asset forfeiture glossary of terms for prosecutors … · 182 bare trust 46 183 blind trust 46 184...

ASSET FORFEITURE GLOSSARY OF TERMS FOR PROSECUTORS AND

FINANCIAL INVESTIGATORS

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ASSET FORFEITURE GLOSSARY OF TERMS FOR PROSECUTORS AND FINANCIAL INVESTIGATORS

OF TAKING PR O C E E D S FRO M CRIME

C E L E B R A T I N G

D ISRUPTING CRIMINAL ACTIVITIES THROUGH TAKING THE PROCEEDS FROM CRIME

ASSET RECOVERYINTER-AGENCY NETWORK

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INDEX1 Account Monitoring Order 8

2 Affidavit 8

3 Agent 8

4 Alternative Remittance System (ARS) (See Hawala ) 8

5 Asset Manager 9

6 Asset Protection 9

7 Asset Protection Trusts (APTs) 9

8 Bank Draft 9

9 Bank Secrecy 9

10 Bare Trust 10

11 Batch Processing 10

12 Batch Transfer 10

13 Bearer Form 10

14 Bearer Negotiable Instruments 10

16 Bearer Security 10

17 Bearer Share 11

18 Bearer Share Certificate 11

19 Benami Account 11

20 Beneficial Owner 11

22 Beneficiary 11

23 Bit Torrent 12

24 Blockchain 12

25 Boiler Room Scam 12

26 Bond 12

27 Botnet 13

28 Bookmaker 13

29 Bureau de Change 13

30 Bust-Out 13

31 Camouflage Passports 14

32 Casa de Cambio 15

34 Cash Collateralized Loans 15

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35 Cashier’s Check or Cheque 15

