Financial institutions play a key role in detecting, preventing, and controlling money laundering and terrorism financing through continuous monitoring of customer relationships and timely reporting of suspicious activities. They must follow know-your-customer procedures and report currency transactions, funds transfers, and other activity to the Financial Crimes Enforcement Network. This helps law enforcement maintain security and integrity in the global financial system.

1. AML/CTF Basics
Understanding Ant-Money Laundering and Counter-Terrorism Financing (AML /CFT)
David F Amakobe
13 December 2016

2. Money Laundering
The processes by which criminals
conceal:
The Origin,
The Possession, and
The Control
of the proceeds of criminal behavior
(Cassara, 2016; Christensen, 2011;
Olatunde Julius & Lauwo, 2012).

3. Methods of Money Laundering
The misuse of the international
financial system (both formal and
alternate),
The physical movement of cash
(cash smuggling)
 The abuse of trade transactions
and their financing (APG, 2012).

4. Trade Based Money Laundering
The misuse of business and their funding include:
Over/under invoicing of goods,
Multiple invoicing of goods,
Over/under shipments of goods and
False description of goods.
Above activities may be combined with
 Cash inflow based payment,
 Third party payment,
Segmental modes of payment and
Alternative remittance payment (APG, 2012).

5. Banking Based Money Laundering
The misuse of the international financial system involves three
independent steps:
 Placement: A process for transferring the proceeds from illegal
activities into the financial institutions or converting cash into
instruments.
 Layering: It is a process in which a launderer may conduct a series of
financial transactions to distance the proceeds from illegal source.
 Integration: It is the final stage in the laundering process; illicit funds
are integrated with monies from legitimate commercial activities as
they enter the mainstream economy (Moustafa, Abd El-Megied,
Sobh, & Shafea, 2015)

6. Terrorism
The use or threat of action with a political motivation, which involves:
Serious violence against a person,
Serious damage to property and
Grave danger to the health and safety of the public.
Article 2 of the 1999 International Convention for the suppression of
terrorist Bombings states that a person commits an offence within the
meaning of the Convention if they cause
Damage to public or government property intending
Death or Serious bodily injury
Significant economic loss, (Grozdanova, 2014).

7. Terrorism Financing
Intentional collection or provision of funds to support an act or
acts of terrorism. Terrorist organizations raise funding from
legitimate sources, including
The abuse of charitable entities
Legitimate businesses or
Self-financing by the terrorists themselves.
Terrorists also derive funding from a variety of criminal activities
ranging in scale and sophistication from
Low-level crime to systematic fraud or narcotics smuggling,
 State sponsors
Events in failed states and other safe havens.

8. Proliferation of Weapons of Mass Destruction (WMD)
Proliferation is the
production,
 storage,
transmission,
trade and
Use or threat of use
of weapons of mass destruction, whose spread and their
delivery systems could have incalculable consequences for
global stability and prosperity. Financing of these operations
is illegal and notifiable. Financial institutions have a
responsibility to enforce sanctions imposed by the UN, the US
and their allies.

9. Financial Action Task Force (FATF)
FATF is an independent inter-governmental body that develops
and promotes policies to protect the global financial system
against
Money laundering,
Terrorist financing and
The financing of proliferation of weapons of mass destruction.
The FATF Recommendations are recognized as the global anti-
money laundering (AML) and counter-terrorist financing (CFT)
standard ((FATF), 2012).

10. Financial Crimes Enforcement Network
The mission of the FinCEN is
To safeguard the financial system from illicit
use and
Combat money laundering
Promote national security through
The collection, analysis, and
Dissemination of financial intelligence for
strategic use by financial authorities

11. Financial Institutions AML/CTF
 Know Your Customer (KYC)
 CDD
 Enhanced CDD for PEPs
 Correspondence banking
 Natural and Legal persons, legal arrangements and Ultimate beneficial ownership
 Continuously monitor new and persisting relationships
 Currency activity reports,
 Funds transfer reports,
 Monetary instrument sales reports,
 Larger item reports,
 Significant balance change reports,
 ATM transaction reports, and
 Nonsufficient funds (NSF) reports
 Report to FINCEN
 Suspicious Activity Report SAR
 Bank Secrecy Act Currency Transaction Report (BCTR)

12. Summary
 Financial institutions play a key role in the detection,
prevention and control of criminal intention to hide the
origin, possession and control of proceeds of crime
 The continuous monitoring of both prospective and
persisting relationships ensure the integrity and security of
the financial system
 Timely detection and reporting to FinCEN ensure that Law
enforcement has the necessary information to maintain
security

13. References
 (FATF), F. A. T. F. (2012). INTERNATIONAL STANDARDS ON COMBATING MONEY LAUNDERING
AND THE FINANCING OF TERRORISM & PROLIFERATION. Retrieved from February 2012:
www.fatf-gafi.org/recommendations.html
 APG. (2012). APG Typology Report on Trade Based Money Laundering. Retrieved from
http://www.apgml.org/documents/default.aspx?pcPage=10
 Cassara, J. A. (2016). Trade-based money laundering: the next frontier in international money
laundering enforcement. Hoboken, New Jersey: John Wiley & Sons.
 Christensen, J. (2011). The looting continues tax havens and corruption. Critical Perspectives on
International Business, 7(2), 177-196. doi:http://dx.doi.org/10.1108/17422041111128249
 Grozdanova, R. (2014). 'Terrorism' - Too Elusive a Term for an International Legal Definition?
Netherlands International Law Review, 61(3), 305-334.
doi:http://dx.doi.org/10.1017/S0165070X14001351
 Moustafa, T. H., Abd El-Megied, M. Z., Sobh, T. S., & Shafea, K. M. (2015). Anti money laundering
using a two-phase system. Journal of Money Laundering Control, 18(3), 304-329.
 Olatunde Julius, O., & Lauwo, S. (2012). The role of offshore financial centres in elite money
laundering practices: evidence from Nigeria. Journal of Money Laundering Control, 15(3), 336-
361. doi:http://dx.doi.org/10.1108/13685201211238070