AML

What is Money Laundering?

Money laundering is an illegal activity aiming to conceal the origin of money obtained from different illicit activities by converting it into a legitimate source of income.

AML Directives

Many jurisdictions adopt a set of specific predicate crimes for money laundering prosecutions, while others criminalise the proceeds of any major crimes. The European Union is no exception and has deployed the following Anti-Money Laundering (AML) directives:

4 AMLD

The fourth directive addressing the threat of money laundering was introduced on 25 June 2015. It was created to prevent using financial systems to fund terrorist activities and launder money. Known as the 4th AML Directive, it was passed as part of a package of anti-money laundering measures. The scope of the 4th AML Directive encompasses all “obligated entities,” such as:

• Credit institutions;
• Financial institutions;
• Auditors;
• Attorneys;
• Notaries public;
• Accountants;
• Tax advisors;
• Realtors;
• Gambling organisations;
• Better organisations;

It also impacts entities engaged in buying and selling goods. While the previous directives applied to traders who received cash payments of at least EUR 15,000, this one lowers the sum to EUR 10,000 – regardless of whether the transaction is executed as a single payment or a series of connected operations. In contrast with previous legislation, the 4th AML Directive no longer makes a difference between domestic and foreign Politically Exposed Persons (PEPs). Generally, PEPs are subject to more strict rules as they are more vulnerable to corruption. It means that politicians, high-ranking government officials, prominent judiciary members, and state-owned company managers are subject to more stringent verifications by the banks in which they have accounts. The central register of ultimate beneficiaries of legal entities and trust funds is an essential feature of the 4th AML Directive. Companies that do NOT abide by their obligation to disclose adequate, accurate, and current information on their ownership structure (including data regarding shareholders) are exposed to penalties.

5 AMLD

Recital 2 of 5 AMLD states that the European Union was compelled to modify its 4 AMLD framework within a year of its transposition deadline because new terrorist attacks brought to light emerging patterns in how terrorist groups finance their operations. 4 AMLD introduced a risk and evidence-based approach to AML/CFT compliance procedures. 5 AMLD expanded the framework with more prescribed measures, including additional due diligence that must be executed in high-risk situations. The 5th AML Directive is part of the European Commission’s much broader Action Plan (launched in February 2016) on terrorist financing. In addition to the 4 AMLD amendments, it covers topics such as:

• Illegal wildlife trafficking;
• Illicit trade in cultural goods;
• Harmonisation of money laundering offences;
• Tax initiatives;

5 AMLD alters and improves every section and chapter within the 4th AML Directive. The changes can be grouped into several broad categories:

• Extends the scope to virtual currency platforms, wallet providers, tax-related services, and traders of art;
• Grants access to the general public to beneficial ownership information of EU-based companies;
• Obligates to consult the beneficial ownership register when performing AML due diligence;
• Obligates member states to create a list of national public offices and functions that qualify as PEP;
• Introduces strict Enhanced Due Diligence (EDD) measures for financial flows from high-risk countries;
• Ends the anonymity of bank accounts, saving accounts, and safe deposits;
• Creates a central access mechanism to bank account and safe deposit box holders’ information throughout the European Union;
• Providers information on real estate holders to public authorities;
• Lowers thresholds for identifying owners of prepaid cards and e-money users;
• Enhances the powers of the FIUs;
• Facilitates cooperation and information exchange between authorities;