36 CDD 15

37 Certificate of Deposit 15

38 Chain Referral Scheme 15

39 Chiti Banking 16

40 Chop Shop Banking 16

41 Clearing Account 16

42 Collateral 16

43 Collection Accounts 16

44 Collective Investment Schemes 16

45 Compliance Officer 17

46 Confidentiality 17

47 Confiscation 17

48 Cookie 18

49 Correspondent Bank 18

50 Corruption 18

51 Credit Cards 18

52 Credit Finance 19

53 Criminal Proceeds 19

54 Cross Border 19

55 Cross-Border Transfer 19

56 Crypto Currency 19

57 Crypto Currency Wallet 19

58 Cuckoo Smurfing 20

59 Currency 20

60 Currency Smuggling 20

61 Currency Transaction Report (CTR) 20

62 Custodian 20

63 Custody 20

64 Customer Due Diligence (CDD) 21

65 Customer Identification Program (CIP) 21

66 Customer Information Order 21

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C E L E B R A T I N G D ISRUPTING CRIMINAL ACTIVITIES THROUGH

TAKING THE PROCEEDS FROM CRIME


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67 Cybersquatting 21

68 Dark Web 21

69 Debenture 22

70 Debit Card 22

71 Debit Transaction 22

72 Denial of Service (DOS or DDOS) 22

73 Digital Footprint 22

74 Disclosure Order 22

75 DNS 23

76 Domestic Transfer 23

77 Downstream Correspondent Clearer 23

78 Dry Trust 23

79 Eastern and Southern African Anti-Money Laundering Group (ESAAMLG) 23

80 Egmont Group of Financial Intelligence Units 23

81 Electronic Banking 24

82 Electronic Cash (E-Cash) 24

83 Electronic Funds Transfer (EFT) 24

84 Encryption 24

85 Enhanced Due Diligence (EDD) 25

86 Exchange Office 25

87 Exempt Account 25

88 Express Trust 25

90 Extradition 25

91 E Mail /SMS Fraud/419 Letters/ Nigerian scams/ Advance Fee Frauds/ 004470 scams

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92 Fiduciary Deposit 26

93 Financial Action Task Force (FATF) 26

94 Financial Intelligence Unit (FIU) 26

95 Forensic Accountant 26

96 Forfeiture 27

97 Freeze 27

98 Front Company 27

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99 Foundations (Private) 28

100 Funds or other assets 28

101 Futures 28

102 Gatekeepers 29

103 Giro House 29

104 Global Program against Money Laundering (GPML) 29

105 Grantor 29

106 Hawala Banking or (Informal Value Transfer Systems) 29

107 Hedge Funds 30

108 Hundi 30

109 Identity Theft 30

110 Informal Value Transfer System (IVTS) 30

111 Insider Dealing 30

112 Integration 31

113 Intermediary Financial Institution 31

114 International Business Companies/ International Business Corporations (IBC) 31

115 Internet Banking 31

116 Internet Protocol (IP) Address 32

117 Investment Banking 32

118 IVTS 32

119 Know Your Customer (KYC) 32

120 Know Your Employee (KYE) 32

121 Layering 33

122 Legal Arrangements 33

123 Legal Persons 33

124 Letter of Credit 33

125 Loan Back Method of Money Laundering 33

126 Lockbox 34

127 Mail-Forwarding or Mail-Drop Service 34

128 Malware 34

129 Manipulation of Import and/or Export Prices 34

130 Meta Data 35

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131 Money Laundering 35

132 Money Laundering Reporting Officer 35

133 Money mule 35

134 Mutual Funds 36

135 Mutual Legal Assistance Treaty (MLAT) 36

136 Naked Trust 36

137 Nesting 36

138 Nominee Account 36

139 Nominee Company 36

140 Offshore 37

141 Offshore Banking 37

142 Offshore Trusts 37

143 Passive Trust 37

144 Placement 37

145 Pharming 38

146 Phishing 38

147 Politically Exposed Person (PEP) 38

148 Ponzi Scheme 38-39

149 Predicate Crimes 39

150 Private Banking 39

151 Private Investment Company (PIC) 40

152 Pyramid scheme 40

153 Private Banks 40

154 Protective Trusts 40

155 Ransomware 40

156 Red Flag 40

157 Regulatory Agency 41

158 Remittance Services 41

159 Respondent Bank 41

160 Retrospective Due Diligence 41

161 Safe Harbour 41

162 Safe Depository 42

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163 Secondary Market 42

164 Seize 42-43

165 Settlor (Trustor or Donor) 43

166 Share(s) Certificate 43

167 Shell Bank 43

168 Smurfing 43

169 Smurfs 44

170 Split Deposits 44

171 Spoofing 44

172 SSL 44

173 SSL Certificate 44

174 Stored Value Card 44

175 Structuring 45

176 Subpoena 45

177 Suspicious Activity 45

178 Suspicious Activity Report (SAR) 45

179 Suspicious Transaction Report (STR) 45

180 Trusts 46

181 Asset Protection Trusts 46

182 Bare Trust 46

183 Blind trust 46

184 Express Trust 46-47

185 Protective Trusts 47

186 Spendthrift Trusts 47

187 Trusts 47

189 Trust Companies 48

190 Trustee 48

191 Unit Trust 48

192 Offshore Trusts 48

193 Trojan 48

194 Vishing 49

195 VPN 49

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196 VAT Fraud also known as MTIC/Carousel Fraud 49-50

197 Wire Transfer 50

198 WHOIS 50

199 WEBSITES TO OBTAIN INFORMATION ON ASSET RECOVERY 51





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ASSET RECOVERY GLOSSARY OF TERMS

Account Monitoring Order

An order from a government authority requiring a financial institution to provide transaction information on a suspect account for a specified period time period.

Affidavit

A written statement given under oath before an officer of the court, notary public, or other authorised person. It is commonly used as the factual basis for an application for search, arrest or seizure warrant.

Agent

Person who is authorized to act for another (the agent’s principal) through employment, by contract or apparent authority.

An agent can also mean any person who provides money or value transfer service under the direction of or by contract with a legally registered or licensed remitter (see below) (for example, licensees, franchisees, concessionaires). 1 An everyday example of this is ‘Western Union’.

