ACAM 1 - Risks and Methods of Money Laundering PDF

Risks and Methods of Money Laundering and Terrorist Financing Overview What Is Money Laundering? Money laundering involves taking criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal activities....

Risks and Methods of Money Laundering and Terrorist Financing Overview What Is Money Laundering? Money laundering involves taking criminal proceeds and disguising their illegal sources in order to use the funds to perform legal or illegal activities. Simply put, money laundering is the process of making dirty money look clean. When a criminal activity generates substantial profits, the individual or group involved must find a way to use the funds without drawing attention to the underlying activity or persons involved in generating such profits. Criminals achieve this goal by disguising the source of funds, changing the form of the currency, or moving the money to a place where it is less likely to attract attention. Criminal activities that lead to money laundering (i.e., predicate crimes) can include illegal arms sales, narcotics trafficking, contraband smuggling, and other activities related to organized crime, embezzlement, insider trading, bribery, and computer fraud schemes. Formed in 1989, the Financial Action Task Force (FATF) is an intergovernmental body created by the Group of Seven industrialized nations to set standards and foster international action against money laundering. One of FATF’s early accomplishments was to dispel the notion that money laundering only involves cash transactions. Through several money laundering typologies exercises, FATF demonstrated that money laundering can be achieved through virtually every medium, financial organization, and business. The United Nations 2000 Convention against Transnational Organized Crime, also known as the Palermo Convention, defines money laundering as: ​ The conversion or transfer of property, knowing it is derived from a criminal offense, for the purpose of concealing or disguising its illicit origin or of assisting any person who is involved in the commission of the crime to evade the legal consequences of his or her actions ​ The concealment or disguise of the true nature, source, location, disposition, movement, or rights with respect to or ownership of property, knowing that it is derived from a criminal offense ​ The acquisition, possession, or use of property, knowing at the time of its receipt that it was derived from a criminal offense or from participation in a crime An important prerequisite in the definition of money laundering is knowledge. In all three of the definitions above is the phrase "knowing that it is derived from a criminal offense,” and a broad interpretation of knowing is generally applied. In fact, FATF’s 40 Recommendations on Money Laundering and Terrorist Financing and the Sixth European Union Directive on the Prevention of the Use of the Financial System for the Purpose of Money Laundering and Terrorist Financing state that “The intent and knowledge required to prove the offense of money laundering includes the concept that such a mental state may be inferred from objective factual circumstances.” Several jurisdictions also use the legal principle of willful blindness in money laundering cases to prove knowledge. Courts define willful blindness as the “deliberate avoidance of knowledge of the facts” or “purposeful indifference” and have held that willful blindness is the equivalent of actual knowledge of the illegal source of funds or of the intentions of a customer in a money laundering transaction. After the events on September 11, 2001, in October 2001, FATF expanded its mandate to address countering the financing of terrorism (CFT). Both terrorists and money launderers can use the same methods to move their money in ways to avoid detection, such as structuring payments to avoid reporting and use of underground banking or value transfer systems (e.g., hawala, hundi, and fei ch’ien). However, while funds destined for money laundering are derived from criminal activities, such as drug trafficking and fraud, terrorist financing can include funds from perfectly legitimate sources. Concealment of funds used for terrorism is primarily designed to hide the purpose for which these funds are used, rather than their source. Terrorist funds might be used for operating expenses, including paying for food, transportation, and rent, as well as for the actual material support of terrorist acts. Terrorists, similar to criminal enterprises, value the secrecy of transactions regarding their destination and purpose. In February 2012 (and amended periodically since), FATF published a revised list of its 40 recommendations, which includes a new recommendation addressing ways to prevent, suppress, and disrupt the proliferation of weapons of mass destruction (WMD). Three Stages of the Money Laundering Cycle Money laundering often involves a complex series of transactions that are difficult to separate. However, it is common to think of money laundering as occurring in three stages. Stage One: Placement—The physical disposal of cash or other assets