Transparency

The European Commission’s original 5AMLD proposal cited considerable gaps in the transparency of financial transactions. Mainly when offshore intermediary entities were used to distance account owners from their assets. This tactic was used to evade taxes or launder money. 5AMLD is drafted to bring additional transparency to financial transactions. Its objective is to grant the public access to information on beneficial owners operating within the European Union. It also aims to identify letterbox companies used for money laundering, tax evasion, and wealth concealment. According to the 5th AML Directive, information regarding beneficial owners of trusts and trust-like arrangements must be provided to those who can display a “legitimate interest,” investigative journalists and non-profit organisations (NGOs) included. All goals mentioned above are attained by mandating Member States to develop separate national registers of beneficial owners of companies (corporates, NGOs, foundations, etc.), trusts, and trust-like arrangements. The idea is to connect the registers into a single European Central Platform. In addition to corporates and trusts, Member States must establish registers for bank accounts, payment accounts, and safety deposit boxes. These registries, however, won’t be accessible to the public. They will only be available to regulatory supervisors and Member State Financial Intelligence Units (FIUs). Last but not least, Member States must grant FIUs and regulatory supervisors access to beneficial ownership information of real estate, which should be kept in a central registry where available. Bank accounts and real estate registries were interconnected centrally within the EU in 2021. Transparency regulations constitute approximately a quarter of the changes implemented by 5AMLD. They are designed to open access to essential data and facilitate cooperation between European institutions, FIUs, prudential supervisors, and competent authorities.

Risk Assessments

The 5th AML Directive obliges the European Commission and Member States to publish periodic risk assessment reports (confidential and sensitive information is exempt). The objective is to offer the public the latest context regarding AML/CFT threats. Under 5AMLD, Member State reports must first be presented to the European Commission and contain data on enforcement and supervision activity volume. It must also provide information about the number of resources deployed to meet the objectives set by the 5th AML Directive. This measure aims to provide the European Commission with enough data to oversee Member States’ compliance with AML regulations.

Virtual Currencies and Pre-Paid Cards

The 5th AML Directive also aims to ease the risks arising from the anonymity associated with virtual currencies. Custodian wallet providers and virtual currency exchange platforms are classified as ‘obliged entities’ under 5AMLD, subject to reporting obligations and due diligence. The 5th AML Directive lowers the threshold for triggering due diligence for monthly payments via pre-paid cards from €250 to €150. Due diligence is also required for withdrawals, cash redemptions, and remote payments over €50. Furthermore, sub-threshold prepaid cards can only be used to purchase goods or services. They cannot be funded with anonymous electronic money, and their issuers must monitor transactions to detect suspicious activities effectively. Credit and financial institutions can only accept payments conducted with anonymous pre-paid cards issued in third countries, where local jurisdictions have requirements equivalent to EU laws. Banks and other organisations must check and refuse transactions with cards from high-risk countries that don’t have regulations equal to AML/CFT protocols.

High-Risk Countries and Enhance Due Diligence

There is no definitive set of Enhanced Due Diligence (EDD) measures that Member States must impose on companies dealing with high-risk third countries. This situation creates weak spots within the regulations, which money launderers and terrorist financers exploit by choosing to operate within a jurisdiction with the most flexible arrangements. 5AMLD addresses this weakness partially. It establishes a set of uniform due diligence measures across the European Union for business relationships and transactions involving high-risk countries. These measures include the obligation to obtain additional information on the following:

• Customers and beneficial owners;
• Nature of business relationships;
• Sources of funds and wealth;
• Reasons for transactions;

The 5th AML Directive introduces enhanced monitoring of business relationships in high-risk situations. The list of high-risk countries was amended most recently in 2018 and is set out in Regulation (EU) 2016/1675.

Extension of Scope and Application

5AMLD further extends the application of the regulations to:

• Accountants
• Auditors
• Tax advisors
• Real estate agents (for lettings above a certain threshold);
• Art dealers (for trades above a certain sum);
• Electronic wallet providers;
• Virtual currency exchange providers;

Just like financial institutions, all entities mentioned above must carry out due diligence, monitoring, and reporting of suspicious transactions. In addition, e-wallet and virtual currency exchange providers will have to be registered. The latter applies to check cashing offices, conventional currency exchanges, and trust and company service providers.

PEPs and Whistle-Blowers

The 5th AML Directive introduced many other amendments, some more impactful than others. Notable alterations include: Substantially enhance protections for individuals who make suspicious transaction reports; Requirement for Member States to maintain up-to-date lists of prominent public functions to facilitate the identification of PEPs; Obligation for the European Commission to publish a cross-Union consolidated list of public functions;

6AMLD

The 6th AML Directive was published approximately six months after 5 AMLD. Its purpose is to strengthen further the rules in the fight against money laundering.

