Prepared and presented by: Lauren L. Pickett Director of Global AML Training Citigroup Global Anti-Money Laundering Citigroup 425 Park Avenue, 4th Floor,
Prepared and presented by: Lauren L. Pickett Director of Global
AML Training Citigroup Global Anti-Money Laundering Citigroup 425
Park Avenue, 4th Floor, Zone 5 New York, NY 10022 Tel: 212-559-2440
/ e-mail: [email protected] 2005 Citigroup, Inc. External
International Seminar on Anti-Money Laundering Anti-Money
Laundering Compliance Program - Banking March 30, 2005
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2 Anti-Money Laundering Goal Effective, comprehensive
anti-money laundering program that is tailored to the business and
responsive to the external environment
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3 What are the Overall Anti-Money Laundering Risks? Reputation
Negative Press Reports Legal Criminal/Civil Fines Restriction
and/or revocation of authority to do business Forfeitures of
money/property Seizure of Customer Assets Imprisonment of
Individual Employees Supervisory Enforcement Actions Civil Money
Penalties
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Financial Institutions Fined for Violations of U.S. Anti- Money
Laundering Regulations AmSouth Bank $10,000,000 $40,000,000 AML
Compliance Program Deficient Suspicious Activity Reports (SARs)
Fail to File 10-12-2004 RIGGS Bank$25.0 Million $16.0 Million AML
Compliance Program Deficient SARs Fail to File Currency Transaction
Reports (CTRs) Fail to File 5-13-2004 1-27-2005 Korea Exchange
Bank$1.1 Million SARs Fail to File 39 SARs ($32 Million in
transactions) 5-24-2003 Western Union Financial Services, Inc.
$11.0 Million SARs Fail to File SARs Incomplete SARs CTRs Fail to
File 3-6-2003 Banco Popular de Puerto Rico $20.0 Million AML
Compliance Program Deficient SARs Fail to File CTRs Fail to File
1-6-2003 Sovereign Bank$700,000 CTRs Fail to File 4-8-2002 U.S.
Trust Company$10,000,000 SARs Fail to File CTRs Fail to File
7-11-2001 (Forfeiture of assets)
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5 Managing Money Laundering Risks Accountability Senior level
support Culture of integrity and compliance Designated oversight
responsibility (with proper authority) Individual employee
responsibility
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6 Managing Money Laundering Risks Training Directors and senior
management All staff Conduct regularly Document
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7 What Is Money Laundering ? Money Laundering is the Process of
Integrating the Proceeds of Crime into the Legitimate Stream of
Financial Commerce by Masking its Origin A process to make
Illegitimate Funds Appear Legitimate
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8 What Is Money Laundering ? Concealing the existence or source
of income from a crime Disguising income from a crime so that it
appears legitimate Knowingly assisting a criminal in moving money
or other property that constitutes the proceeds of criminal
activity In the U.S. Money Laundering is the Proceeds Related to
Many Illicit Activities, Not Just Drug Trafficking
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9 Some Examples of Proceeds of Activities Which Constitute
Money Laundering in the U.S. are: Drug Trafficking Foreign Official
Corruption Embezzlement Securities, Wire and Mail Fraud Bribery
Terrorist Financing Trafficking in Human Cargo Illegal Gambling
Racketeering Arson Certain Foreign Smuggling & Export Control
Violations Money Derived From Nearly 200 Predicate Crimes Money
Laundering is separate from the charges of the underlying
crime(s)
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10 U.S. Requirement for Identifying Suspicious Activity
Transaction conducted or attempted by, at, or through a business
and the business Knows, Suspects or has Reason to Suspect the
Transaction: involves funds from illegal activities hides or
disguises funds or assets from illegal activities; is designed to
evade a money laundering recordkeeping or reporting requirement; or
has no business or apparent lawful purpose is not the sort in which
the particular customer would normally be expected to engage
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11 Definition of Knowing Under U.S. Law Actual Knowledge
Willful Blindness Deliberate Indifference, Conscious Avoidance
Collective Knowledge of Information Regarding the Source and Nature
of Proceeds Knowledge is a Key Element of an Offense under U.S.
Money Laundering Criminal Statutes
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12 Anti-Money Laundering Compliance Program
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13 Financial Institutions Can Protect Themselves By
Establishing an Anti-Money Laundering Program Designation of an
Anti-Money Laundering Compliance Officer responsible for
coordinating and monitoring compliance Verification of the identity
of each customer that opens an account Evaluation of potential
risks associated with the customers and their transactions
Business/Entity Country Product Performance of appropriate due
diligence at account opening and monitoring of transactions based
upon the assessments of risk Procedures to detect and report
suspicious transactions to government authorities and in accordance
wit the Global Anti-Money Laundering Policy Development of a
training plan that sets for the the frequency of training and
personnel to be trained Assessments by the business of its
adherence to its Anti-Money Laundering procedures At Citigroup each
business shall be covered by a written Anti-Money Laundering
Program that includes:
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14 The Anti-Money Laundering Program should be Based Upon a
Risk-Based Approach Key Factors to be considered in assessing and
developing appropriate controls to manage Money Laundering Risk:
Different categories of customers Localities of the businesses and
customers Nature of the products and services provided Expected use
by customers of products and services Determines where enhanced due
diligence measures should be taken in obtaining customer
information and in monitoring suspicious activity
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15 The Enhanced Due Diligence Program Criteria for determining
product lines and customers that pose a heightened risk or concern,
for example, but not all inclusive : Private banking Onshore vs.
