Anti Money Laundering Blog

In the beginning of February, 11 people have pleaded guilty to a money-laundering scheme that caused big bank losses. The scheme led to losses of more than USD 2.5 million.

10 of the 11 defendants live in Houston. The criminals will be sentenced in April. All of them face up to 20 years in prison and a fine of USD 500,000.

According to US Attorney Don DeGabrielle, the scheme ran from May until August 2005. The US Postal Service led the investigation, which found that Uzoma Okechukwu Osuagwu, 35, obtained confidential bank accounts and identity information of people all over the USA while his co-conspirators opened bank accounts in Houston.

The stolen information was then used by Osuagwu to wire money to the Houston accounts. After that, the money was withdrawn and immediately divided among the 11 people.

Does Money Laundering Affect me, too? Yes, it does. While the effects of money laundering on individuals’ lives are obvious, its influence on people’s lives viewed more globally is… obvious, too.

Financial crime affects everyone. It affects everyone globally, too.

Far-reaching consequences of money laundering have already been indicated indirectly, however, the below-mentioned is to generalize and conclude the way it enormously complicates everything.

So, first of all, money laundering sponsors crime. With its help, drug traffickers, smugglers and other criminals have more possibilities and opportunities to expand their operations. As e result, it increases the expenses necessary for law enforcement and health care (in case of treating drug addictions, for instance).

Not global enough? Well… This provides the potential for undermining the financial community because of the enormous the sums involved in illegal proceeds. Accordingly, the potential for corruption increases at an enormous speed, too, as far as tons and tons illegally obtained money is available in circulation.

Then, laundering diminishes government tax revenue and (let it be indirectly, whatever) does harm honest taxpayers. Also, as a consequence, it reduces legitimate job opportunities.

So, how can it be even more decomposing for quality of life and national security?

On January 31, 2007, a news release was issued by the Bank of England in respect of the financial sanctions regarding terrorism.

As agent for Her Majesty’s Treasury, the Bank of England, issued a Notice aimed at publicizing a direction given by Her Majesty’s Treasury that some particular individuals are designated persons for the purposes of the Terrorism (United Nations Measures) Order 2006.

The above-mentioned means that any funds (meaning financial assets and benefits of every kind) or economic resources belonging to, owned or held by the individuals and entities are to be frozen. Also, in accordance with the Order, no funds, economic resources or financial services are to be available, either directly or indirectly, to the individuals without the authority of a licence.

The names of the individuals were listed in the notice and financial institutions are requested to check whether they maintain any accounts or economic resources or provide financial services to these individuals. If so, they are to freeze the accounts or whatever, to suspend the provision of financial services and report their findings to the Bank of England. The list is not the first one (a consolidated list has been published previously, and the particular names are not necessary to be indicated here – what is more important is that the world is taking serious measures against terrorist financing, and the story described above is just one of the instances to exemplify this fight.

The international trade system is rather vulnerable and, therefore, it can be exploited by criminal organizations and terrorist financiers. Criminals often find loopholes to launder the proceeds of crime and obtain funding to terrorists not being detected.

The international trade system seems very attractive to money-launderers because of many reasons. Enormous ever-growing volume of international trade, limited resources for detection at a disposal of many customs agencies and complex multiple foreign exchange transactions are just some of the above-mentioned factors of attractiveness. To add, nearly all economies have become more open to trade in last decade.

Trade-based money laundering is usually defined as the process of covering the proceeds of crime and moving value using trade transactions in order to legitimise their illegal nature.

Trade-based money laundering can be carried out by means of the mispresentation of the price, quality or quantity of goods and services. The basic techniques of trade-based money laundering are as follows:

• over- and under-invoicing of goods and services;

• over- and under-shipments of goods and services;

• multiple invoicing of goods and services;

• falsely described goods and services.

However, in practice, the basic techniques of trade-based money laundering are used not so often – usually money launderers use combinations of several basic techniques to develop a complex trade-based money laundering techniques. The examples of complex trade-based money laundering can be provided by almost any black market with numerous and complex criminal operations.

Swiss Finance Ministry is going to suggest several new measures for Switzerland’s anti-money laundering regulation for considering at a month- long public hearing.

The above-mentioned anti-money laundering measures are the finance ministry’s response to pressure from those banking lobby groups who demand changes to the Financial Action Task Force 40 anti-money laundering regulations.

Particularly, the finance ministry suggests that people carrying over CHF 25 000 (USD 20 000) across the country’s borders provide information to authorities when asked. However, the ministry proposes that, unlike within the European Union, they are not obliged to disclose the cash itself.

According to the announcement made by Hong Kong’s Security Bureau on January 26, 2007, customers’ identities and record transactions of USD 1 026 or more must be verified by remittance agents and money changers. The new requirements were worked out to meet the new international standard of combating money laundering and terrorism financing.

So, from January 26, 2007 on, customers must produce one of the following documents – Hong Kong identity cards, certificates of identity, documents of identity or travel documents – to reveal their identity, which must be verified. Also, customers must indicate their addresses and telephone numbers.

Agents and money changers now also must record and retain the particulars of the sender and, if the 2 are not the same person, of the instructor of any transaction.

Commissioner for Narcotics, Sally Wong, asked agents and money changers to include the sender’s information in the transactions, so that remittance would be provided to countries demanding such information. Wong also urged persons who came across suspicious transactions to report to the joint financial intelligence unit, which is a team set up jointly by Police and Customs departments.

China’s central bank suggests cracking down on a popular virtual currency, dubbed Q-coin, if it could be used for money laundering or harbor other risks.

The currency is widely used on the Internet. It is issued by a leading Internet community operator, Tencent, for the users of an on-line chat room QQ, which had 220 million users by March 2006. It is possible to buy this currency with bank cards, telephone cards or QQ cards at an official price of USD 00.125.

Initially, the currency was to be used to buy on-line services provided by Tencent, including electronic cartoon portraits, greeting cards, chips in on-line QQ games and anti-virus software. However, Q-coins began being used by many people when trading among themselves and buying services provided by other websites.

According to some experts, conversion between the Q-coin and the yuan, if unchecked, could involve dire economic consequences. Therefore, Li Chao, spokesman of the People’s Bank of China (PBOC) says that the central bank has begun to investigate the issue, and that it will crack down on virtual money if it is used for money laundering.