Key Amendments

1. Unified List of Predicate Offences

• 6AMLD lists 22 specific predicate offences for money laundering that all EU Member States are obliged to criminalise. Some of the more interesting offences are:
  • Cybercrime;
  • Direct and indirect tax evasion;
  • Environmental offences;
• Member States and regulated companies must develop an in-depth understanding of the predicate offences, relevant risk factors, and typologies to deploy new AML requirements more efficiently.

2. Aiding, Abetting, Attempting, and Inciting

• The 6th AML Directive widens the scope of money laundering offences to include aiding, abetting, attempting, and inciting.

3. Extension of Criminal Liability to Legal Persons

• Arguably the most significant amendment under 6 AMLD is the extension of criminal liability to legal persons (companies or incorporate partnerships). The new regulations also encompass individuals in certain positions, such as:
  • Representatives;
  • Decision-markers;
  • Control officers;

4. Increased International Cooperation for Prosecution of Money Laundering

• Member States that each have jurisdiction over the prosecution of an offence are required to collaborate and agree to prosecute in a single Member State.
• Member States must adopt more effective investigative tools to guarantee swifter cross-border cooperation between different competent authorities.

5. Tougher Punishments

• The 6th AML Directive increases the minimum prison sentence for money laundering offences for individuals from one to four years.
• Introduces a variety of “dissuasive” sanctions.
• Legal persons are also subject to judiciary punishment. It means one or several of the following penalties:
  • Exclusion from public benefits or aid;
  • Temporary or permanent ban from doing business;
  • Compulsory winding-up;
  • Temporary or permanent closure of facilities used to commit offences;

6. Requirement for Dual Criminality for Specified Offences

• Member States are obliged to criminalise money laundering arising from six specified predicate offences, even if the conduct constituting those predicate offences is lawful in the jurisdiction in which they are committed. The six violations are:
  • Organised crime and racketeering;
  • Terrorism;
  • Human trafficking and migrant smuggling;
  • Sexual exploitation (children included);
  • Trafficking in narcotics and psychotropic substances;
  • Corruption;

AML in Other Countries/Regions

Afghanistan

The Financial Transactions and Reports Analysis Center of Afghanistan (FinTRACA) was founded in 2004 to serve as a Financial Intelligence Unit (FIU). The organisation was established under the Anti-Money Laundering and Proceeds of Crime Law, which aims to protect the integrity of the Afghan financial system and gain compliance with international conventions and treaties. FinTRACA is a semi-independent body housed within the Central Bank of Afghanistan. Its primary purpose is to deny the use of the local financial system to those who obtained funds through illicit operations. It’s also intended to stop financial support to terrorist organisations and activities. To meet its objectives, FinTRACA gathers and analyses data from several sources. These sources include entities legally obliged to submit reports of suspicious activities and cash transactions above a specified amount. The Financial Transactions and Reports Analysis Center of Afghanistan has access to all Afghan-related government information and databases. When data analysis supports the supposition of illegal activities, FinTRACA alerts local authorities and works closely with them to investigate and prosecute the guilty individuals or organisations. It also cooperates internationally in support of its investigations and analyses of foreign individuals and companies to the extent of the law.

Armenia

The Armenian government set up a Financial Monitoring Center to ensure the existence of legal mechanisms necessary for the stability of the local economy. Classified as an FIU, the centre is situated in the Central Bank of Armenia. It proposed and adopted the Law of the Republic of Armenia in the fight against legalising illegal incomes and financing terrorism. The Law is based on the FATF 40 Recommendations, proven international practices, and other model legislation. It’s intended to protect the rights, legal interests, and freedoms of the citizens, society, and state. The centre’s main objectives are:

• Deploy specific measures to detect and deter money laundering and the financing of terrorist activities;
• Facilitate the investigation and prosecution of terrorist financing and money laundering offences;
• Mandatory reporting of suspicious transactions and large fiat and electronic fund transfers;
• Establishment of client identification requirements for financial service providers;
• Fulfil Armenia’s commitments to cooperate in the global fight against money laundering and terrorist financing;
• Respond to threats posed by organised crime and terrorists by providing law enforcement officials with the information they need to deprive criminals of their funds and proceeds from illicit operations.

