BGLC WELCOMES YOU TO THE Anti-Money Laundering Training Session now Proceeds of Crime Act (POCA) 2007:
What is Money Laundering? 1. The term Money Laundering refers to all procedures, methods and transactions designed to change the identity of illegally obtained money so that it appears to have obtained from a legitimate source. 2
What is Money Laundering? Money Laundering (ML) is the process through which criminals introduce the proceeds of their illegal activities, often in the form of cash, into the financial system. Once safely introduced into the Financial System criminals manipulate the funds to take on the appearance of clean money funds derived from legitimate business activity and untraceable back to the criminal origins. 3
What is Money Laundering? There are two common misconception about Money Laundering: 1.The first Misconception Money Laundering (M/L) just involves drug trafficking. This is only partially correct, and is a misconception that hinders overall detection of illegal activity that may be money laundering. M/L is any action taken to conceal the source of funds that derived from any criminal activity not just narcotic sales. 4
What is Money Laundering? 2. Second Misconception M/L just involves cash; It is true that the majority of illegal activity generates profits in cash, and these cash profits are often deposited into the banking system, and that is Money Laundering. However, these same funds, once deposited, are often wire transferred from one account to another and from one institution to another. 5
What is Money Laundering? The proceeds of a bank robbery deposited to the credit of an account would also represent proceeds of crime, and the act of depositing the stolen cash into a bank account could be deemed Money Laundering. When the funds obtained from fraud or employee defalcation are put in another bank account, or used to purchase something then there is Money Laundering. 6
What is Money Laundering? Each time these funds are wired from one account to another, or from one institution to another money laundering also occurs. Using those funds to buy securities, jewelry, a yacht, or a piece of property is laundering as well. In recent years studies have identified an increase in trade-based money laundering 7
What is Money Laundering? e.g Invoice inflation or deflation, intermingling of funds from illegal activities with funds derived from a front business operation. The point is that any transaction, whether through the banking system or not can be money laundering, if it involves the Proceeds of Crime. 8
Why is Preventing Money Laundering Important? Money Laundering contributes to social problems and violence caused by crime. There is ample evidence that the easier it is for criminals to launder money, the more prevalent violent crime is, particularly with the illegal drug trade, Cash for gold, & lotto scamming. Since banking depends on the confidence of its customers, shareholders and regulators, sound anti-money laundering policies and procedures are integral to maintaining that public trust. 9
What are stages of Money Laundering? Money Laundering is a dynamic three stage process that requires: Placement moving the funds from direct association with the crime Layering disguising the trail to foil pursuit; and Integration making the money available to the criminal once again with its occupational and geographic origins hidden from view. 10
What are stages of Money Laundering? The criminal objective in these multiple transactions is to create as much distance as possible between the crime that generated the proceeds and the proceeds themselves. A criminal s goal can be considered the three C s of Money Laundering. Conceal the origin and ownership of the funds Change the form of the money to recycle it into the economy; and Control the movement of the funds to avoid detection 11
What are stages of Money Laundering? The majority of criminal activity generates proceeds in cash, which criminals attempt to introduce into the banking system as either deposits to existing accounts or as cash payments for other negotiable instruments such as bank drafts, cashiers cheques travelers cheques or wire transfers. This phase of the money laundering cycle is referred to as the placement stage; Generally this is our best opportunity to identify unusual and potentially suspicious activity. 12
Why was Legislation Needed? Most crimes are committed for profit Organized crime was on the increase and affected all areas of the society Existing legislation was inadequate Majority of proceeds from crime went untaxed Hence we had the M/Laundering Act of 1998 13
Why was Legislation Needed? Creation of the Proceeds of Crime Act (POCA) POCA was introduced for two major reasons: 1. To strengthen government s effort to detect and confiscate money and property obtained through criminal acts; and 2. To better prevent and detect and confiscate in instances of money laundering 14
