Introduction to Anti-Money Laundering

Transcription

1 Professional Development Course Introduction to Anti-Money Laundering COPYRIGHT Chartered Professional Accountants of British Columbia All rights reserved. No part of this publication/course material may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means (photocopying, electronic, mechanical, recording or otherwise) without the prior written permission of the copyright holder and publisher, applications for which shall be made to the Chartered Professional Accountants of British Columbia, West Hastings Street, Vancouver, BC V6B 4N6. DISCLAIMER This course material deals with complex matters and may not apply to particular facts and circumstances. As well, the course material and references contained therein reflect laws and practices which are subject to change. For these reasons, the course material should not be relied upon as a substitute for specialized professional advice in connection with any particular matter. Although the course material has been carefully prepared, neither the Chartered Professional Accountants of British Columbia, the course author and/or firm, nor any persons involved in the preparation and/or instruction of the material accepts legal responsibility for its contents or for any consequence arising from its use. September 2018

2 Anti Money Laundering 101 for Accountants Chartered Professional Accountants of British Columbia Vancouver, BC September 14, 2018 Money Laundering Pirate Style Captain William Kidd, 1690 Frederick Philipse, John N. Ahern Law Corporation,

3 Money Laundering Basics Definition, Types, Stages, Methods and Effects 3 What is Money Laundering? The process of making dirty money look clean by disguising the source of funds The disguising or concealing of illegally derived income to make it appear legitimate The use of money derived from illegal activity by concealing the identity of the individual who obtained the money and converting it to assets that appear to have come from a legitimate source 4 John N. Ahern Law Corporation,

4 Some Types of Money Launderers Pirates Criminals Tax Evaders Terrorists and Freedom Fighters Pariah Nations Wealthy Spouses and Ex Spouses 5 Three Stages of Money Laundering Placement Move dirty money into the financial system Deposit into financial institution or purchase assets Layering Distance dirty money from illegitimate source Move money around increase anonymity, make audit trail opaque Integration Place money that is now clean into the economy Normal personal and business transactions 6 John N. Ahern Law Corporation,

5 7 Common Money Laundering Methods Structuring/Smurfing Cryptocurrency Trade Based Money Laundering (TBML) Black Market Peso Exchange (BMPE) Free Trades Zones Panama, Shanghai, RAK Casinos Real Estate Pump and Dump Securities Scams 8 John N. Ahern Law Corporation,

6 Money Laundering in a Pump and Dump Set Up Stage Bad Guys set up Corporations A J Off shore, nominee officers Corporations A J open brokerage and bank accounts Off shore, nominee signatories Bad Guys set up domestic bank accounts Nominee signatories 9 Money Laundering in a Pump and Dump Execution Stage Corporations A J buy up shares in moribund companies listed on OTCBB Paper share certificates or shares issued out of treasury No more than 5% per Corporation A J Convert paper shares to electronic form Deposit into brokerage accounts of Corporations A J Conduct promotion ( pump ) By hired touts usually almost entirely fictitious representations Sell off when share price rises ( dump ) Transfer proceeds to domestic accounts 10 John N. Ahern Law Corporation,

7 Effects of Money Laundering Increased crime and corruption Lost tax revenue Distorted economy Weakened financial institutions Undermining of private sector Civil unrest 11 AML/CTF Regulatory Framework 12 John N. Ahern Law Corporation,

8 International Framework FATF (OECD, Paris) Regional FATF Style Bodies Basel Committee on Banking Supervision EU Directives on Money Laundering Egmont Group of Financial Intelligence Units Wolfsberg Group of Global Banks Development Banks Interpol IOSCO 13 Domestic Framework Proceeds of Crime (Money Laundering) and Terrorist Financing Act FINTRAC RCMP CBSA Criminal Code, Income Tax Act RCMP and other police forces CRA Securities Commissions Civil Forfeiture Offices 14 John N. Ahern Law Corporation,

9 Proceeds of Crime (Money Laundering) and Terrorist Financing Act Focus is on compliance Enforcement through administrative action Compliance orders and monetary penalties But PCMLTFA also provides for criminal prosecution Up to five years imprisonment and $500,000 fine 15 Accountants, the PCMLTFA and FINTRAC PCMLTFA, s. 5 and SOR , s. 34(1) Every accountant and every accounting firm is subject to the PCMLTFA when they engage in any of the following activities on behalf of any person or entity: receiving or paying funds purchasing or selling securities, real properties or business assets or entities transferring funds or securities by any means 16 John N. Ahern Law Corporation,