Offshore client Correspondent banking (foreign vs. domestic)
Foreign political figures/foreign corrupt officials Accounts with
frequent or excessive use of funds transfers (in and out or
frequent purchase of bank drafts under reporting limits)
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16 Citigroup Risk Based Approach to Money Laundering And Terror
Financing Risk
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17 Risk Based Approach To Money Laundering And Terror Financing
Risk Identify as early as possible suspicious activity that may
represent money laundering and terror financing risk Prioritize
customer and transaction for review and investigation based upon
risk; Ensure that resources are deployed commensurate with
perceived risks, and to Establish a corporate baseline to ensure
that money laundering and terror financing risk are given
appropriate weight and addressed in a consistent and quality manner
across Citigroup globally.
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18 Risk Based Approach To Money Laundering And Terror Financing
Risk Key considerations in the development of the model : objective
verifiable previously published material where possible,
international sources
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19 Citigroup Risk Models Risk Models for Three Principal Money
Laundering/Terror Financing Factors Geography and Country Risk 244
Countries Under Development Business and Entity Risk 2,500 Types
Product and Transaction Risk 130 Types
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Risk Model Convergence HMLHML
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21 Geography and Country Risk Principal factors are those that
in and of themselves are so significant that they will result in a
high risk score; Scoring factors, that can increase or decrease a
risk score on the margin Scoring factors are not prime determinants
of the risk score.
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22 Principal Factors Financial Action Task Force (FATF)
Non-cooperative Countries and USA Patriot Act Section 311
Designated Countries Perceived Terrorist Finance Risk Country Drug
Source or Transit Country International Narcotics Control Strategy
Report (INCSR) Tax Problem Country - Organization of Economic
Cooperation and Development (OECD) Offshore Banking Location -
INCSR Citigroups Global Market Risk Management Rating Geography and
Country Risk
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23 Scoring Factors INCSR Primary Money Laundering Concern INCSR
Money Laundering Concern INCSR Precursor Chemical Transparency
International: Corruption Index INCSR: Money Laundering Crime
Laws/Drug Crime Laws Heritage Foundation: Economic Freedom Index
Member of FATF Geography and Country Risk
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24 Geography and Countries Risk Distributions H-M-L
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25 Business and Entity Risk Model Uses North American Industry
Classification System (NAICS) as source of identifying 2,500
Business and Entities Permits a high level of specificity in
describing businesses - activities
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26 Business and Entity Risk Model Categorize Business or Entity
as either High or Low risk based on U.S. and International
Regulatory Sources U.S. Comptrollers Handbook Bank Secrecy Exam
Handbook FATF Money Laundering Typologies EU Directive Egmont Group
Wolfsberg Principles
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Citigroup Draft Business and Entity Risk Scoring Chart
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28 Citigroup Draft
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29 Risk Businesses and Entities Approximately 130 Businesses
and Entities have been identified as High Risk Retail Stores
Wholesale Stores Electronics High Value / Luxury Goods
Communication Transportation Services Financial Institutions
Entertainment
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Citigroup Draft High Risk Businesses and Entities Retail
Stores
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Citigroup Draft High Risk Businesses and Entities Wholesale
Stores
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Citigroup Draft High Risk Businesses and Entities
Electronics
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Citigroup Draft High Risk Businesses and Entities High Value
Luxury Goods
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Citigroup Draft High Risk Businesses and Entities
Communications
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Citigroup Draft High Risk Businesses and Entities
Transportation
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Citigroup Draft High Risk Businesses and Entities Services
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Citigroup Draft High Risk Businesses and Entities Services
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Citigroup Draft High Risk Businesses and Entities Services
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Citigroup Draft High Risk Businesses and Entities Services
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Citigroup Draft High Risk Businesses and Entities Financial
Institutions
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Citigroup Draft High Risk Businesses and Entities Financial
Institutions
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Citigroup Draft High Risk Businesses and Entities
Entertainment
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Evaluate 130 types of products as high, medium, or low risk
based upon the following scoring factors Offering targeted as high
risk by regulators or evaluated as high risk by business unit
Favors anonymity and/or involves 3rd parties Involves cash and/or
cash-based instruments Involves cross-border transactions that may
involve high risk geographies Funds in i.e. customer's money May
support high speed of funds movement May support high volume
Citigroup Draft Product Risk Model
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Citigroup Draft Product Risk Scoring Model
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Citigroup Draft Product Risk
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High Risk Products Citigroup Draft
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Medium Risk Products Citigroup Draft
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Low Risk Product Citigroup Draft
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Risk Model Convergence HMLHML
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Assists in amount of KYC due diligence at account opening and
for ongoing updates Assists in decision on monitoring efforts to
identify suspicious activity Escalates the account opening approval
process How to Use the Rating Models