Alternative Remittance System (ARS) (See Hawala )

Underground banking or informal value transfer systems. Often associated with ethnic groups from the Middle East, Africa or Asia, and commonly involves the transfer of values among countries outside of the formal banking system. The remittance entity can be an ordinary shop selling goods that has an arrangement with a correspondent business in another country. There is usually no physical movement of currency and a lack of formality with regard to verification and record-keeping. The money transfer takes place by coded information that is passed through couriered, letters or faxes, followed by telephone confirmations. Almost any document that carries an identifiable number can be used by the receiver to pick up the values in the other country. The

1 Methodology to FATF 40 Recommendations

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systems are referred to by different names depending upon the country: Hawala (an Arabic word meaning “change” or “transform”), Hundi (a Hindi word meaning “collect “), Chiti banking (referring to the way the system operates), Chop Shop banking (China), and Poey Kuan (Thailand).

Asset Manager

A person appointed through a written contract by a company or trust to direct the entity’s investment program. The program can be a fully discretionary account, or the contract can impose limitations on it. Fees to the asset manager can be based on performance achieved, trading commissions or a percentage of the value of the asset and under his or her management.

Asset Protection

A process that includes reorganizing how assets are held so as to make them less vulnerable should a claim be made against a person. Asset protection is a term also used by tax pay planners for measures taken to protect assets from taxation in other jurisdictions.

Asset Protection Trusts (APT’s)

See Trusts.

Bank Draft

Vulnerable to money laundering because it represents a reputable international monetary instrument drawn on a reputable institution, and is often made payable – in cash – upon presentation and at the issuing institution’s account in another country.

Bank Secrecy

Refers to laws and regulations in countries that prohibit banks from disclosing information about an account – or even revealing its existence - without the consent of the account holder. Impedes the flow of information across national borders among financial institutions and their supervisors.

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Bare Trust

See Trusts

Batch Processing

A type of data processing and data communications transmission in which related transactions are grouped together and transmitted for processing, usually by the same computer under the same application.

Batch Transfer

Transfer comprising a number of individual wire transfers that are sent to the same financial institution, and which may be ultimately intended for different persons.

Bearer Form

In relation to a certificate, share transfer or other document, a bearer form enables a designated investment or deposit to be sold, transferred, surrendered, or addressed to a bearer without the need to obtain further written instructions.

Bearer Negotiable Instruments

Includes monetary instruments in bearer form such as: travellers cheques; including cheques, promissory notes and money orders that are either in bearer form and/or endorsed without restriction.

Bearer Security

A bond or share certificate that is not registered to any authority. Ownership is never recorded so there is lack of regulation and control. Whoever holds the certificate (or bears it) can collect the interest or dividend due or transfer the ownership of the stock. A bearer security can be bought or sold; it is as liquid as cash.

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Bearer Share

Negotiable instruments that accord ownership in a corporation to the person who physically possesses the bearer share certificate.2

Bearer Share Certificate

A negotiable corporate share certificate made out to “Bearer” and not in the name of an individual organisation.

Benami Account

Also called a nominee account. Held by one person or entity on behalf of another or others, Benami accounts are associated with the hawala underground banking systems. A person in one jurisdiction seeking to move funds through a hawaladar to another jurisdiction may use a Benami account or Benami transaction to disguise his/her true identity or the identity of the recipient of the funds.

Beneficial Owner

The natural person who ultimately owns or controls an account on whose behalf a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement. The ultimate owner of a security, that is, the person who is entitled to receive the benefits associated with the security. The expression is applied in cases where a security is registered in the name of a custodian and/or someone who holds it in trust for the beneficial owner.

Beneficiary

Any person or entity who is to receive assets or profits from an estate, a trust, an insurance policy or any instrument in which there is distribution.


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Bit Torrent

BitTorrent is a peer-to-peer (also known as P2P) file sharing protocol designed to reduce the bandwidth required to transfer files. It does this by distributing file transfers across multiple systems, thereby lessening the average bandwidth used by each computer.

Blockchain

A blockchain, originally block chain, is a growing list of records, called blocks, which are linked using cryptography. Each block contains a cryptographic hash of the previous block, a timestamp, and transaction data. By design, a blockchain is resistant to modification of the data because it is decentralised.