10 Exceptions SOR , s. 34(2) and (3) Does not apply to accountants when they engage in any of the activities referred to in s. 34(1) on behalf of their employer. Does not apply to audit, review or compilation engagements, carried out in accordance with the recommendations set out in the CICA Handbook. 17 If the PCMLTFA Applies to You, What Are Your Legal Duties? Recordkeeping PCMLTFA, ss. 6 and 9(3) and SOR , s. 36 Reporting suspicious transactions (STR) [You have reasonable grounds to believe the transaction is related to money laundering or terrorist financing] PCMLTFA, s. 7 Reporting large cash transactions ($10,000 or more) unless received from a financial institution (LCTR) SOR , s John N. Ahern Law Corporation,

11 PCMLTFA Enforcement Cases Kabul Farms Inc. v. Canada, 2015 FC 628, 2016 FCA 143 R. v. Au Canada Coin Exchange Inc. and Lazeo, [1998] B.C.J. No (S.C.) No accountant PCMLTFA cases currently reported on QuickLaw! 19 Criminal Code Focus on prosecution Money laundering offences (s ) Possession of proceeds of crime offences (s. 355(a)) Special procedures ( search, seizure, restraint, management, forfeiture) Up to 10 years imprisonment for ML or POC offences No accountant money launderer currently reported on QuickLaw! 20 John N. Ahern Law Corporation,

12 Examples of Criminal Code Cases R. v. Tortone, [1993] 2 SCR 973 Linking dirty money to the criminal act that produced it R. v. Tejani (1999), 123 OAC 329 Example of a money laundering sting operation R. v. Black, 2009 NBPC 329 The role of accounting in money laundering investigations R. v. Chun & Lech, 2014 QCCQ 8890 Laundering Quebec drug money in Cambodia R. v. Garnett, 2016 NSSC 131 A breath of fresh judicial air from the Maritimes 21 Compliance Programs 22 John N. Ahern Law Corporation,

13 Accountants and Compliance Recall PCMLTFA and Regulations Enforced by FINTRAC Requirements KYC Reporting to FINTRAC Recordkeeping 23 AML Compliance Program Protect organization from money laundering and terrorist financing Assess risks Ensure compliance by setting standards and policy KYC Report large cash transactions Identify and report suspicious transactions Keep required records Reality check have a trained compliance officer (CAMS) More problematic for small accounting firms But small organizations are not off the PCMLTFA hook 24 John N. Ahern Law Corporation,

14 Accountants as Gatekeepers Accountants (and Lawyers!) Foxes Guarding the Henhouse? 25 Gatekeeping Functions of Accountants (and Lawyers) Creating corporate vehicles Setting up trusts Buying and selling property (layering stage) Buying and selling property (integration stage) Performing financial transactions for client Providing financial and tax advice Difference between accountants and lawyers solicitor client privilege 26 John N. Ahern Law Corporation,

15 Gatekeeper Case Studies KPMG and the Isle of Man Trusts Law Society of British Columbia v. Gurney, 2017 LSBC Dealing with Police and CRA Investigations of Your Clients When Police or Your Friendly Neighbourhood Tax Folks Come Calling 28 John N. Ahern Law Corporation,

16 The Law Enforcement Investigation Investigations are usually generated by STRs and tips Criminal investigators use Information requests Production orders Search warrants Restraint orders Witness interviews Arrest and interrogation of suspects 29 Responding to the Investigation Follow any organizational policy that may be in place Appoint one person to manage your organization s response Assess risks to your organization and the client Consider whether to advise senior management Ensure investigators requests are focused and lawful Understand and comply with lawful judicial orders Consider whether to retain legal counsel 30 John N. Ahern Law Corporation,

17 John N. Ahern Law Corporation John N. Ahern Senior Legal Counsel John N. Ahern Law Corporation 890 West Pender Street, Suite 600 Vancouver, BC V6C 1J John N. Ahern Law Corporation,