derived from criminal activity. During this phase, the money launderer introduces the illicit proceeds into the financial system. Often, this is accomplished by placing the funds into circulation through formal financial institutions, casinos, and other legitimate businesses, both domestic and international. Examples of placement transactions include the following: ​ Blending of funds: Commingling illegitimate funds with legitimate funds, such as placing the cash from illegal narcotics sales into a cash-intensive locally owned restaurant ​ Purchasing significant stored value cards with currency ​ Foreign exchange: Purchasing foreign exchange with illegal funds ​ Breaking up amounts: Dividing cash into small amounts and depositing it into numerous bank accounts in an attempt to evade reporting requirements ​ Currency smuggling: Cross-border, physical movement of cash or monetary instruments ​ Loans: Repayment of legitimate loans using laundered cash Stage Two: Layering—The separation of illicit proceeds from their source by layers of financial transactions intended to conceal the origin of the proceeds. The second stage involves converting the proceeds of the crime into another form and creating complex layers of financial transactions to obscure the source and ownership of funds. Examples of layering transactions include: ​ Electronically moving funds from one country to another and dividing them into advanced financial options and/or markets ​ Moving funds from one financial institution to another or within accounts at the same institution ​ Converting the cash placed into monetary instruments ​ Reselling high-value goods and prepaid access or stored value products ​ Investing in real estate and other legitimate businesses ​ Placing money in stocks, bonds, or life insurance products ​ Using shell companies to obscure the ultimate beneficial owner and assets Stage Three: Integration—Supplying apparent legitimacy to illicit wealth through the reentry of the funds into the economy in what appears to be normal business or personal transactions. The third stage entails using laundered proceeds in seemingly normal transactions to create the perception of legitimacy. The launderer, for example, might choose to invest the funds in real estate, financial ventures, or luxury assets. By the integration stage, it is exceedingly difficult to distinguish between legal and illegal funds. This stage gives a launderer the opportunity to increase his wealth with the proceeds of crime. Integration is generally difficult to identify unless there are great disparities between a person’s or company’s legitimate employment, business, or investment ventures and a person’s wealth or a company’s income or assets. Examples of integration transactions include: ​ Purchasing luxury assets, such as property, artwork, jewelry, and high-end automobiles ​ Entering into financial arrangements and other ventures in which investments can be made in business enterprises The Economic and Social Consequences of Money Laundering Money laundering is a result of any crime that generates profits for the criminals involved. It knows no boundaries, and jurisdictions in which there are weak, ineffective, or inadequate anti-money laundering (AML) and CFT legislation and regulations are most vulnerable. However, large, well- developed financial centers are also vulnerable to laundering due to the large volumes of transactions that allow the launderer to blend in, as well as the wide range of services that enable the launderer to conduct transactions in a way that is convenient. Because most launderers want to eventually use the proceeds of their crimes, their ultimate intent is to move funds through stable financial systems. Money laundering has significant negative economic and social consequences, especially for developing countries and emerging markets. The easy passage of funds from one organization to another, or relatively facile systems that allow money to be placed without raising any questions, is fertile territory for money launderers. The upholding of legal, professional, and ethical standards is critical to the integrity of financial markets. The potential macroeconomic consequences of unchecked money laundering include: ​ Increased exposure to organized crime and corruption ​ Undermining the legitimate private sector ​ Weakening financial organizations ​ Dampening effect on foreign investments ​ Loss of control of, or mistakes in, decisions regarding economic policy ​ Economic distortion and instability ​ Loss of tax revenue ​ Risks to privatization efforts ​ Reputation risk for the country ​ Risk of international sanctions ​ Social costs ​ Reputational risk ​ Operational risk ​ Legal risk ​ Concentration risk Increased Exposure to Organized Crime and Corruption Successful money laundering enhances the profitable aspects of criminal activity. When a country is seen as a haven for money laundering, it can attract people who commit crimes. Typically, havens for money laundering and terrorist financing have: ​ Limited numbers of predicate crimes for money laundering (i.e., criminal offenses that would permit