Boiler Room Scam

An operation where scammers sell shares to investors in companies which are usually fake, or are not successfully trading. The Scammers typically cold-call people and use hard-selling tactics to pressure them into buying shares that promise high returns. The shares are worthless or non-existent in reality. It is common for fraudsters to operate in one country while calling prospective investors in another.

The advantage of such an operation is that fraudsters can operate without fear of prosecution from the investor’s native legal system. (See Ponzi Schemes)

Bond

An interest bearing instrument issued by governments, corporations and some other organisations. Bonds are sold to investors in order to raise capital, and they may be bought and sold many times over in the secondary market before they are finally redeemed. Bonds are sold at a discount or premium to their face value, such discount or premium reflecting the difference between the (fixed) interest rate on the bond and the current market interest rate.

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Botnet

A collection of otherwise unrelated personal computers (PCs) which have been infected by a virus and which are under the central control of criminals or hackers. Short for robot network.

Bookmaker

A person who accepts bets from individuals on a variety of matters, mostly sporting events. Bookmakers are vulnerable to money laundering, since money launderers may offer their customers money for winning betting slips, often 7 to 10 percent above the value of the winnings. The launderer then collects clean money from the bookmaker.

Bureau de Change

Also called “Casa de cambio” or “exchange office,” a bureau de change offers a range of services that are attractive to money launderers: currency exchange and consolidation of small denomination bank notes into larger ones; exchange of financial instruments such as travellers’ cheques, money orders and personal cheques; telegraphic transfer facilities.

Bust-Out

Also called Sleeper Fraud. A scheme in which the use or extension of credit is obtained and is increased fraudulently, while the perpetrators avoid having to pay back the illegally obtained credit or goods. Typically a bust-out ring will operate a shell or front business that accepts credit purchases on stolen or fraudulently obtained credit cards. The criminals run the cards or numbers through credit card terminals, but either do not provide any goods or services or provide stolen or non-licensed goods. The innocent credit card company credits the account of the front business. Before the transactions can be reversed, the criminals have moved funds from the front business. The cardholders who knowingly participate in these bust-out schemes generally refuse to pay the credit card companies for their “purchases”.

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Camouflage Passports

A passport issued in the name of a non-existent country that is intended to look like a real country’s passport. Such passports are also often sold with several matching documents, including an international driver’s license and similar supporting identity papers. Camouflage passports are generally issued in names of countries that have never existed, no longer exist or that have changed their name. Others use the names of places or political subdivisions that exist within a real country, but that have never issued and cannot issue passports. Still others are issued in the names of wholly fictitious countries but that typically have a plausible or familiar ring to their names. The most commonly used countries for camouflage passports are:

• British Guiana (now Co-operative Republic of Guyana)

• British Honduras (now Belize)

• British West Indies (place name, various British Caribbean islands)

• Burma (now Union of Myanmar)

• Ceylon ( now Sri Lanka)

• Czechoslovakia (now split into the Czech Republic and Slovakia)

• Dutch Guiana (now Republic of Suriname)

• Eastern Samoa (now Territory of American Samoa)

• Newfoundland and Labrador (Canada)

• New Granada (now Republic of Colombia)

• New Hebrides (now Republic of Vanuatu)

• Netherlands East Indies (now become part of the Republic of Indonesia)

• Rhodesia (now the Republic of Zimbabwe)

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• South Vietnam (absorbed into Socialist Republic of Vietnam)

• Spanish Guinea (now Republic of Equatorial Guinea)

• Upper Volta (now Burkina Faso)

• Zanzibar (Has now merged with Tanzania)

Casa de Cambio

See Bureau de Change

Cash Collateralized Loans

Cash deposits are used as collateral for a loan. The deposits can sometimes be in another jurisdiction.

Cashier’s Check or Cheque

A check/cheque that is guaranteed by the bank. Money launderers use this instrument because it is drawn on the bank’s own funds and signed by a cashier. The bank certifies that the signature is genuine and that the customer has sufficient funds in the account.

CDD

See Customer Due Diligence.