Australia

Australia has adopted and deployed a number of strategies to fight money laundering. The country’s financial intelligence unit is the Australian Transaction Reports and Analysis Center (AUSTRAC). Its objective is to combat terrorism financing and money laundering. It obligates every designated service provider to report suspicious cash transactions and other related information. The Attorney-General’s Department maintains a list of outlawed terror organisations. It’s illegal to support or be supported by the listed organisations. It’s also an offence to open a bank account in Australia under a fake name, which is why rigorous procedures are followed when new accounts are opened. The Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF act) is the principal legislative mechanism used by AUSTRAC. However, other offence provisions are contained in Division 400 of the Criminal Code Act 1995.

Bangladesh

The Money Laundering Prevention Act 2002 was Bangladesh’s first anti-money laundering legislation. In 2008, it was replaced by the Money Laundering Prevention Ordinance, which was later repealed by the Money Laundering Prevention Act 2009. The latest amendment was made in 2012. According to the 2012 Money Laundering Prevention Act, “Money Laundering means – knowingly moving, converting, or transferring crime proceeds or property involved in illegal operations. To prevent the illicit use of money, the Bangladeshi government and Bangladesh Bank issued 26 legal procedures obligatory for all financial institutions. To avoid money laundering, a bank or financial organisation must:

• Account opening forms should contain all the information of the holder;
• Know Your Customers (KYC) must be filled property;
• Mandatory Transaction Profile (TP) for all customers to understand their behaviour;
• National ID cards and other documents should be collected and verified;
• Suspicious transactions must be reported;
• Large deposits should be reported;
• Over/under invoicing should be subject to due diligence;
• Bank officials must execute all 26 legal procedures;

Canada

In 1991, the Proceeds of Crime Act was introduced in Canada. It gave legal effect to the former FATF 40 Recommendations by establishing client identification and record-keeping protocols. Its goal was to facilitate the investigation and prosecution of money laundering offences under the Criminal Code and the Controlled Drugs and Substances Act. The Proceeds of Crime Act was amended in 2000 to expand the scope of its application. It also launched a financial intelligence unit known as FINTRAC. In December 2001, the range of the Proceeds of Crime Act was further extended by amendments enacted under the Anti-Terrorism Act to avert terrorist financing and activities. The legislation was also renamed the Proceeds of Crime and Terrorist Financing Act. In response to the pressure from FATF for Canada to strengthen its money laundering and financing of terrorism legislation, the Proceeds of Crime and Terrorist Financing Act was again amended in 2006. The changes expanded client identification, reporting, and record-keeping requirements for specific organisations. They also included new obligations to report attempted suspicious transactions and incoming and outgoing international electronic fund transfers, implement written compliance procedures, and undertake risk assessment protocols. In Canada, money service businesses, notaries, accountants, banks, life insurance agencies, realtors, security brokers, precious metal and stone dealers, and casinos to record-keeping and reporting obligations.

India

The Parliament of India passed the Prevention of Money Laundering Act in 2002. Its primary objective is to stop money laundering and ensure the confiscation of property derived from or involved in illegal financial activities. Section 12 (1) of the Act describes the obligations that financial institutions, banks, and other intermediaries have to:

• Maintain records that recount the value and nature of monthly transactions, regardless of whether they are a single transfer or a series of connected operations;
• Provide information on transactions referred to the abovementioned point to the Director within the statute of limitation, including identifying records of all its customers;

Section 12 (2) determines that records referred to in subsection (1) must be kept for ten years after completing the transaction. The Indian Income Tax Department is responsible for this procedure. The provisions of the Prevention of Money Laundering Act in 2002 are frequently reviewed and amended. Most money laundering operations in India are done via corporate companies, share markets, and political parties. These entities are all investigated by the Enforcement Directorate and Indian Income Tax Department. Banks must record all Rs. 1 million transactions and report them within seven days if the transfer appears suspicious. They must submit their reports to the Enforcement Directorate and Indian Income Tax Department.

