anti-money laundering
Over the past several years, money laundering has become an increasingly prevalent issue. Both financial institutions and governments are constantly looking for new ways to fight money launderers, and several anti-money laundering policies have been put in place to help this effort.
What is anti-money laundering (AML) ?
Anti money laundering (AML) refers to the web of laws, regulations, and procedures aimed at uncovering efforts to disguise illicit funds as legitimate income. Money laundering seeks to conceal crimes ranging from small-time tax evasion and drug trafficking to public corruption and the financing of groups designated as terrorist organizations.
objective of anti-money laundering
The objective of anti-money laundering (AML) is to deter criminals from feeding their illicit funds into the financial system. Criminals use money laundering to hide the true source of their money that has been derived from crimes.
Anti Money Laundering (AML) efforts seek to make it harder to hide profits from crime.
Criminals use money laundering to make illicit funds appear to have a legitimate origin.
AML regulations require financial institutions to develop sophisticated customer due diligence plans to assess money laundering risks and detect suspicious transactions.
Know Your Customer
For banks, compliance starts with verifying the identity of new clients, a process sometimes called Know Your Customer (KYC). In addition to establishing the customer's identity, banks are required to understand the nature of a client's activity and verify deposited funds are from a legitimate source.
The KYC process also requires banks and brokers to screen new customers against lists of crime suspects, individuals and companies under economic sanctions, and "politically exposed persons"—foreign public officials, their family members and close associates.
Money laundering can be divided into these steps:
Deposit of illicit funds into the financial system
Transactions designed to conceal the illicit origin of the funds, known as "layering"
Use of laundered funds to acquire real estate, financial instruments or commercial investments
Customer Due Diligence
Customer due diligence is integral to the KYC process, for example by ensuring the information a potential customer provides is accurate and legitimate. But it is also a constant process extending to customers old and new, and their transactions.
Customer due diligence requires ongoing assessment of the risk of money laundering posed by each client and the use of that risk-based approach to conduct closer due diligence for those identified as higher non-compliance risks. That includes identifying customers as they are added to sanctions and other AML lists.
Customer due diligence seeks to detect money laundering strategies including layering and structuring, also known as "smurfing"—the breaking up of large money laundering transactions into smaller ones to evade reporting limits and avoid scrutiny.
Financial institutions are required to develop and implement a written AML compliance policy, which much be approved in writing by a member of senior management and overseen by a designated AML compliance officer. These programs must specify "risk-based procedures for conducting ongoing customer due diligence" and conduct "ongoing monitoring to identify and report suspicious transactions."
Anti-Money Laundering and FATF
Anti-money laundering laws entered the global arena soon after the Financial Action Task Force was created. The FATF was responsible for the creation of most anti-money laundering standards, and it made a framework for countries to follow. After putting this framework into effect, the FATF then began to systematically identify countries that did not have proper legislation regarding money laundering. This “name and shame” tactic helped motivate countries to alter their legislation and start properly enforcing the policies that were in already place.
In addition to the FATF, the United Nations Office on Drugs and Crime also proactively tries to identify and stop money laundering.
The World Bank also provides information about money laundering, as well as offering a plethora of advice to help both governments and private enterprises end the money laundering epidemic.
The CRime of money laundering
What Are Some Ways That Money Is Laundered ?
Money launderers often funnel illicit funds through associates' cash-generating businesses, or by inflating invoices in shell company transactions. Layering transactions are money transfers designed to disguise the source of illicit funds. Structuring, or smurfing, refers to the practice of breaking up a large transfer into smaller ones to evade reporting limits and AML scrutiny.
what is the legal authority to prosecute money laundering ?
Money laundering is criminalized by article 10 of the Act on Punishment of Organized Crimes and Control of Crime Proceeds.
Key elements to be considered a money laundering offence :
disguising facts pertaining to the sources, acquisition or disposition of Criminal Proceeds, etc.,
hiding of Criminal Proceeds, etc.,
acquiring shares or ownership of an entity to control such entity using Criminal Proceeds, etc. and executing such shares or ownership to appoint or remove any director or other management member or to change representative director or similar officer.
is tax evasion considered an offence for money laundering ?
Definitely. Tax evasion is an offence by law.
which authority in japan are responsible for investigating and prosecuting money laundering offences ?
The National Police Agency (NPA) and the government agency supervising the applicable industry area are responsible for making investigations and for imposing administrative penalties.
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