HOUSE_OVERSIGHT_024117.jpg

7. What is the difference between money laundering and terrorist financing?
In contrast to money laundering, which involves the disguising of funds derived from illegal activity so they may be used without detection of the illegal activity, terrorist financing can involve the use of legally derived money to carry out illegal activities. The objective of money laundering is financial gain or the hiding or disguising of illicit proceeds, whereas with terrorism, the objective is to promote the agenda or cause of the terrorist organization. For example, it is widely believed that the terrorist activities of September 11, 2001, were partially financed by legally obtained funds that had been donated to charities. Both money launderers and terrorists, however, do need to disguise the association between themselves and their funding sources.

8. Is the approach to combat money laundering and terrorist financing the same?
Although some of the risk factors and red flags that apply to other types of money laundering also may apply to terrorist financing, the patterns of activity tend to be very different. Terrorist financing often involves very small amounts of funds, which may be moved through charities or nontraditional banking systems, whereas other types of money laundering may involve large volumes of funds. It is important to understand the different patterns to protect against the risks.

Overview of U.S. AML Laws and Regulations

9. What are the key U.S. AML laws and regulations?
The key U.S. AML laws and regulations are the Bank Secrecy Act of 1970 (BSA) and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (commonly referred to as the USA PATRIOT Act).

The BSA was the first major money laundering legislation in the United States. It was designed to deter the use of secret foreign bank accounts and provide an audit trail for law enforcement by establishing regulatory reporting and recordkeeping requirements to help identify the source, volume and movement of currency and monetary instruments into or out of the United States or deposited in financial institutions. For additional guidance on the Bank Secrecy Act, please refer to the Bank Secrecy Act section.

The USA PATRIOT Act was signed into law by President George W. Bush on October 26, 2001, following the terrorist activity of September 11. Title III, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001, deals with money laundering and terrorist financing. Title III made significant changes to money laundering regulations, imposed enhanced requirements for AML programs, and significantly expanded the scope of coverage to nonbank financial institutions. It requires financial institutions to establish AML programs that include policies, procedures and controls, designation of a compliance officer, training, and independent review. It also requires, among other things, that certain financial institutions establish customer identification procedures for new accounts as well as enhanced due diligence (EDD) for correspondent and private banking accounts maintained by non-U.S. persons. For additional guidance on the USA PATRIOT Act, please refer to the USA PATRIOT Act section.

10. What other AML laws have been enacted in the United States?
In addition to the BSA and Title III of the USA PATRIOT Act, other AML laws include the Money Laundering Control Act of 1986 (MLCA), the Anti-Drug Abuse Act of 1988, the Annunzio-Wylie Anti-Money Laundering Act of 1992, the Money Laundering Suppression Act of 1994 (MLSA), and the Money Laundering and Financial Crimes Strategy Act of 1998.

The MLCA established two AML criminal statutes that, for the first time, made money laundering a criminal offense, with penalties of up to 20 years and fines of up to $500,000 for each count. Additionally, the MLCA prohibits the structuring of currency transactions to avoid filing requirements and requires financial institutions to develop BSA compliance programs.

The primary purpose of the Anti-Drug Abuse Act of 1988 was to provide funding and technical assistance to state and local units of government to combat crime and drug abuse. This Act increased the civil and criminal penalties for money laundering and other BSA violations to include forfeiture of any property or asset involved in an illegal transaction related to money laundering. It introduced the “sting” provision, which enables law enforcement to represent the source of funds involved in a transaction as the proceeds of unlawful activity. This Act also required the identification and recording of purchases of monetary instruments, including bank checks or drafts, foreign drafts, cashier’s checks, money orders or traveler’s checks in amounts between $3,000 and $10,000 inclusive. This legislation, in conjunction with the Office of National Drug Control Policy (ONDCP) Reauthorization Act of 1998,

protiviti | 11
HOUSE_OVERSIGHT_024117