What is the Proceeds of Crime Act? POCA was enacted because previous laws introduced in the 1990s particularly the Drug offences (Forfeiture of Proceeds Act) and the Money Laundering Act were not adequately meeting the challenges of the time. POCA fulfilled several requirements arising from the Vienna Convention, the International Financial Action Task Force and the Caribbean Financial Action Task Force 15
What is the Proceeds of Crime Act? POCA was passed by Parliament and signed by the Governor General in March 2007. POCA requires institutions to establish and implement programmes, policies, procedures, and controls they feel are necessary to prevent or detect money laundering. Regardless of their exact form, these programmes and policies must include five things: 16
What is the Proceeds of Crime Act? 1. Procedures that ensure customer s integrity and legitimate business relationships; 2. Procedures that ensure a high standard of integrity among employees 3. A system for evaluating employees personal employment and financial histories 4. Continuing education for all staff members about their responsibilities under POCA; and 5. Independent audits to ensure that appropriate Antimoney Laundering programmes are in place 17
Indicators to support the Detection of Money Laundering activity 1. Broad Risks in the Gaming & Betting Industry: Casinos are by definition non-financial institutions. As part of their operation casinos offer gambling for entertainment, but also undertake various activities that are similar to financial institutions, which put them at risk of money laundering. 18
Indicators to support the Detection of Money Laundering activity Most, if not all, casinos conduct financial activities akin to financial institutions including: accepting funds on account, conducting money exchange, money transfers, currency exchange, stored value services debit card cashing facilities, cheque cashing, safety deposit boxes, etc. In many cases these financial services are available 24 hours per day. 19
Indicators to support the Detection of Money Laundering activity It is the variety, frequency and volume of transactions that makes the casino sector particularly vulnerable to money laundering. Casinos are by nature a cash intensive business and the majority of transactions are cash based. During a single visit to a casino a customer may undertake one or many cash or electronic transactions, at either the buy in stage, during play, or at the cash out stage. 20
Indicators to support the Detection of Money Laundering activity It is this routine exchange of cash for casino chips or plagues, TITO tickets and certified cheques, as well as the provision of electronic transactions to and from casino deposit accounts, the movement of funds in and out of the financial sector, which makes casino an attractive target for those attempting to launder money. 21
Definitions - Terms The buy in stage is when a customer enters a casino and purchases casino chips, tickets, or gaming machine credits in order to commence gambling. The cash out stage is when a customer converts casino chips, tickets or gaming machine credits for cash, casino cheque, credit an account or transfer funds to another casino. The term casino chip also refers to plaques and other wagering instruments provided by the casino 22
Definitions - Terms Ticket In/Ticket Out (TITO) is a gaming machine system that allows a gaming machine to accept either bank notes or tickets with a credit value printed on them. (Ticket In) to commence playing. TITO also prints tickets with a credit value when a player wishes to cash out of the gaming machine (Ticket Out). The player can then 23
Definitions - Terms redeem his/her ticket for cash at a cashier s desk, ticket redemption kiosk, or insert the ticket into another TITO machine and continue playing. Casinos are attractive venues for criminals. They are consistently targeted by criminals for criminal influence and criminal exploitation. Organized crime groups seek to control or own casinos or aspects of casino operations. Criminals attempt to infiltrate or influence casinos to facilitate theft, fraud, money laundering and other crimes. 24
Definitions - Terms A core function of all casino regulators is making certain that gaming is conducted honestly by approving the rules of the game and requiring operators to provide a high standard of surveillance and security systems. This ensures public confidence in the gaming product, minimizes opportunities for criminal activities and provides certainty of government revenue streams. 25
Definitions - Terms Gaming venues attract ancillary criminal activities including loan sharking, vice and other crimes. Loan sharking (also known as usury) is prevalent in casinos in a number of jurisdictions. Loan sharking is a crime that involves loaning money to individuals at an interest rate that is above a maximum interest rate, sometimes collected under blackmail or threats of violence. Loan sharks may be financed and supported by organized crime networks who are also involved in money laundering activities. 26
