATF Special
Recommendations).

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 Coming Up NEXT

Anti Money Laundering

and Counter Terrorist
Financing in a Nutshell
How to Combat ML and TF

C h a p t e r 2

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