Nigeria

To combat and prevent money laundering, Nigeria founded the Economic and Financial Crimes Commission in 2003. It works closely with the National Drug Law Enforcement Agency and the Central Bank of Nigeria to investigate and prosecute individuals and organisations charged with illegal activities. The Money Laundering Act was introduced in 2011 and contains elaborate provisions on the legal and institutional framework to avert money laundering. It also established the Special Control Unit against Money Laundering under the EFCC. The act made essential alterations to existing legislation, some of which are:

• Restrictions on cash payment transactions. Operations exceeding N5 million for individuals and N10 for companies/organisations must be made through a bank. Attempts to break such transfers into smaller amounts are to be reported to the Nigerian Financial Intelligence Unit.
• Improved and detailed KYC protocols for Politically Exposed Persons (PEPs) and agents.
• Reconstruction and preservation of transaction records. The Money Laundering Act states that all records must be readily accessible when in need for five years.
• New technology must be evaluated for terrorism risks and money laundering before being launched.

In May 2022, Nigerian President Muhammadu Buhari signed into law the following three bills:

• Money Laundering (Prevention and Prohibition);
• Terrorism (Prevention and Prohibition);
• Proceeds of Crime (Recovery and Management);

In addition, the Central Bank of Nigeria listed a new set of regulations to avert and stop money laundering. New requirements state all transactions through correspondent banking relationships must be managed with a risk-based approach and KYC procedures. To goal is to reduce the vulnerability of financial institutions to money laundering schemes.

Latin America

In Latin America, money laundering is generally connected to drug trafficking activities, extortion, arms trafficking, smuggling, blackmail, human trafficking, and corruption. The economic power in the region has been increasing rapidly without legislative support. It has allowed individuals to amass significant fortunes from illegal operations masked as legal profits. Concerning money laundering, the ultimate objective of the legislation is to enable local governments to integrate illegal capital into the general economy and convert it into lawful goods and services. Different money laundering techniques are used in different regions. Depending on the country, these are the most common channels used to legalise profits obtained from criminal activities:

• Organised crime in Columbia uses import businesses to legalise billions from drug trafficking;
• Guatemala, Honduras, Costa Rica, Panama, and other Central American countries lack proper money laundering legislation, which enables criminals to whiten their illicit profits through tourism, real estate, and the exchange of goods.
• Smuggling currency abroad is Mexican crime bosses’ go-to money laundering technique.
• Caribbean countries, just like their Central American counterparts, are a haven for money laundering. Organised crime uses free trade zones, telephone betting operations, and funds transfer to legalise their proceeds.

Casinos are widely used throughout the region for money laundering operations of different scales.

Jurisprudence

Inefficient local enforcement of money laundering laws is the key factor behind the region’s ever-increasing money laundering operations. Most Latin American countries lacked regulations regarding the whitening of money, assets, and goods up until the 21st century. Even worse, the issue affects the whole world and is the leading subject in seminars, conferences, and academic analysis throughout the globe. The hope is that the newly implemented Economic Criminal Law legislation will change the status quo. Still, its impact will remain limited until money laundering isn’t fought seriously at the national level.

Singapore

Singapore’s legal architecture for fighting money laundering contains a blend of legal instruments. These are its key elements:

• The Corruption, Drug Trafficking and Other Serious Crimes (Confiscation of Benefits) Act (CDSA). It criminalises money laundering and imposes strict reporting protocols for suspicious transactions. It also requires full disclosure for local and international operations involving goods or physical currency that exceed S$20,000.
• The Mutual Assistance in Criminal Matters Act (MACMA). This statute defines the groundwork for mutual legal cooperation in criminal matters.
• The Monetary Authority of Singapore (MAS) issued regulatory requirements obligating financial institutions to carry out Customer Due Diligence (CDD).

