US PATRIOT ACTS

Anti-Money Laundering (AML)

Risk Assessment

• Identifying and assessing the risk of money laundering and terrorist financing
• Factors to consider:
  • Customer risk (e.g. PEPs, high-risk countries)
  • Product/service risk (e.g. cash-intensive, anonymous transactions)
  • Geographic risk (e.g. high-risk countries, regions)
  • Transaction risk (e.g. large, complex, or unusual transactions)
• Risk assessment informs AML program development and resource allocation

Customer Due Diligence (CDD)

• Verifying customer identity and assessing risk
• CDD requirements:
  • Identification and verification of customers and beneficial owners
  • Ongoing monitoring of customer activity
  • Enhanced due diligence for high-risk customers
• CDD helps prevent anonymous transactions and identifies suspicious activity

Transaction Monitoring

• Identifying and reporting suspicious transactions
• Transaction monitoring systems:
  • Flagging unusual or high-risk transactions
  • Generating alerts for review and investigation
  • Identifying patterns and trends of suspicious activity
• Transaction monitoring helps detect and prevent money laundering and terrorist financing

Sanctions Screening

• Identifying and blocking transactions with sanctioned individuals or entities
• Sanctions lists:
  • OFAC (Office of Foreign Assets Control)
  • EU Sanctions List
  • UN Sanctions List
• Sanctions screening helps prevent transactions with prohibited parties

Compliance Regulations

• AML/CFT regulations and guidelines:
  • BSA (Bank Secrecy Act) and USA PATRIOT Act
  • FATF (Financial Action Task Force) recommendations
  • EU's 4th and 5th Anti-Money Laundering Directives
• Compliance regulations provide framework for AML/CFT programs and requirements

Suspicious Activity Report (SAR) and Suspicious Transaction Report (STR)

• Reporting suspicious activity to regulatory authorities:
  • SAR (USA): reporting suspicious activity to FinCEN
  • STR (international): reporting suspicious transactions to relevant authorities
• SAR/STR reporting helps identify and prevent money laundering and terrorist financing

Combating the Financing of Terrorism (CFT)

• Identifying and preventing financing of terrorist activities
• CFT requirements:
  • Identifying and reporting suspicious transactions
  • Implementing targeted financial sanctions
  • Cooperating with law enforcement and intelligence agencies
• CFT helps prevent and disrupt terrorist financing

Bank Secrecy Act (BSA) and Financial Action Task Force (FATF)

• BSA: US legislation requiring financial institutions to report cash transactions and maintain records
• FATF: international organization setting standards and guidelines for AML/CFT
• BSA and FATF provide framework for AML/CFT regulations and guidelines

Anti-Money Laundering (AML)

Risk Assessment

• Identifying and assessing the risk of money laundering and terrorist financing
• Factors to consider: customer risk, product/service risk, geographic risk, and transaction risk
• Risk assessment informs AML program development and resource allocation

Customer Due Diligence (CDD)

• Verifying customer identity and assessing risk
• CDD requirements: identification and verification of customers and beneficial owners, ongoing monitoring, and enhanced due diligence for high-risk customers
• CDD helps prevent anonymous transactions and identifies suspicious activity

Transaction Monitoring

• Identifying and reporting suspicious transactions
• Transaction monitoring systems: flagging unusual transactions, generating alerts, and identifying patterns and trends
• Transaction monitoring helps detect and prevent money laundering and terrorist financing

Sanctions Screening

• Identifying and blocking transactions with sanctioned individuals or entities
• Sanctions lists: OFAC, EU Sanctions List, UN Sanctions List
• Sanctions screening helps prevent transactions with prohibited parties

Compliance Regulations

• AML/CFT regulations and guidelines: BSA, USA PATRIOT Act, FATF recommendations, EU's 4th and 5th Anti-Money Laundering Directives
• Compliance regulations provide framework for AML/CFT programs and requirements

Suspicious Activity Report (SAR) and Suspicious Transaction Report (STR)

• Reporting suspicious activity to regulatory authorities: SAR in USA, STR internationally
• SAR/STR reporting helps identify and prevent money laundering and terrorist financing

Combating the Financing of Terrorism (CFT)

• Identifying and preventing financing of terrorist activities
• CFT requirements: identifying and reporting suspicious transactions, implementing targeted financial sanctions, and cooperating with authorities
• CFT helps prevent and disrupt terrorist financing

Bank Secrecy Act (BSA) and Financial Action Task Force (FATF)

