Reference Guide to Anti-Money Laundering and Combating the

292 Pages·2006·2.12 MB·English

by  Paul Allan Schott

35052
Reference Guide to
Anti-Money Laundering and
Combating the Financing of Terrorism
Second Edition
and Supplement on
Special Recommendation IX
Paul Allan Schott

Reference Guide to
Anti-Money Laundering and
Combating the Financing of Terrorism
Second Edition
and Supplement on
Special Recommendation IX

Reference Guide to
Anti-Money Laundering and
Combating the Financing of Terrorism
Second Edition
and Supplement on
Special Recommendation IX
© 2006 The International Bank for Reconstruction and Development/The World Bank/
The International Monetary Fund
1818 H Street NW
Washington DC 20433
Telephone: [phone]
Internet: www.worldbank.org
E-mail: [email protected]
All rights reserved
First printing of Second Edition and Supplement on Special Recommendation IX, January 2006
1 2 3 4 5 10 09 08 07 06
This volume is a product of the staff of the International Bank for Reconstruction and
Development/The World Bank/The International Monetary Fund. The findings, interpretations,
and conclusions expressed in this paper do not necessarily reflect the views of the World Bank, the
International Monetary Fund, their Executive Directors, or the governments they represent.
The World Bank and International Monetary Fund do not guarantee the accuracy of the data
included in this work. The boundaries, colors, denominations, and other information shown on
any map in this work do not imply any judgment on the part of the World Bank or International
Monetary Fund concerning the legal status of any territory or the endorsement or acceptance of
such boundaries.
Rights and Permissions
The material in this publication is copyrighted. Copying and/or transmitting portions or all of
this work without permission may be a violation of applicable law. The International Bank for
Reconstruction and Development/The World Bank/The International Monetary Fund encourage
dissemination of their work and will normally grant permission to reproduce portions of the work
promptly.
For permission to photocopy or reprint any part of this work, please send a request with complete
information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923,
USA; telephone: [phone]; fax: [phone]; Internet: www.copyright.com.
All other queries on rights and licenses, including subsidiary rights, should be addressed to the
Office of the Publisher, The World Bank, 1818 H Street NW, Washington, DC 20433, USA; fax:
202-522-2422; e-mail: [email protected].
ISBN: 0-8213-6513-4
ISBN-13: 978-0-8213-6513-7
eISBN: 0-8213-6514-2
DOI: 10.1596/978-0-8213-6513-7
Library of Congress Cataloging-in-Publication Data has been applied for.
Cover and publication design: James E. Quigley, World Bank Institute.
Cover photos: Comstock.
www.amlcft.org
iv
Contents
Foreword ix
Acknowledgments xi
Abbreviations and Acronyms xiii
Introduction: How to Use this Reference Guide xv
Part A: The Problem and the International Response
Chapter I: Money Laundering and Terrorist Financing:
Definitions and Explanations I-1
A. What Is Money Laundering? I-2
B. What Is Terrorist Financing? I-4
C. The Link Between Money Laundering and Terrorist Financing I-5
D. The Magnitude of the Problem I-6
E. The Processes I-7
F. Where Do Money Laundering and Terrorist Financing Occur? I-9
G. Methods and Typologies I-9
Chapter II: Money Laundering Impacts Development II-1
A. The Adverse Implications for Developing Countries II-2
B. The Benefits of an Effective AML/CFT Framework II-7
Chapter III: International Standard Setters III-1
A. The United Nations III-2
B. The Financial Action Task Force on Money Laundering III-7
C. The Basel Committee on Banking Supervision III-13
D. International Association of Insurance Supervisors III-16
v
Reference Guide to Anti-Money Laundering and Combating the Financing of Terrorism