The term ‘money laundering’ is not used as such within the CDSA. Part VI of the act criminalises the laundering of proceeds obtained through drug trafficking and criminal operations via the following offences:

• The assistance of another person in retaining, controlling or using the benefits of criminal conduct or drug dealing under an arrangement (whether by concealment, removal from the jurisdiction, transfer to nominees or otherwise) [section 43(1)/44(1)].
• The conversion, concealment, removal, or transfer from the jurisdiction or the acquisition, possession or use of benefits for criminal conduct or drug dealing [section 46(1)/47(1)].
• The transfer, conversion, removal, or concealment from the jurisdiction of another person’s benefits of criminal conduct or drug operations [section 46(2)/47(2)].
• The acquirement, use, or possession of another person’s benefits of criminal conduct or drug trafficking [section 46(3)/47(3)].

South Africa

The Financial Intelligence Center Act (2001) and its subsequent amendments have added the obligation to the Financial Intelligence Centre (FIC) to fight and prevent money laundering.

Thailand

The Anti-Money Laundering Office (AMLO) is Thailand’s primary agency for enforcing counter-terrorism financing and anti-money laundering laws. It was established in 1999 and adopted the Anti-Money Laundering Act, B.E. 2542 (1999) (AMLA). AMLO is an independent government agency with approximately 400 employees. It has the status of a department operating neutrally and independently under the supervision of the Ministry of Justice but is not part of the ministry.

United Arab Emirates

The United Arab Emirates (UAE) has long been known as a hub for corruption and illegal financial flows. Its lax regulatory environment has met severe backlash from the international community. Despite the demand for legislative improvement, local authorities have yet to do anything to change the status quo. To force change, the Financial Action Task Force (FATF) warned the UAE at the beginning of 2022 that they would be named in their “grey list” if noticeable actions weren’t taken. On 4 March 2002, the FATF placed the UAE on the ‘grey’ list, meaning the country would be subject to increased monitoring. In December 2022, the European Union placed the UAE on its money laundering blacklist as it considers the country a high-risk nation that presents “strategic deficiencies in the anti-money laundering countering the financing of terrorism regimes.”

United Kingdom

Terrorist funding and money laundering legislation in the United Kingdom (UK) is governed by six Acts of primary importance:

• Terrorism Act 2000;
• Anti-Terrorism, Crime, and Security Act 2001;
• Proceeds of Crime Act 2002;
• Serious Organised Crime and Police Act 2005;
• Criminal Finances Act 2017;
• Sanctions and Anit-Money Laundering Act 2018;