Certificate of Deposit

A certificate issued by a bank to indicate ownership of a large deposit (usually over $10,000) a certificate of deposit (CD) is a negotiable instrument and can be bought and sold in a secondary market.

Chain Referral Scheme

See Pyramid Scheme

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Chiti Banking

See Alternative Remittance System/Informal Value Transfer System

Chop Shop Banking

See Alternative Remittance System/Informal Value Transfer System

Clearing Account

Also called “concentration account” or “omnibus”. A temporary account that holds costs or amounts that are going to be transferred to another account. They are used for internal administration or for inter-bank transactions. The funds are commingled, and there is no identification of the originators.

Collateral

In lending agreements, collateral is a borrower’s pledge of specific property to a lender, to secure repayment of a loan. The collateral serves as protection for a lender against a borrower’s default i.e. any borrower failing to pay the principal and interest under the terms of a loan obligation. If a borrower does default on a loan the borrower forfeits the property pledged as collateral - and the lender then becomes the owner of the collateral.

Collection Accounts

Immigrants from foreign countries deposit many small amounts of currency into one account in the country they are staying in, and the collected sum is transferred to an account in their home country without documentation of the sources of the funds. Collection accounts can be easily used to launder money.

Collective Investment Schemes

Collective Investment Schemes are a way of investing money together with other investors to benefit from the advantages of pooling resources.

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Collective Investment Schemes are run by a professional investment manager. The benefit to the investor is that the costs of the professional investment manager are shared.

Compliance Officer

An employee who is appointed to make sure that the entity follows the rules laid down by the appropriate regulators.

Confidentiality

Keeping certain facts, data and information out of public or unauthorized view. In many jurisdictions, confidentiality is required when filing suspicious transaction or activity reports – the filling institution’s employees cannot notify a customer that a report has been filed. In a different context, a breach of confidentiality can occur when an institution discloses client information to enforcement agencies or a financial intelligence unit in violation of the jurisdiction’s bank secrecy laws.

Confiscation

Includes forfeiture where applicable, and means the permanent deprivation of funds or other assets by order of a competent authority or a court. Confiscation or forfeiture takes place through a judicial or administrative procedure that transfers the ownership of specified funds or other assets to the state. Upon transfer, the person(s) or entity(ies) that held an interest in the specified funds or other assets at the time of the confiscation or forfeiture lose all rights, in principle, to the confiscated or forfeited assets. Confiscation or forfeiture orders are usually linked to a criminal conviction or a court decision whereby the confiscated or forfeited property is determined to have been derived from or intended for use in a violation of the law. Mutual legal assistance treaties can provide for confiscation of assets in one jurisdiction based upon prosecutions elsewhere.

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Cookie

A cookie is a small amount of data generated by a website and saved by your web browser. Its purpose is to remember information about you, similar to a preference file created by a software application.

Correspondent Bank

A financial institution that provides services (“the correspondent bank”) on behalf of another financial institution (“the respondent bank”). A correspondent bank can conduct business transactions, accept deposits and gather documents on behalf of the other financial institution. Correspondent banks are more likely to be used to conduct business in foreign countries. For example Raiffessen Bank in Belgrade could use a bank in Miami to conduct transactions with banks in the Caribbean.

Corruption

Improper and usually unlawful conduct intended to secure a benefit for oneself or another. Its forms include bribery, extortion, and the misuse of inside information. It exists where there is community indifference or a lack of enforcement policies. In societies with a culture of ritualized gift giving, the line between acceptable and unacceptable gifts is often hard to draw.

Corruption is difficult to identify, it is difficult to investigate & prosecute. There is significant value in specialists in these fields being recruited, trained and their integrity maintained. Positive vetting of persons involved in this specialist area is essential. i.e. in depth background checks to ensure those involved are likely to be and to remain beyond reproach.

Credit Cards

A plastic card with a credit limit used to purchase goods and services and to obtain cash advances on credit. The cardholder is subsequently billed by the issuer for repayment of the credit extended. Credit cards may be used to launder money when payments of the amounts owed on the card are made with criminal money.