a jurisdiction to bring a money laundering charge) ​ Limited types of organizations and persons covered by money laundering laws and regulations ​ Little to no enforcement of the laws and weak penalties or provisions that make it difficult to confiscate and freeze assets related to money laundering ​ Limited regulatory capacity to effectively monitor and supervise compliance with money laundering and terrorist financing laws and regulations If money laundering is prevalent, there is more likely to be corruption. Typically, the penetration of organized crime groups in a jurisdiction is directly linked to public and private sector corruption. Criminals might try to bribe government officials, lawyers, and employees of financial and nonfinancial organizations so they can continue to run their criminal businesses. In countries with weaker laws and enforcement, it is often corruption that triggers money laundering. It also leads to increases in the use of bribery in financial organizations, among lawyers and accountants, in the legislature, in enforcement agencies, with police and supervisory authorities, and even with courts and prosecutors. A comprehensive AML/CFT framework, on the other hand, helps curb criminal activities, eliminates profits from such activities, and discourages criminals from operating in a country, especially where law is fully enforced and the proceeds from crime are confiscated. Undermining the Legitimate Private Sector One of the most serious microeconomic effects of money laundering is felt in the private sector. Money launderers are known to use front companies, that is, businesses that appear legitimate and engage in legitimate business, but are in fact controlled by criminals who commingle the proceeds of illicit activity with legitimate funds to hide the unlawful gains. These front companies have a competitive advantage over legitimate firms because they have access to substantial illicit funds, allowing them to subsidize products and services sold at below-market rates. This makes it difficult for legitimate businesses to compete against front companies. Clearly, the management principles of these criminal enterprises are not consistent with traditional free market principles, which results in further negative macroeconomic effects. By using front companies, particularly multiple front companies, and other investments in legitimate companies, money laundering proceeds can be used to control whole industries and sectors of the economy of certain countries. This increases the potential for monetary and economic instability due to the misallocation of resources from artificial distortions in asset and commodity prices. It also provides a vehicle for evading taxes, thus depriving the country of revenue. Weakening Financial Organizations Money laundering and terrorist financing can harm the soundness of a country’s financial sector. They can negatively affect the stability of individual banks and other financial organizations, such as securities firms and insurance companies. Criminal activity has been associated with several bank failures around the globe, including the closures of the first Internet bank, European Union Bank, and Riggs Bank. The establishment and maintenance of an effective AML/CFT program is usually part of a financial organization’s charter to operate; noncompliance can result not only in significant civil money penalties but also in the loss of its charter. Dampening Effect on Foreign Investments Although developing economies cannot afford to be overly selective about the sources of capital they attract, there is a dampening effect on foreign direct investment when a country’s commercial and financial sectors are perceived to be compromised and subject to the influence of organized crime. To maintain a business-friendly environment, these impedances need to be eliminated. Loss of Control of, or Mistakes in, Decisions Regarding Economic Policy Due to the significant amounts of money involved in the money laundering process, in some emerging market countries, these illicit proceeds might dwarf government budgets. This can result in the loss of control of economic policy by governments or in policy mistakes due to measurement errors in macroeconomic statistics. Money laundering can adversely affect currencies and interest rates, as launderers reinvest funds where their schemes are less likely to be detected, rather than where rates of return are higher. Volatility in exchange and interest rates due to unanticipated cross-border transfers of funds can also occur. To the extent that money demand appears to shift from one country to another because of money laundering—resulting in misleading monetary data—it can have adverse consequences for interest and exchange rate volatility. This is particularly true in economies based on the US dollar, as the tracking of monetary aggregates becomes more uncertain. Last, money laundering can increase the threat of monetary instability due to the misallocation of resources from artificial distortions in asset and commodity prices. Economic Distortion and Instability Money launderers are not primarily