• BSA: US legislation requiring financial institutions to report cash transactions and maintain records
• FATF: international organization setting standards and guidelines for AML/CFT
• BSA and FATF provide framework for AML/CFT regulations and guidelines

AML Risk Assessment

• Identifies and assesses money laundering and terrorist financing risks associated with a financial institution's products, services, and customer base
• Evaluates risk exposure based on factors such as customer types, geographic locations, products and services, and delivery channels
• Informs the development of AML policies, procedures, and controls

Customer Due Diligence (CDD)

• Identifies and verifies customer identity through identity verification and risk profile assessment
• Required for new customers, existing customers with changes in risk profile, and high-risk customers
• Ongoing monitoring of customer activity to detect suspicious activity
• Helps prevent anonymous or fictitious accounts and detect suspicious activity

Transaction Monitoring

• Ongoing monitoring of customer transactions to detect and report suspicious activity
• Reviews transactions against predefined rules and scenarios
• Identifies transactions that exceed certain thresholds or exhibit unusual patterns
• Files Suspicious Activity Reports (SARs) with the relevant authorities
• Helps detect and prevent money laundering and terrorist financing

Sanctions Screening

• Checks customer and transaction information against sanctions lists and databases
• Screens customers, vendors, and counterparties against sanctions lists
• Checks transactions against sanctions lists and embargoes
• Identifies and reports matches or potential matches
• Helps prevent financial institutions from engaging in transactions with sanctioned individuals or entities

Compliance Regulations

• AML regulations vary by country, but common requirements include CDD, ongoing transaction monitoring, sanctions screening, reporting suspicious activity, and maintaining accurate records
• Key regulations and guidelines include USA PATRIOT Act, Bank Secrecy Act (BSA), Financial Action Task Force (FATF) recommendations, and EU's 5th Anti-Money Laundering Directive (5AMLD)
• Regulations aim to prevent money laundering and terrorist financing

What is AML?

• AML (Anti-Money Laundering) refers to laws, regulations, and procedures aimed at preventing criminals from disguising illegally obtained funds as legitimate income.

Key Concepts

• Money laundering is the process of concealing the source of illegally obtained funds to make them appear legitimate.
• Terrorist financing involves the provision or collection of funds to support terrorist activities.

AML Regulations

• Know Your Customer (KYC) requires financial institutions to verify customer identities and understand their risk profiles.
• Customer Due Diligence (CDD) involves ongoing monitoring of customer activity to detect suspicious behavior.
• Suspicious Activity Reporting (SAR) involves reporting suspicious transactions to the relevant authorities.

AML Requirements

• Risk Assessment involves identifying and assessing the risks of money laundering and terrorist financing.
• Training and Awareness educate employees on AML regulations and procedures.
• Independent Audit involves regular audits to ensure AML compliance.

AML in Different Industries

• Banking and Finance: AML regulations apply to banks, credit unions, and other financial institutions.
• Gaming and Casinos: Casinos and gaming operators must implement AML measures to prevent money laundering.
• Real Estate and Luxury Goods: Dealers in luxury goods and real estate must comply with AML regulations.

Consequences of Non-Compliance

• Fines and Penalties: Failure to comply with AML regulations can result in significant fines and penalties.
• Reputational Damage: Non-compliance can damage an organization's reputation and lead to a loss of customer trust.
• Criminal Prosecution: In severe cases, non-compliance can lead to criminal prosecution.

Terrorism Prevention

• Terrorism definition expanded to include domestic terrorism, in addition to international terrorism
• Military force authorized against terrorists and those who harbor them
• Suspected terrorists can be detained for up to 7 days without charge

Financial Intelligence

• Financial institutions required to report suspicious transactions and implement anti-money laundering programs
• Treasury Secretary authorized to regulate and enforce financial transactions related to terrorism
• Financial Crimes Enforcement Network (FinCEN) established to track and analyze financial transactions

Surveillance Powers

• Wiretaps and electronic surveillance authorized for gathering intelligence on suspected terrorists
• Government can collect business records and other tangible things for foreign intelligence purposes
• Information sharing allowed between agencies, including grand jury information

Border Security

• Biometric technology authorized for identifying and tracking individuals entering and leaving the US
• Border patrol agents increased and infrastructure improved at ports of entry
• National Security Entry-Exit Registration System (NSEERS) implemented to track and monitor non-citizens

Civil Liberties

• Criticized for infringing on civil liberties, including privacy, freedom of speech, and due process
• National Security Letters (NSLs) allow personal information to be obtained without a warrant
• Privacy and Civil Liberties Oversight Board created to monitor and protect civil liberties