ACCOUNTANTS ANNUAL CONFERENCE - OVERVIEW OF MONEY LAUNDERING.ppt

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    06-Dec-2015

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  • BACK-GROUND -What is Money Laundering?Illegally obtained moneyConversionCriminal ActivityDrugs / RobberyCorruptionExtortionAppears to originate from legitimatesource

  • WHAT IS MONEY LAUNDERING?Money laundering is the processing of criminal proceeds to disguise their illegal origin.Traditionally, Money laundering was associated with the crime of hiding the proceeds of the offence of narcotics as captioned in the Vienna convention. In modern era, other criminal activities generate large proceeds of crime which need to be cleansed and made legitimate.

    Tanzania FIU*

    Tanzania FIU

  • WHAT IS TERRORIST FINANCING?The financial support, in any form of terrorism or of those who encourage, plan or engage in it (IMF/World Bank).Terrorism is the deliberate use of violence against civilian targets with the intention of instilling terror in a population for some political gain or purposeIn the 1990s (Kenya and Tanzania US embassy bombings) and particularly after September 11, 2001, the world caught up with Financing of TerrorismML and TF remain global problems with far reaching effects

  • TERRORIST FINANCING

    Legal SourcesCollection of membership duesSale of publicationsCultural or social eventsDoor to door solicitation within communityAppeal to wealthy members of the community

    Illegal SourcesKidnap and extortion;Smuggling;Fraud;Misuse of non-profit organizations and charities fraud;Thefts and robbery; and Drug traffickingState Sponsorship

  • TERRORIST FINANCING Things Terrorists NeedAbility to Travel CommunicationsInstruments of terrorDisposable Funds

  • PREDICATE OFFENCEPredicate offence- is the underlying criminal offence that gave rise to criminal proceeds which are or may be the subject of a ML charge. Legitimately earned funds do not need to be laundered(with exception of TF) You cant launder money unless you have got some money to launder. You wont have the money to launder unless you got it from someone, somewhere, somehow doing something wrong.That act of doing something wrong is the predicate offence: it comes before, it is predicate to, the act of ML.

    Tanzania FIU*

    Tanzania FIU

  • CRIMINAL ACTIVITIES- Drug TraffickingBribery / CorruptionRobbery and FraudWhite Collar Crimes (including Insider Trading and Securities offences)Counterfeiting and Forgery Piracy and hijackingSmuggling (arms, people, goods)Poaching, Illegal fishing,illegal mining, Other crimes

  • WHY LAUNDER MONEY?Hide the origin of the money to make it appear legitimate.Confuse the audit trail by truncating information flow.Divert suspicions and avoid unwanted questions about unexplained wealthMoney Laundering seeks to achieve two basic goals:- separate the perpetrator and the proceeds from the underlying crime, and disguise the proceeds as legitimate funds or assets and hence allow the criminal to enjoy the benefits of criminal activities

    Tanzania FIU*

    Tanzania FIU

  • WHY LAUNDER MONEY?Criminals thus launder moneyAvoid prosecution Increase profitsAvoid seizure of accumulated wealthLegitimize proceeds of crimeSecure income for the future if successful.

    Tanzania FIU*

    Tanzania FIU

  • MONEY LAUNDERING PROCESSThree stages of money launderingPlacementLayeringIntegration

    PlacementImmersion or SoakingThe physical disposal of cash proceeds derived from illegal activityThe initial point of entry for funds derived from criminal activities.The easiest form of soaking being use of the banking system via a myriad of financial services.

    Tanzania FIU*

    Tanzania FIU

  • MONEY LAUNDERING PROCESSLayeringSoaping and ScrubbingCreating complex layers of financial transactions- aimed at separation of illicit proceeds from their source These disguise the audit trail and provide anonymityThe creation of complex networks of transactions which attempt to obscure the link between the initial entry point, and the end of the laundering cycle.

    Tanzania FIU*

    Tanzania FIU

  • MONEY LAUNDERING PROCESSIntegrationRepatriation / Spin DryRe-injecting laundered proceeds into the main stream economy so that they re-enter the financial system as normal business fundsProvides an apparently legitimate explanation to criminally derived wealthThe return of funds to the legitimate economy for later extraction.

