AML/CFT Practice Flashcards

Comprehensive vocabulary flashcards covering money laundering stages, regulatory frameworks, risk factors, and legal concepts based on the ACAMS lecture notes.

Money Laundering

The process of taking criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal activities; making "dirty money" look "clean."

Placement

The first stage of money laundering involving the physical disposal of cash or other assets derived from criminal activity.

Layering

The second stage of money laundering involving the separation of illicit proceeds from their source through layers of financial transactions intended to obscure the audit trail and conceal the origin.

Integration

The third stage of money laundering involving supplying apparent legitimacy to illicit wealth through the reentry of funds into the economy via normal business or personal transactions.

Yates Memo

A memorandum reminding prosecutors that criminal and civil investigations into corporate misconduct should focus on individuals and that corporate settlements do not protect individuals from liability.

Remote Deposit Capture (RDC)

A bank product allowing customers to scan a check and transmit an electronic image to the bank for deposit, which decreases human intervention and the ability to identify potential fraud.

Payable Through Accounts (PTAs)

Accounts at a correspondent bank where the respondent bank's customers have direct access to conduct transactions, posing risks when CDD is not applied to subaccount holders.

Concentration Accounts

Internal bank accounts used to process and settle multiple transactions; they pose money laundering risks if customer-identifying information is separated from the audit trail.

Politically Exposed Person (PEP)

An individual entrusted with a prominent public function domestically, by a foreign country, or an international organization, including their relatives and close associates.

Structuring

Designing transactions to evade reporting or recordkeeping requirements, such as breaking a large cash deposit into amounts below reporting thresholds.

Third-Party Payment Processors (TPPPs)

Service providers that process payments for merchant clients through their own bank accounts, potentially obscuring suspicious activity across multiple financial organizations.

Money Services Businesses (MSBs)

Entities like currency exchanges and money remitters that can be used by launderers to make funds available in local currencies in destination countries.

Black Market Peso Exchange (BMPE)

A form of trade-based money laundering where illegal US dollar proceeds are purchased by peso brokers, deposited into US banks, and used by legitimate businesses to buy goods for export.

Gatekeepers

Professionals such as attorneys, notaries, accountants, and auditors who can be used by launderers to create corporate vehicles, perform financial transactions, or provide introductions to financial organizations.

Willful Blindness

The deliberate avoidance of knowledge of the facts or purposeful indifference; legally equivalent to actual knowledge of a money laundering transaction.

Microstructuring

A method of placing illicit cash into the financial system by breaking it into many very small deposits, such as taking $18,000$ and making $20$ deposits of approximately $900$ each.

Trust and Company Service Providers (TCSPs)

Entities that act as formation agents, directors, secretaries, or trustees for legal persons and arrangements to provide business addresses or nominee shareholder services.

Shell Company

A company used to convert criminal proceeds into alternative assets, provide a perception of legitimacy, and conceal the ultimate beneficial owner.

Bearer Securities

Bonds or stock certificates that belong to the physical holder and lack a registry of owners, making them prime vehicles for disguising ownership.

Hawalas

Informal value transfer systems attractive to terrorist financiers because they lack formal government oversight and standard recordkeeping.

Reputational Risk

The potential for adverse publicity regarding an organization's business practices to cause a loss of public confidence in the integrity of the institution.

USA PATRIOT Act

US legislation passed after the September 11, 2001 terrorist attacks to strengthen money laundering laws and improve mechanisms to disable terrorist financing.

Free-look Period

A feature in insurance allowing investors to cancel a policy shortly after the premium is paid without penalty, potentially resulting in a refund check of "cleaned" funds.

Financial Intelligence Units (FIUs)

National agencies that receive and analyze suspicious transaction reports and disseminate resulting intelligence to law enforcement and foreign counterparts.

FATF Black List

A list of countries and jurisdictions with strategic AML/CFT deficiencies so serious that the FATF calls for the application of enhanced due diligence and countermeasures.

FATF Grey List

A list of jurisdictions under increased monitoring that have committed to swiftly resolving identified strategic AML/CFT deficiencies within an agreed-upon timeframe.

The Four Pillars of AML/CFT

A system of internal policies/controls; a designated compliance officer; an ongoing employee training program; and an independent audit function.

Office of Foreign Assets Control (OFAC)

A division of the U.S. Department of Treasury that enforces economic and trade sanctions and maintains the Specially Designated Nationals and Blocked Persons (SDN) list.

Egmont Group

An international organization providing a forum for FIUs to improve cooperation and securely share information to fight money laundering and terrorist financing.

Commission Rogatoire

A written request for evidence (also known as letters rogatory) sent by the central authority of one country to the central authority of another during a criminal investigation.

Mutual Legal Assistance Treaty (MLAT)

A bilateral agreement that provides a legal basis for transmitting evidence between two countries for prosecution and judicial proceedings.

Smurfing

A money laundering method involving the use of multiple individuals and/or transactions to make cash deposits or buy monetary instruments in amounts under reporting thresholds.

Tipping Off

The illegal act of notifying a suspect that they are the subject of a suspicious activity report (SAR) or an ongoing investigation.

Safe Harbor

Legal protection for financial organizations and their staff from liability for reporting suspicious activity in good faith to an FIU.

IMoLIN

The International Money Laundering Information Network; a clearinghouse of money laundering information developed by the UN Office on Drugs and Crime.