Money laundering requirements are designed to detect and avert financial crimes and protect the UK’s financial system. If these regulations cover an organisation, then controls are deployed to prevent it from being used for money laundering. The UK’s primary anti-money laundering legislation is cited in the Proceeds of Crime Act 2002. It also includes provisions requiring businesses within the “regulated sector” (banks, investment firms, money transmission agencies, etc.) to report suspicions of money laundering by their customers and their affiliates. UK laws broadly define the term “money laundering.” According to current legislation, any handling or involvement with any proceeds of any crime can be treated as a money laundering offence. Offenders’ possession of the proceeds of their crimes falls under the United Kingdom’s definition of money laundering. The description also covers operations that conceal or disguise illicit financial flows as legitimate. Unlike other jurisdictions (notably much of Europe and the United States), UK money laundering offences are not limited to the proceeds of major crimes. Nor are there any monetary limits. For local authorities to consider them an offence, financial operations need no money laundering schemes or purpose. A money laundering offence under UK law does not need to involve money since the legislation covers assets of any description. Secondary requirements are provided by the Money Laundering Regulations 2003, which were replaced in 2007 by a new set of protocols. They are based on the EU Directives 91/308/EEC, 2001/97/EC and 2005/60/EC. The requirements list several supervisory authorities who have a role in monitoring the financial operations of their members. One important consequence of the Act is that accountants, tax advisers, insolvency practitioners, and solicitors are obliged to report to the authorities their suspicions that their clients have engaged in criminal conduct or tax evasion that produced a benefit. These provisions, however, do not require disclosure to the authorities if the information is procured by certain professionals in privileged circumstances or where the data is subject to legal professional privilege. Financial institutions, real estate agents, chartered surveyors, credit institutions, trusts, high-value dealers, casinos, and company service providers are also subject to the abovementioned requirements. Various industry groups provide professional guidance, including the Law Society, the Joint Money Laundering Steering Group, and the Consultative Committee of Accountancy Bodies. However, banking organisations have no legal obligation to report deposits or transactions above a particular value routinely. Instead, reports must be made on all suspicious operations, irrespective of their value. Reporting obligations for all organisations mentioned above include reporting suspicious gains from activities in other countries that would be considered illegal within the United Kingdom. Exceptions were later added for certain operations, such as bullfighting in Spain. According to statistics, an estimated 200,000 reports of suspected money laundering are filed annually to UK authorities. Banks and other similar financial institutions submit most reports. Failing to report a suspicion of money laundering by another person carries a maximum penalty of five years imprisonment. On the other hand, principal money laundering offences carry a maximum sentence of fourteen years imprisonment. The Criminal Finances Act 2017 introduced unexplained wealth orders, another instrument to fight money laundering. It can oblige owners of an asset greater than £50,000 to show proof of how the purchase is financed. The Sanctions and Anti-Money Laundering Bill was passed without opposition in the House of Commons on 1 May 2018. It’s designed to help local authorities implement their sanctions. It also obliges overseas British territory tax havens, like the Cayman Islands and the British Virgin Islands, to establish, maintain, and monitor registers of the beneficial ownership of firms in their jurisdictions. The House of Lords passed the legislation in May 2018 and received Royal Asset on the 23rd. However, the Act’s public register provision is challenged by local governments (the Cayman Islands and the British Virgin Islands), who believe the laws violate their Constitutional sovereignty. Under the Proceeds of Crime Act, goods that account holders cannot legally account for are seized and auctioned to raise funds. Authorised auctioneers usually carry out the procedure within the geographical areas of the criminals. However, exceptions are possible.

Bureaux de Change

All United Kingdom-based bureaux de change (exchange bureaux) are registered with His Majesty’s Revenue and Customs. Otherwise, they wouldn’t obtain a trading licence. In the UK, exchanges and money transmitters, like Western Union, are legally considered “regulated entities” and must comply with the Money Laundering Regulations 2007. HMRC on all Money Service Businesses can carry out checks.

London Bullion Market Association

The London Bullion Market Association (LBMA) wrote a letter to several countries with large gold markets, including Dubai (UAE), South Africa, China, Singapore, Japan, Russia, and the United States of America, in November 2020. The objective was to set out standards regarding money laundering and other issues, like where they sourced their gold. It also emphasised that these countries could be blacklisted if they failed to comply with the mentioned regulations. It was LBMA’s first step to combat the unethical or illegal production and trading of gold.

United States

The United States’ strategy to prevent and stop money laundering can be divided into Preventive and Criminal measures.