    Tanzania FIU*

    Tanzania FIU

  • MONEY LAUNDERING PROCESS/SCHEMETanzania FIU*

    Tanzania FIU

  • EFFECTS OF ML Erode countrys ability to use the international financial system or for its institutions to grow into other countriesErode the integrity of financial institutions and thus the financial systemReputational risk Legal riskOperational riskPresent a threat to political stability, peace, unity and growth of democratic systems and institutionsGive criminal organizations considerable leverage over economies,Threatens law and order,Ruins competitiveness in an economy,Affects attainment of national goals

    Tanzania FIU*

    Tanzania FIU

  • REASONS FOR IMPLEMENTING AML MEASURESProtecting your family: Fighting money laundering deters the underlying crimes that can affect you and your family directly(e.g. drug trafficking, kidnapping of family members)Protecting the community: Creating an environment that is hostile to criminal enterprise deters the criminalisation of the communityLaw and order: Reduce crime, and prevent failed statesPrevent Reputational damage: Money laundering can erode a countrys ability to use the international financial system or for its institutions to grow into other countriesProtect the financial sector: to ensure financial sector stability and protecting integrity of the financial system.The economy in general: Support development and access to finance, remove distortions in the economy and stabilize it.

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  • REASONS FOR IMPLEMENTING AML MEASURESIndividual institutions: In addition to reputational damage, there may be significant financial consequences from lost business, fines, including revocation of licence; and limitations on (international) business activities,ML vulnerabilities can have a systemic impactMoney laundering and related financial crimes can contribute to financial sector crises or impede macro-economic performance and affect attainment of national goals

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  • ACCOUNTANTS ROLEAccountants and Auditors are two sides of the same coin.Accountants write and keep books.Auditors examine and vouch books.Accountants help in the establishment of companies in their early formation.Accountants and Auditors are reporting persons for Money Laundering Terrorist Financing purposes.In their role of writing and keeping books of accounts, accountants should be alive to the risks of ML/TF.In the process of booking assets, the accountant should ensure that assets are generated legally.Equally, companies should make payments for bonafide goods and services acquired by companies..Tanzania FIU

    Tanzania FIU

  • ACCOUNTANTS ROLEThe International Financial Reporting Standards (IFRS) did not come as an accident. They came in to close the gap of establishing a mechanism for measuring performance across the world. This instills sensibility inside the firm and to the parties trading with the firms.In ML/TF parlance, it is only the accountant who can structure the accounts and conceal illegal proceeds. If successful, the auditor may find it difficult to exhume the illegality and therefore render a positive opinion on the accounts when in fact they should not.Practically, accountants will be the first to know if Money Laundering or Terrorist Financing is going on in an institution. An astute accountant will interrogate transactions which do not make sense. If they are not happy they should refer such transactions to Internal

    Tanzania FIU*

    Tanzania FIU

  • ACCOUNTANTS ROLE

    Risk Management Internal Audit or Money Laundering Reporting Officer.

    Auditors come into the picture after the effect. They look at the laws of the country, policies developed by management and good practice. They have the best opportunity of seeing the bigger picture. With their panoramic view they can query management on any practices they think make no sense or were in gross violation of the law or internal policies and procedures.

    In all events, accountants and auditors should report suspicious Transactions to the Financial Intelligence Unit as their legal obligation.

    Tanzania FIU*

    Tanzania FIU

  • CHALLENGESMoney Laundering and Terrorist financing are new phenomena.

    Accountants and Auditors must have a good understanding of how money is laundered including the financing of terrorism. There is therefore an urgent need to include these in the teaching curriculum at all levels so that people know what to look for.

    Money launderers and terrorist financiers employ the best accountants and lawyers to guard their forts. You therefore need very sophisticated accountants and auditors to match the criminal industry. This requires talent and resources.

    Tanzania FIU*

    Tanzania FIU

  • CHALLENGES

    Just as we complain of climates change, we should seriously consider the change in the moral fabric of our people. The get rich quickly at any cost syndrome is such a serious challenge to the accounting and auditing profession. Some enterprises want to thrive and they do not care about the source of wealth. Young men and women see their success in the gold and silver that they can amass. Ethics is no longer an issue!! The accounting and auditing profession should guard against these developments.The dual economy where the informal sector is so large is a problem.While we are challenged for resources and skills, we must as a profession look at the feasibility of developing a strong code of conduct for the profession and deal with problematic cases seriously to safe guard the profession.

    Tanzania FIU*

    Tanzania FIU

  • CHALLENGESWe should remember that the biggest audit scandal (Enron) does not speak well about the industry. Arthur Anderson got into a lot of problems and when enough research is done this was a sure Money Laundering case.Tanzania FIU*

    Tanzania FIU

  • CONCLUSIONMoney laundering and financing of terrorism are serious crimes whose effects are serious,The war against money laundering and terrorist financing calls for domestic, regional and international cooperation,The accountants, like all other professionals have a pivotal role to play. Sensitization and training of reporting persons, stakeholders and the Public is very important,Efforts by our governments to attain national development goals becomes hard with unchecked financial criminality.Tanzania FIU*

    Tanzania FIU

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