Guest Author - Consuelo Herrera, CAMS, CFE
As financial crimes have increased, forensic accountants must know how dirty money penetrate markets. It helps them to assess the risk and assist clients in making risk-based decisions when implementing anti money laundering programs. We must be ready and equiped with knowledge and skills to combat money laundering as this is the outcry of the international community.
Below is a check list of vulnerability factors determined by the US Department of State. The checklist of what drug money managers reportedly look for includes:
o Failure to criminalize money laundering for all serious crimes or limiting the offense to narrow predicates.
o Rigid bank secrecy rules that obstruct law enforcement investigations or that prohibit or inhibit large value and/or suspicious or unusual transaction reporting by both banks and nonbank financial institutions.
o Lack of or inadequate “know your customer” requirements to open accounts or conduct financial transactions, including the permitted use of anonymous, nominee, numbered or trustee accounts.
o No requirement to disclose the beneficial owner of an account or the true beneficiary of a transaction.
o Lack of effective monitoring of cross-border currency movements.
o No reporting requirements for large cash transactions.
o No requirement to maintain financial records over a specific period of time.
o No mandatory requirement to report suspicious transactions or a pattern of inconsistent reporting under a voluntary system and a lack of uniform guidelines for identifying suspicious transactions.
o Use of bearer monetary instruments.
o Well-established nonbank financial systems, especially where regulation, supervision, and monitoring are absent or lax.
o Patterns of evasion of exchange controls by legitimate businesses.
· Ease of incorporation, in particular where ownership can be held through nominees or bearer shares, or where off-the-shelf corporations can be acquired.
o No central reporting unit for receiving, analyzing, and disseminating to the competent authorities information on large value, suspicious or unusual financial transactions that might identify possible money laundering activity.
o Lack of or weak bank regulatory controls, or failure to adopt or adhere to Basel Committee’s “Core Principles for Effective Banking Supervision,” especially in jurisdictions where the monetary or bank supervisory authority is understaffed, under-skilled or uncommitted.
o Well-established offshore financial centers or tax-haven banking systems, especially jurisdictions where such banks and accounts can be readily established with minimal background investigations.
o Extensive foreign banking operations, especially where there is significant wire transfer activity or multiple branches of foreign banks, or limited audit authority over foreign-owned banks or institutions.
o Jurisdictions where charitable organizations or alternate remittance systems, because of their unregulated and unsupervised nature, are used as avenues for money laundering or terrorist financing.
o Limited asset seizure or confiscation authority.
o Limited narcotics, money laundering, and financial crime enforcement, and lack of trained investigators or regulators.
o Jurisdictions with free trade zones where there is little government presence or other supervisory authority.
o Patterns of official corruption or a laissez-faire attitude toward business and banking communities.
o Jurisdictions where the U.S. dollar is readily accepted, especially jurisdictions where banks and other financial institutions allow dollar deposits.
o Well-established access to international bullion trading centers in New York, Istanbul, Zurich, Dubai, and Mumbai.
o Jurisdictions where there is significant trade in or export of gold, diamonds, and other gems.
o Jurisdictions with large parallel or black market economies.
o Limited or no ability to share financial information with foreign law enforcement authorities.
Our commitment as forensic accountants is to join the international community and apply the Gatekeeper Approach to Combat Money Laundering. Make a difference and contribute to a safer society.