Preventive Measures

In 1970, the United States Congress passed a series of laws known as the Bank Secrecy Act (BSA) to avert dirty money from entering the U.S. financial system. The BSA obliged financial institutions, which under the latest definition, include a wide array of entities (banks, life insurers, credit card companies, security broker-dealers, money service businesses, etc.), to report certain transactions to the United States Department of the Treasury. Cash operations over a certain amount must be reported on a currency transaction report (CTR), identifying the individual making the transaction and the source of the money. Originally the threshold was $5,000, but due to excessive reporting, it was raised to $10,000. The U.S. is one of the few countries worldwide that obligates the reporting of all cash transactions over a specific limit. However, some businesses can be exempt from the requirement. In addition, financial organisations must report cash operations on a Suspicious Activity Report (SAR) if they are deemed “suspicious,” defined as knowing or suspecting that the funds come from illicit activities. Attempts by customers to evade or circumvent the BSA are also considered criminal acts. Reports are used to manage a financial database administered by the Financial Crimes Enforcement Network (FinCEN), the United States’ Financial Intelligence Unit. FinCEN is based in Vienna, Virginia and uses computer-assisted analyses to examine reports to determine trends and refer investigations. It collaborates with other FIUs around the globe. The BSA obliges financial entities to engage in customer due diligence, which in parlance is known as Know Your Customer (KYC). It requires them to obtain adequate information to identify the account holder’s actual name and the nature and source of their funds. Customers with private banking accounts and foreign government officials are subject to Enhanced Due Diligence (EDD) because local laws deem such account holders at a higher risk for money laundering. All accounts are subject to ongoing monitoring, meaning software scrutinises transactions and flags operations outside specific regulations for manual inspection. Industry regulators are tasked to ensure that financial organisations comply with the BSA. For example, the Office of the Comptroller of the Currency and the Federal Reserve frequently inspect banks and have the authority to impose civil fines or delegate matters for criminal prosecution if non-compliance has been proven. In addition to the BSA, the United States imposes controls over the movement of currency across its borders. They require individuals to fill out the Report of International Transportation of Currency or Monetary Instruments (CMIR) and report the transportation of cash in excess of $10,000. Businesses that receive cash payments over $10,000 must file Form 8300 with the IRS to identify the source of the money.

Criminal Measures

Money laundering has been criminalised in the U.S. since the Money Laundering Control Act of 1986. The law prohibits individuals from executing financial operations with proceeds generated from specific crimes. The law requires that an individual intends explicitly to make the transaction to conceal the funds’ ownership, control, or origin. There is no minimum sum or requirement that the operation successfully disguises the money. U.S. legislation broadly defines what a “financial transaction” is. According to the law, monetary operations don’t necessarily involve a financial institution or business. It’s enough for one individual to pass funds to another with the intent to conceal their source, ownership, or control for a transaction to take place. In addition to money laundering, U.S. legislation forbids spending more than $10,000 derived from Specified Unlawful Activities (SUAs), regardless of whether the individual wishes to disguise it. This violation carries a lesser penalty than money laundering, and unlike the money laundering statute, it requires that the funds pass through a financial institution. The Anti-Drug Abuse Act of 1998 widened the classification of financial institutions to include car dealers and real estate closing personnel. Such professionals are obliged to file reports on large currency operations. It also requires identity verification of those who acquire monetary instruments for over $3,000. The Annunzio-Wylie Anti-Money Laundering Act of 1992 further strengthened sanctions for BSA sanctions by eliminating “Criminal Referral Forms,” establishing the Bank Secrecy Act Advisory Group (BSAAG), and implementing the following requirements:

• Filling of “Suspicious Activity Reports;”
• Verification of wire transfers;
• Recordkeeping of wire transfers;

The Money Laundering Suppression Act from 1994 obliged banking agencies to:

• Review and enhance personnel training;
• Develop anti-money laundering examination procedures;
• Review and ameliorate processes for referring cases to law enforcement agencies;
• Streamline currency transaction report exemption protocols;
• Register money service businesses (MSBs) through their owner or controlling person;
• Require every MSB to keep a list of businesses authorised to act as agents in connection with their services;
• Make operating an unregistered MSB a federal crime;
• Recommend uniform laws applicable to MSBs across the U.S.;

The Money Laundering and Financial Crimes Strategy Act of 1998 introduced the following requirements:

• Banking agencies had to develop anti-money laundering training examiners;
• The Department of the Treasure and other agencies had to create a “National Money Laundering Strategy”;
• The creation of the High-Intensity Money Laundering and Related Financial Crime Area (HIFCA) Task Forces to focus law enforcement efforts at local, state, and federal levels.

In 2004, the Intelligence Reform & Terrorism Prevention Act amended the Bank Secrecy Act to require the Secretary of the Treasury to stipulate regulations requiring specific financial organisations to report cross-border electronic fund transfers.