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Credit Finance

The use of credit to buy expensive items, and the subsequent payment of the borrowed credit with criminal funds. The criminal borrows funds to purchase a high value asset, such as a yacht, pays off the loan promptly with cash from illegal proceeds, sells the boat and starts all over again. By paying the credit loans off with illicit money, money launderers can use credit to finance criminal activity.

Criminal Proceeds

Any property derived from or obtained, directly or indirectly, through the commission of a crime.

Cross Border

Used in the context of activities that involve at least two countries, such as wiring money from one country to another or taking currency across a border.

Cross-Border Transfer

Any wire transfer in which the originator and beneficiary institutions are located in different jurisdictions. A cross-border transfer also refers to any chain of wire transfers that has at least one cross-border element.

Crypto Currency

A digital currency such as Bitcoin, that is mathematically mined and used for legitimate and illegitimate purposes. Cryptocurrency is stored in a digital virtual or hardware wallet and requires a wallet address to be received or sent.

Crypto Currency Wallet

A storage location that may be physical or digital, designed to retain the algorithm of a cryptocurrency. Usually requires a unique address.

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Cuckoo Smurfing

A form of money laundering linked to alternative remittance systems in which criminal funds are transferred through the accounts of unwitting persons who are expecting genuine funds or payments from overseas. The term cuckoo smurfing first originated in investigations in the U.K., where it is a significant money laundering technique.

Currency

Banknotes and coins that are in circulation as a medium of exchange.

Currency Smuggling

The illicit movement of large quantities of cash across borders, often into countries with strict banking secrecy, poor exchange controls or poor anti-money laundering legislation

Currency Transaction Report (CTR)

A report that documents a currency transaction that exceeds a certain monetary threshold. A CTR can also be filed on multiple currency transactions that occur in one day that add up to or are greater than the required reporting amount. In some countries, including the U.S., currency transaction reports must be filed with government authorities under specific circumstances.

Custodian

A bank, financial institution or other entity that is responsible for managing or administering or safekeeping assets for other persons or institutions. Typically, custodians are not active, aggressive managers of the assets in question, but, instead, serve to passively conserve them.

Custody

The act or authority of safeguarding and administration of clients’ investments or assets.

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Customer Due Diligence (CDD)

In terms of money laundering controls, it means implementing adequate policies, practices and procedures that promote high ethical and professional standards for dealing with customers and are designed to prevent banks from being used, intentionally or unintentionally, by criminal elements. Customer due diligence includes not only establishing the identity of customers, but also monitoring account activity to identify those transactions that do not conform with the normal or expected transactions for that customer or type of account.

Customer Identification Program (CIP)

The policies and procedures of an institution that aim to identify and verify the identity of its customers. In general, the program must be in writing, have senior board approval and include procedures for customer notification.

Customer Information Order

Requires all financial institutions—or a targeted sample of banks and other financial institutions—to provide the details of any accounts held by the person under investigation, thus enabling an investigator to find out where the suspect’s accounts are held.

Cybersquatting

Cybersquatters may own anywhere from a single domain to a few thousand domain names. These “domainers,” as they are also called, typically register domain names that contain popular words and phrases. High profile domain names may generate traffic through manual “type-ins” or may simply be attractive to potential buyers. Some domainers, called “typosquatters,” register domain names that are similar to well-known websites, but contain typos.

Dark Web

The illicit and secret section of the internet which requires special browsers to access that give surfers anonymity. All types of criminal products and services are available for sale, including contract killings, drugs and firearms.

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Debenture

An unsecured debt backed only by the integrity of the borrower, not by collateral, and documented by an agreement called an indenture.

Debit Card

A card issued by a financial institution that permits an account- holder to draw funds from a pre-existing account in his or her name for the purpose of paying obligations or for making purchases in other locations or businesses. Debit cards have been found to be convenient tools to launder criminal proceeds, especially if they are issued by financial institutions in secrecy havens because they leave few, if any, traces of the debited sources of funds.

Debit Transaction

A transaction that involves the use of a bankcard to purchase goods and services or to obtain cash. The transaction automatically debits the cardholder’s deposit account.