interested in profit generation from their investments, but rather in protecting their proceeds and hiding the illegal origin of the funds. Thus, they invest their money in activities that are not necessarily economically beneficial to the country where the funds are located. Furthermore, when money laundering and financial crime redirect funds from sound investments to low-quality investments that hide their origin, economic growth can suffer. Loss of Tax Revenue Of the many underlying forms of illegal activity, tax evasion is perhaps the one with the most obvious macroeconomic impact. Money laundering diminishes government tax revenue and therefore indirectly harms honest taxpayers. It also makes government tax collection more difficult. This loss of revenue generally means higher tax rates than would normally be the case. A government revenue deficit is at the center of economic difficulties in many countries, and correcting it is the primary focus of most economic stabilization programs. The International Monetary Fund (IMF) has been involved in efforts to improve the tax collection capabilities of its member countries, and the Organisation for Economic Co-operation and Development (OECD) has been instrumental in moving many jurisdictions toward tax transparency. Risks to Privatization Efforts Money laundering threatens the efforts of many states trying to introduce reforms into their economies through the privatization of state-owned properties, such as land, resources, and enterprises. Sometimes linked with corruption or inside deals, a government might award a state privatization tender to a criminal organization potentially at an economic loss to the public. Moreover, while privatization initiatives are often economically beneficial, they can also serve as a vehicle to launder funds. In the past, criminals have been able to purchase ports, resorts, casinos, and other state properties to hide their illicit proceeds and facilitate their criminal activities. Reputation Risk for the Country A reputation as a money laundering or terrorist financing haven can harm development and economic growth in a country. It diminishes legitimate global opportunities because foreign financial organizations find that the extra scrutiny involved in working with organizations in money laundering havens is too expensive. Legitimate businesses located in money laundering havens can also suffer from reduced access to markets (or might have to pay more to have access) due to the extra scrutiny of ownership and control systems. Once a country’s financial reputation is damaged, rebuilding it is very difficult. It requires significant resources to rectify a problem that could have been prevented with proper AML controls. Other effects include specific countermeasures that can be taken by international organizations and other countries and reduced eligibility for governmental assistance. Risk of International Sanctions In order to protect the financial system from money laundering and terrorist financing, the United States, United Nations, European Union, and other governing bodies may impose sanctions against foreign countries, entities, individuals, terrorists and terrorist groups, drug traffickers, and other security threats. In the United States, the Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions. Countries can be subject to comprehensive or targeted sanctions. Comprehensive sanctions prohibit virtually all transactions with a specific country. Targeted sanctions prohibit transactions with specified industries, entities, or individuals listed on OFAC’s Specially Designated Nationals and Blocked Persons (SDN) list. Failure to comply can result in criminal and civil penalties. FATF also maintains a list of jurisdictions identified as high risk and noncooperative, where AML/CFT regimes have strategic deficiencies and do not meet international standards. As a result, FATF calls on its members to implement countermeasures against these jurisdictions, such as financial organizations applying enhanced due diligence (EDD) to business relationships and transactions with natural and legal persons from an identified jurisdiction in an attempt to persuade it to improve its AML/CFT regime. Social Costs Significant social costs and risks are associated with money laundering. Money laundering is integral to maintaining the profitability of crime. It also enables drug traffickers, smugglers, and other criminals to expand their operations. This drives up the cost of government expenses and budgets to combat the serious consequences that result, due to the need for increased law enforcement and other expenditures (e.g., increased healthcare costs for treating drug addicts). Financial organizations that rely on the proceeds of crime face great challenges in adequately managing their assets, liabilities, and operations, as well as in attracting legitimate clients. They also risk being excluded from the international financial system. The adverse consequences of money laundering are reputational, operational, legal, and concentration risks, and they include: ​ Loss of profitable business ​ Liquidity