E. International Organization of Securities Commissioners III-18
F. The Egmont Group of Financial Intelligence Units III-19
Chapter IV: Regional Bodies and Relevant Groups IV-1
A. FATF-Style Regional Bodies IV-1
B. Wolfsberg Group of Banks IV-4
C. The Commonwealth Secretariat IV-8
D. Organization of American States–CICAD IV-9
Part B: The Elements of an Effective AML/CFT Framework
Chapter V: Legal System Requirements V-1
A. Criminalization of Money Laundering V-2
B. Criminalization of Terrorism and the Financing of Terrorism V-15
C. Seizure, Confiscation, and Forfeiture V-15
D. Types of Covered Entities and Persons V-19
E. Supervision and Regulation—Integrity Standards V-23
F. Laws Consistent with Implementation of FATF Recommendations V-26
G. Cooperation Among Competent Authorities V-26
H. Investigations V-27
Chapter VI: Preventive Measures VI-1
A. Customer Identification and Due Diligence VI-2
B. Record Keeping Requirements VI-16
C. Suspicious Transaction Reporting VI-18
D. Cash Transaction Reporting VI-24
E. Balancing Privacy Laws with Reporting and Disclosure Requirements VI-26
F. Internal Controls, Compliance and Audit VI-27
G. Regulation and Supervision—Integrity Standards VI-27
H. Legal Entities and Arrangements VI-28
Chapter VII: The Financial Intelligence Unit VII-1
A. Definition of a Financial Intelligence Unit VII-3
B. Core Functions VII-4
C. Types or Models of FIUs VII-9
D. Possible Additional Functions VII-15
E. Organizing the FIU VII-17
vi
Content s
F. Privacy Safeguards VII-19
G. Information and Feedback VII-23
Chapter VIII: International Cooperation VIII-1
A. Prerequisites for Effective International Cooperation VIII-2
B. General Principles of International Cooperation Against
Money Laundering VIII-5
C. International Cooperation Between FIUs VIII-6
D. International Cooperation Between Financial Supervisory Authorities VIII-8
E. International Cooperation Between Law Enforcement and
Judicial Authorities VIII-11
F. Considerations for Fiscal Matter Offenses VIII-13
Chapter IX: Combating the Financing of Terrorism IX-1
A. Ratification and Implementation of United Nations Instruments IX-2
B. Criminalizing the Financing of Terrorism and Associated
Money Laundering IX-4
C. Freezing and Confiscating Terrorist Assets IX-5
D. Reporting Suspicious Transactions Related To Terrorism IX-7
E. International Cooperation IX-8
F. Alternative Remittance Systems IX-9
G. Wire Transfers IX-10
H. Non-Profit Organizations IX-12
I. Cash Couriers IX-13
J. Self-Assessment Questionnaire on Terrorist Financing IX-17
Part C: The Role of the World Bank and International Monetary Fund
Chapter X: World Bank and International Monetary Fund
Initiatives to Fight Money Laundering and Terrorist Financing X-1
A. Awareness Raising X-3
B. Development of a Universal AML/CFT Assessment Methodology X-5
C. Building Institutional Capacity X-6
D. Research and Analysis X-9
vii
Reference Guide to Anti-Money Laundering and Combating the Financing of Terrorism
Annexes
I. Websites for Key Organizations, Legal Instruments,
and Initiatives Annex I-1
II. Other Useful Websites and Resources Annex II-1
III. United Nations Anti-Terrorist Conventions Referred to in the
International Convention for the Suppression of the Financing
of Terrorism Annex III-1
IV. The Financial Action Task Force Forty Recommendations on
Money Laundering and Interpretative Notes Annex IV-1
V. The Financial Action Task Force Special Recommendations
on Terrorist Financing Annex V-1
VI. The Financial Action Task Force Interpretative Notes
and Guidance Notes for the Special Recommendations on
Terrorist Financing and the Self-Assessment Questionnaire Annex VI-1
VII. Cross-Reference of The Forty Recommendations to
Reference Guide Annex VII-1
VIII. Cross-Reference of the Special Recommendations to
Reference Guide Annex VIII-1
Diagrams
The Processes of Money Laundering and Financing of Terrorism I-8
viii