Denial of Service (DOS or DDOS)

A denial of service attack is an effort to make one or more computer systems unavailable. It is typically targeted at web servers, but it can also be used on mail servers, name servers, and any other type of computer system.

Digital Footprint

A digital footprint is a trail of data you create while using the Internet. It includes the websites you visit, emails you send, and information you submit to online services.

Disclosure Order

A document that requires a person who has information relevant to an investigation to answer questions at an interview, to provide information, or to produce documentation. The order can be exercised not only against a person whose assets are under investigation, but also against a third party, such as a financial institution.

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DNS

Stands for “Domain Name System.” Domain names serve as memorisable names for websites and other services on the Internet. However, computers access Internet devices by their IP addresses. DNS translates domain names into IP addresses, allowing you to access an Internet location by its domain name.

Domestic Transfer

Wire transfer in which the originator and beneficiary institutions are located in the same jurisdiction. A domestic transfer therefore refers to any chain of wire transfers that takes place entirely within the borders of a single jurisdiction, even though the system used to send the wire transfer may be located in another jurisdiction.

Downstream Correspondent Clearer

A correspondent banking client who receives correspondent banking services from one institution and provides correspondent banking services to other financial institutions in the same currency as the account it maintains with the institution.

Dry Trust

See Bare Trust.

Eastern and Southern African Anti-Money Laundering Group (ESAAMLG)

A FATF-style regional body comprising fourteen countries from the Eastern region of Africa down to the Southern tip of Africa. It was established in 1999. See www.esaamlg.org.

Egmont Group of Financial Intelligence Units

In 1995, a number of national financial intelligence units (FIUs) began working together in an informal organization known as the Egmont Group, named for the site of its first meeting in the Egmont-Arenberg Palace in Brussels. The goal of the group is to provide a forum for FIUs to improve support to their national anti-money laundering programs and to develop protocols for information sharing. The FIUs’ support includes

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expanding and systematizing the exchange of financial intelligence, improving expertise and capabilities of the personnel of such organizations, and fostering improved communications among FIUs through application of new technologies and sharing of information for financial crimes investigations.

Electronic Banking

A form of banking in which funds are transferred through an exchange of electronic signals among financial institutions rather than through an exchange of cash, checks or other negotiable instruments.

Electronic Cash (E-Cash)

A payment mechanism designed for the Internet, electronic cash represents a series of monetary value units electronically stored on the hard drive of a computer or microchip of a plastic card. It is anonymous like cash, and has immediate value. E-cash is attractive to money launderers because of its anonymity and the ease it provides in “transporting” large sums quickly and easily via the Internet. It is also called “e-money.”

Electronic Funds Transfer (EFT)

The movement of funds between financial institutions electronically. The two most common electronic funds transfer systems in the U.S. are FedWire and CHIPS. (SWIFT is often referred to as the third EFT system, but in reality it is an international messaging system that carries instructions for wire transfers between institutions, rather than the wire transfer system itself.) Other systems that facilitate funds movement, but are not technically EFT systems, include automated clearing houses (ACH), which are networks that conduct batch processing of messages for book transfers between institutions.

Encryption

Legitimately, this converts data into cipher text (a type of computer code) to prevent it from being understood by an unauthorised party. Hackers also encrypt victims’ data as part of their ransomware demands so that the owners cannot access it.

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Enhanced Due Diligence (EDD)

Additional examination and cautionary measures aimed at identifying customers and confirming that their activities and funds are legitimate.

Exchange Office

See Bureau de Change.

Exempt Account

In some countries, a distinction is granted to certain customers of a financial institution permitting the institution to waive its responsibility to report certain transactions that are otherwise required. Exempt accounts must be documented and the financial institutions that secure the exemptions must still monitor their transactions.

Express Trust

See Trusts.

Extradition

The surrender by one country to another of an accused or convicted person under a bilateral agreement that specifies the terms of such exchanges, such as the persons subject to being exchanged and the crimes for which exchanges will be permitted. The 1988 Vienna Convention against Illicit Traffic in Narcotics and Psychotropic Substances makes money laundering an internationally extraditable offense.