problems through withdrawal of funds ​ Termination of correspondent banking facilities ​ Investigation costs and fines ​ Asset seizures ​ Loan losses ​ Reduced stock value of financial organizations Reputational Risk Adverse publicity regarding an organization’s business practices and associations, whether accurate or not, will cause a loss of public confidence in the integrity of the organization. As an example, reputational risk for a bank represents the potential that borrowers, depositors, and investors might stop doing business with the bank because of a money laundering scandal. The loss of high-quality borrowers reduces profitable loans and increases the risk of the overall loan portfolio. Depositors might withdraw their funds. Moreover, funds placed on deposit with a bank could be unreliable as a source of funding once depositors learn that the bank might not be stable. Depositors could be more willing to incur large penalties rather than leave their funds in a questionable bank, resulting in unanticipated withdrawals and causing potential liquidity problems. Operational Risk The potential for loss results from inadequate internal processes, personnel, or systems, or from external events. Such losses can occur when organizations incur reduced or terminated inter-bank or correspondent banking services or an increased cost for these services. Increased borrowing or funding costs are also a component of operational risk. Legal Risk There is potential for lawsuits, adverse judgments, unenforceable contracts, fines and penalties that generate losses, increased expenses for an organization, and even the closure of the organization. For example, legitimate customers could become victims of a financial crime, lose money, and sue the financial organization for reimbursement. There could be investigations conducted by regulators and/or law enforcement authorities, resulting in increased costs, as well as fines and other penalties. Also, certain contracts could be unenforceable due to fraud on the part of the criminal customer. Concentration Risk The potential for loss results from too much credit or loan exposure to one borrower or group of borrowers. Regulations usually restrict a financial organization’s exposure to a single borrower or group of related borrowers. Lack of knowledge about a specific customer, who controls the customer, or the customer’s relationships to other borrowers can place an organization at risk in this regard. This is particularly a concern when there are related counterparties, connected borrowers, and a common source of income or assets for repayment. Loan losses can also result from unenforceable contracts and contracts made with fictitious persons. For these reasons, international bodies have issued statements, such as the Basel Committee on Banking Supervision’s guidelines on the Sound Management of Risks Related to Money Laundering and Financing of Terrorism and FATF’s International Standards on Combating Money Laundering and the Financing of Terrorism & Proliferation. Economic and social consequences of money laundering (Case example) In 2017, in Minneapolis, Minnesota, US, 21 people were indicted on sex trafficking and money laundering charges. The organized crime group (OCG) allegedly trafficked women from Thailand to cities across the US for sexual exploitation. The OCG dealt primarily in cash and conducted a sophisticated international money laundering ring to promote, redistribute, and conceal illegal profits. Funnel accounts were used to launder and route cash from cities across the US to money launderers in Los Angeles. A funnel account is a money laundering method that exploits branch networks of financial institutions. It involves depositing illegal funds into an account at one geographic location and giving criminals immediate access to the money via withdrawals in a different geographic location. The transaction amounts are kept under the AML reporting requirements in an attempt to avoid detection. In this case, funds were withdrawn in Los Angeles and then wired, transported as bulk cash, or mailed to Thailand. Through the coordinated efforts of various government and enforcement agencies, the human trafficking ring was taken down. The investigation resulted in 20 arrests, recovery of victims from active houses of prostitution, and seizures of hundreds of thousands of dollars in cash and numerous weapons. The indictment consisted of predicate crimes including sex trafficking, fraud, human trafficking, threats of force, and money laundering. The victims in this case were primarily poor women with limited ability to speak English. They were promised a better standard of living in exchange for US$40,000 to $60,000 in bondage debt. Criminals gained information about their families and used it to threaten the women and prevent them from fleeing and becoming noncompliant. The operatives of the money laundering ring helped their victims attain fraudulent visas and travel documents by forging bank statements and creating fictitious backgrounds and employment information. In the US, victims were escorted by a member of the OCG organization