Understanding Money Laundering and Financial Crimes

This set of flashcards covers key concepts and examples related to money laundering, financial crimes, and prevention measures as discussed in the lecture.

What are money mules?

Individuals who act as intermediaries, transferring illicit funds between accounts on behalf of criminals.

What is Trade-based money laundering (TBML)?

A method of laundering that includes techniques like over-invoicing, under-invoicing, and phantom shipments to obscure the source of funds.

What does market-based money laundering (MBML) exploit?

It exploits financial instruments like stocks, bonds, and derivatives to create complex transaction chains that mask fund origins.

How do shell companies facilitate money laundering?

They provide a way to move illicit financial flows without conducting real business activities.

Who was Yamel Guevara Tamayo?

A money mule sentenced for conspiring to commit money laundering and recruited additional mules in an international laundering operation.

What did Tamayo use to evade financial reporting thresholds?

He used microstructuring, making smaller incremental deposits to avoid detection.

What are predicate crimes?

Specified unlawful activities whose proceeds can lead to prosecution for money laundering.

What is one example of a predicate crime identified by FATF?

Participation in organized criminal groups and racketeering.

What is sanctions evasion?

Attempts to circumvent economic sanctions in order to secretly engage in prohibited activities.

What did Alexei Komarov do to evade sanctions?

He created a shell company and used transshipment points to continue his trade.

What are common methods of sanctions evasion?

Payments, trade, and ownership-related evasion.

What distinguishes tax avoidance from tax evasion?

Tax avoidance is legal and involves legitimate strategies to reduce taxes, while tax evasion is illegal and involves fraudulent practices to minimize taxes.

What is the purpose of the Common Reporting Standard (CRS)?

To combat tax evasion by requiring jurisdictions to exchange financial account information.

What is fraud?

An intentional act of criminal deception to obtain an unjust or illegal advantage.

What are the three elements of the Fraud Triangle?

Pressure, opportunity, and rationalization.

What is cyber-enabled crime?

Illegal activities carried out or facilitated by electronic systems and devices.