Indicators of ML using casino value instruments Inserting funds into gaming machines and immediately claiming those funds as credits Customers claiming gaming machine credits/payouts with no jackpot Customers claiming a high level of gaming payouts Noticeable spending/betting pattern changes Customers frequently inserting substantial amounts of banknotes in gaming machines 27
Indicators of ML using casino value instruments that have high payout percentages and do not play max bet to limit chances of significant losses or wins, thereby accumulating gaming credits with minimal play Customers purchases chips and leaves the casino shortly after Frequent purchase of casino gift certificates High volume of transaction within a short period 28
Indicators of ML using casino value instruments Structuring: Structuring or surfing involves the distribution of a large amount of cash into a number of smaller transactions in order to minimize suspicion and evade threshold reporting requirements. Common methods of structuring include: Regularly depositing or transacting similar amounts of cash, which are below a country s reporting disclosure limit 29
Indicators of ML using casino value instruments The use of third parties to undertake transactions using single or multiple accounts Using cheques from multiple financial institutions or branches of a financial institution to buy in while the amount of each cheque is below the reporting threshold Utilizing shift changes to systematically cash in chips or other value instruments to avoid threshold reporting 30
Indicators of ML using casino value instruments Regularly switching gaming tables, gaming rooms, junkets or casinos within a chain when the wagering amounts are approaching the reporting threshold Requesting the division of winnings or prize money, which exceeds the reporting threshold, to be broken down into cash and chips below the reporting threshold in order to exchange it at the cashier s desk. 31
Indicators of ML using casino value instruments Refining refers to the exchanging of low denomination for high denomination currency; 32
Indicators of ML using structuring/refining methods Activity was inconsistent with the customers profile Associations with multiple accounts under multiple names Using of multiple names to conduct similar activity Depositing multiple amounts of cash and receiving multiple cheques drawn on that account 33
Indicators of ML using structuring/refining methods Multiple individuals sending funds to the one beneficiary Cheque issued to a family member of the person 34
Casino Accounts & Facilities Casino accounts provide criminals further opportunities to attempt to laundering crime proceeds. Many casinos offer deposit accounts and lines of credit with less scrutiny and Customer Due Diligence (CDD) requirements than financial institutions. The frequent movement of funds between Financial institutions and casinos or between casino accounts held in different casinos may be vulnerable for money laundering. 35
Casino Accounts & Facilities Many casinos offer private safe deposit boxes, particularly to VIP/High end customers. These present a risk due to lack of transparency with the use of such boxes and the possibility for third parties to be given access to these boxes via a password or key, to facilitate financial transactions. 36
To Prevent Money Laundering Maintain Vigilance Know your clients players refusing to provide identification - Reluctance to disclose Source of funds Ensure effective AML/CFT controls are in place (Counter Financing & Terrorism) Ongoing training for employees Ensure employees competence to perform the functions as authorized by their employment license 37
Summary Critical features of any AML/POCA regime is: 1. Protection of the Financial System 2. Co-operation between other regulators, enforcement agencies and front line staff within the industry 38
Penalties for Non-Reporting Under POCA only institutions can be penalized for failure to submit required reports to the Designated Authority (although the Nominated Officer can be charged for nondisclosure). Failure to file a report a fine of $400,000 An institution found guilty of concealing or dealing with criminal property a fine of up to $5,000,000 39
Penalties for Non-Reporting Individuals can be penalized for five types of Money Laundering: 1. For dealing or concealing with criminal property a fine of $3 million, up to five years in prison or both; 2. Acquiring, using, or possessing criminal property fine up to $3 million, up to 5 years in prison or both; 40
Penalties for Non-Reporting 3. Employee non-disclosure up to $1 million fine up to 1 year in prison or both 4. Non-disclosure by the Nominated Officer up to $1 million fine up to 1 year in prison or both 5. Tipping off up to $1 million fine up to 1 year in prison 41