to a bank and instructed to open accounts in their own names. OCG members then took control of the accounts and provided the account information to co- conspirators to coordinate deposits throughout the US. The OCG recruited money mules to carry large volumes of cash on trips to Thailand and used a hawala system to transfer money to Thailand. The OCG moved tens of millions of dollars in illegal proceeds from the US to Thailand and elsewhere using this system. Collaboration between law enforcement and the private sector is essential to identify money laundering red flags. In addition, organizations must have mechanisms in place to report suspicious activities to regulators and law enforcement in the continuous fight against financial crime. Organizations need to sufficiently train frontline officers to identify fraudulent documents and red flags associated with human trafficking. Money laundering undermines the legitimacy of the private sector and weakens the financial sector, both of which are critical for a nation’s economic growth. Criminals often exploit loopholes within various institutions to facilitate financial crimes. This method undermines the legitimate financial system and exploits various markets, such as the labor market. Money laundering also promotes crime and corruption, which slow economic growth and cause significant reputational risk. In addition, money laundering perpetuates other crimes, such as human trafficking and smuggling, fraud, and corruption. These predicate crimes exploit and victimize vulnerable individuals. Key takeaways ​ Money laundering promotes crime and corruption and slows economic growth. ​ Money laundering exploits institutional loopholes and undermines the legitimate financial system and markets. ​ Money laundering perpetuates other crimes, such as smuggling, fraud, and corruption. ​ Collaboration among various agencies and the private and public sector is necessary to fight financial crime. AML/CFT Compliance Programs and Individual Accountability Regulatory guidance and legislation place individual accountability at the senior levels of regulated entities when they have contributed to deficiencies in AML/CFT and sanctions compliance programs. In 2014, the Financial Crimes Enforcement Network (FinCEN) of the US Department of the Treasury and the US financial intelligence unit (FIU) issued an advisory to financial organizations, reminding them to maintain a strong culture of compliance and specifying that the entire staff is responsible for AML/CFT compliance. This advisory was followed in 2015 by a memorandum on “Individual Accountability for Corporate Wrongdoing” from the US Department of Justice’s Deputy Attorney General, Sally Quillian Yates. The Yates Memo, as it is often referred to, reminds prosecutors that criminal and civil investigations into corporate misconduct should also focus on individuals who perpetrated the wrongdoing. Further, it notes that the resolution of a corporate case does not provide protection to individuals from criminal or civil liability. Although the Yates Memo does not specifically address AML/CFT compliance, enforcement actions issued by US regulators against financial organizations demonstrate a continued focus on AML/CFT compliance deficiencies. In the United Kingdom, the Financial Conduct Authority (FCA) published final rules for the Senior Managers and Certification Regime (SM&CR), which are designed to improve individual accountability within the banking sector. In relation to financial crime, the SM&CR requires a financial organization to give explicit responsibility to a senior manager, such as an executive-level money laundering reporting officer (MLRO), for ensuring that its efforts to combat financial crime are effectively designed and implemented. The senior manager is personally accountable for any misconduct within the organization’s AML/CFT regime. The New York State Department of Financial Services (DFS) issued a Final Rule requiring regulated organizations to maintain “transaction monitoring and filtering programs” reasonably designed to monitor transactions after their execution for compliance with the Bank Secrecy Act (BSA) and AML laws and regulations, including suspicious activity reporting requirements, and prevent unlawful transactions with targets of economic sanctions administered by OFAC. This Final Rule, which went into effect on January 1, 2017, includes very specific requirements concerning the implementation of transaction monitoring systems, including: ​ Risk-Based Models: Models should be risk-based and commensurate with the organization’s own risk assessment and profile. ​ Model Performance Calibration: Organizations must perform ongoing analysis and testing of the AML/CFT models to assess the scenario logic, performance, model technology, assumptions, and model parameter settings. ​ End-to-End, Pre- and Post-Model Implementation Testing: End-to-end testing is required to ensure rules are validated and data are complete and accurate. This Final Rule also requires regulated organizations’ boards of directors or senior officers to annually certify to the DFS that they