4. Money Laundering Risks in DNFBPs and High-Risk Sectors

Vocabulary flashcards covering key anti-money laundering concepts, high-risk sectors, DNFBPs, TBML techniques, alternative remittance systems, and case examples from CAMS Version 7.04.

Designated Nonfinancial Businesses and Professions (DNFBPs)

Entities that are not primarily financial institutions but engage in high-risk activities handling large sums, assets, or legal structures that make them vulnerable to money laundering and terrorist financing.

Gatekeepers

Intermediaries such as lawyers, accountants, real estate agents, and TCSPs who stand between criminals and the financial system and can be exploited to facilitate illicit transactions.

Hendricks Case

A case involving a Russian customer who laundered nearly US$4 million through offshore accounts in Latvia and Switzerland, BVI shell companies, and nominees to purchase California condominiums.

Junkets

Incentive-based tourism trips for high-net-worth individuals managed by operators who refer clients to casinos but rarely collect or share KYC details with the casinos.

Peer-to-Peer Gaming Collusion

A scheme in games like poker where participants intentionally lose to another player to transfer illicit value and criminal proceeds.

Tax Avoidance vs. Tax Evasion

Tax avoidance is the legal minimization of tax liabilities, whereas tax evasion involves illegal actions such as falsifying records or concealing income.

Trust and Company Service Providers (TCSPs)

Businesses that offer legal and corporate formation services, such as setting up shell companies, establishing offshore entities, and providing nominee directors or shareholders.

Nominee Services

A service where a TCSP provides third parties to act as directors, officers, or shareholders on behalf of customers to create anonymity and conceal the ultimate beneficial owner.

Shelf Companies

Pre-registered entities with clean corporate histories that are sold to expedite company formation but carry heightened money laundering risks due to potential fake or hidden ownership structures.

High-Value Assets

Valuable items such as art, antiques, jewelry, precious metals, jets, or yachts that pose financial crime risks because they are easy to move, easy to hide, and hold high monetary value.

Trade-Based Money Laundering (TBML)

The process of disguising the proceeds of crime and moving value across borders through the manipulation of trade transactions.

Under-Invoicing

A TBML technique where goods or services are invoiced below fair market value to transfer value from the seller to the buyer.

Over-Invoicing

A TBML technique where goods or services are invoiced above fair market value, enabling the seller to receive excess funds from the buyer.

Multiple Invoicing

A TBML technique involving the issuance of multiple invoices for the exact same shipment of goods to justify numerous payments.

Short-Shipping

A TBML technique where the actual quantity of goods shipped is less than the quantity recorded on the invoice.

Over-Shipping

A TBML technique where the actual quantity of goods shipped exceeds the quantity recorded on the invoice.

Ghost-Shipping

A TBML technique involving fictitious trade schemes where fake shipping documents are produced for transactions with no actual goods shipped.

Dual-Use Goods

Items, technologies, or goods that possess both legitimate commercial civilian applications and military applications.

Free-Trade Zone (FTZ)

A designated geographic region treated as outside a country's domestic customs territory, allowing duty-free storage, manufacturing, and distribution, which can be vulnerable to abuse due to relaxed oversight.

Alternative Remittance System (ARS)

An informal, unlicensed value-transfer system that operates outside regulated financial banking channels based on trust.

Hawala

An informal alternative remittance system relying on trust, debt balances, and overseas broker ledgers to transfer equivalent currency values without physically moving money or using banks.

Arms Embargo

An international sanction that bans a targeted jurisdiction or entity from importing or exporting military goods, dual-use items, or related defense services.

Export Controls

Laws and regulations requiring exporters to obtain specific licenses to sell critical military, dual-use, or defense items internationally.

Politically Exposed Person (PEP)

An individual entrusted with a prominent public function, or their immediate family members or close associates, who presents a higher inherent risk for bribery and corruption.

Goodwish Jade Case

A Macau case study where midnight cash purchases over US$500,000 by low-salaried nightclub managers were used to launder drug and prostitution proceeds through a jade retail shop owned by a BVI company.