have taken all steps necessary to comply with transaction monitoring and filtering program requirements. Although the law may seem New York-specific on its face, numerous foreign banks are subject to the law because they operate in New York. Specifically, the law covers banks, trust companies, private bankers, savings banks, and savings and loan associations chartered pursuant to the New York Banking Law, as well as all branches and agencies of foreign banking corporations licensed pursuant to the Banking Law to conduct banking operations in New York. Moreover, the law also applies to nonbank financial organizations with a banking law license, such as check cashers and money transmitters. Individual accountability and consequences (Case example) In August of 2020, the UK’s Solicitors Disciplinary Tribunal suspended and fined lawyer Steven David Kinch for repeatedly breaching his professional anti- money laundering obligations. It is well-known that several legal options exist globally to impose corporate liability. For example, in vicarious liability, an organization could be found criminally liable for the acts of its employees. There is, however, increasing focus on individual liability for professionals when their behaviors and actions encourage, tolerate, or lead to regulatory violations or criminal activity. Individuals are now expected to conduct business responsibly and prevent AML/CFT violations. Individual professionals are increasingly being held accountable for sector- specific crimes, through prosecution of linked financial crime offenses such as fraud. They may also be held accountable for their organizations’ AML/CFT failures. When prosecuted, individuals have been imprisoned, fined, suspended, or debarred from professional activities in regulated sectors. On August 12, 2020, the UK Solicitors Disciplinary Tribunal suspended lawyer Steven David Kinch for repeatedly breaching his professional anti-money laundering obligations. Kinch failed to check source of funds and perform customer and third-party due diligence when establishing new business relationships. He did not review transactions while doing business with a company incorporated in Sinaloa, Mexico. In fact, he stated that transactions involving foreign nationals and overseas residents, in a location where he had no connection or profile himself, did not raise red flags for him. He admitted that the nature of the transactions being conducted was out of his expertise. Kinch’s actions amounted to serious misconduct with high culpability and harm involving significant monies over a three-year period. Kinch was suspended from practice as a lawyer for 15 months and fined £5,000, after which he would be banned from practicing as a sole practitioner, manager, or owner of an authorized or recognized body. He was also forbidden from acting as a compliance officer for legal practice or finance and administration for three years. Compliance professionals must recognize the risks and specific accountability that they personally face in their work environments. They should ensure that they are fully up-to-date with legislative and regulatory requirements specific to their role and sector. If they have any concerns regarding integrity or behavior within their firm or business, they should escalate issues through the appropriate formal reporting or whistleblowing channels and document the fact. Key takeaways ​ Regulators use powers to sanction professionals who commit crimes from their sectors. ​ Criminal courts can impose a range of sanctions against guilty professionals, including prosecution and imprisonment. ​ Accountability for money laundering offenses in a professional capacity can have devastating financial, personal, and reputational consequences for individuals. Methods of Money Laundering Money laundering is a constantly evolving activity; it must be continuously monitored in all its various forms for countermeasures to be timely and effective. Illicit money can move through numerous commercial channels, including products such as checking, savings, and brokerage accounts; loans; wires and transfers; and financial intermediaries, such as trusts and company service providers, securities dealers, banks, and money services businesses. Money launderers operate in and around the financial system in a manner that best fits the execution of the scheme to launder funds. Since many governments around the world have implemented AML/CFT obligations for the banking sector, a shift in laundering activity into the nonbank financial sector and nonfinancial businesses and professions has risen. FATF and FATF-style regional bodies (FSRBs) publish periodic typology reports to monitor changes and better understand the underlying mechanisms of money laundering and terrorist financing. The objective of these reports is to provide information on the key methods and trends in these areas and to ensure that the FATF 40 Recommendations remain effective and relevant. This Study Guide refers often to these typologies because they serve as clear examples of how money can be laundered through different methods and in different settings.