E Mail /SMS Fraud/419 Letters/ Nigerian scams/ Advance Fee Frauds/ 004470 scams

There are numerous variations of these frauds. Essentially, it is a confidence trick. An unsolicited approach is made to the victim with a very attractive offer. The letters are often full of compliments regarding the victim’s honesty and written in poor English to make the victim believe that the author is unsophisticated. The offer will appear to result will be a huge payment being made to the victim. Once the victim expresses an interest in the deal, a series of delays and hurdles are presented by the fraudster that

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can only be resolved by the payment of money. Further requests for funds are made until the victim is unable to send more money or realises it is a scam.

SMS messages from numbers beginning 004470 are likely to be scams. The number appears to be a UK number, but can be stored on laptops and is frequently used in scams and frauds.

Fiduciary Deposit

A Swiss speciality in which a bank takes a deposit and lends it on to someone else, entirely at the depositor’s risk. One of the big benefits for the bank is the deposit remains off its balance sheet, yet the bank still makes a return on the transaction. The advantage for the depositor is a higher rate of interest and the veil of Swiss secrecy.

Financial Action Task Force (FATF)

FATF was chartered in 1989 by the Group of Seven industrial nations to foster the establishment of national and global measures to combat money laundering. It is an international policy-making body that sets anti-money laundering standards and counter-terrorist financing measures worldwide. Its Recommendations do not have the force of law. Thirty-four countries and two international organizations are members. In 2012, FATF substantially revised its 40 + 9 Recommendations and reduced them to 40. FATF develops annual typology reports showcasing current money laundering and terrorist financing trends and methods. See www.fatf-gafi.org.

Financial Intelligence Unit (FIU)

A central governmental office that obtains information from financial reports, processes it and then discloses it to an appropriate government authority in support of a national anti- money laundering effort. The activities performed by an FIU include receiving, analyzing and disseminating information and, sometimes, investigating violations and prosecuting individuals indicated in the disclosures.

Forensic Accountant

Specializes in analyzing financial evidence and testifying as an expert witness in cases of white-collar crime, including money laundering.

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Forfeiture

The permanent loss of private property or assets as a result of legal action by a government authority. Generally, the owner of the property has failed to comply with the law or the property is linked to some sort of criminal activity.

Freeze

To prevent or restrict the exchange, withdrawal, liquidation, or use of assets or bank accounts by governmental action. The term freeze means to prohibit the transfer, conversion, disposition or movement of any property, equipment or other instrumentalities on the basis of, and for the duration of the validity of, an action initiated by a competent authority or a court under a freezing mechanism, or until a forfeiture or confiscation determination is made by a competent authority.

In all cases, the frozen property, equipment, instrumentalities, funds or other assets remain the property of the natural or legal person(s) that held an interest in them at the time of the freezing and may continue to be administered by third parties, or through other arrangements established by such natural or legal person(s) prior to the initiation of an action under a freezing mechanism, or in accordance with other national provisions. As part of the implementation of a freeze, countries may decide to take control of the property, equipment, instrumentalities, or funds or other assets as a means to protect against flight.

Front Company

A business that commingles illicit funds with revenue generated from the sale of legitimate products or services. Criminals use front companies to launder illicit money by giving the funds the appearance of legitimate origin. Organized crime has used pizza parlors to mask proceeds from heroin trafficking. Front companies may have access to substantial illicit funds, allowing them to subsidize front company products and services at levels well below market rates or even below manufacturing costs. Front companies have a competitive advantage over legitimate firms that must borrow from financial markets, making it difficult for legitimate businesses to compete with front companies.

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Foundations (Private)

A private foundation is a legal entity set up by an individual, a family or a group of individuals, for a purpose such as humanitarian causes. Unlike a charitable foundation, a private foundation does not generally solicit funds from the public. The main Common Law jurisdictions that provide for Private Foundations are:

The Bahamas, The United States, Nevis and St. Kitts. Civil Law jurisdictions that provide for Private Foundations include: Austria - The Austrian Private Foundation (Privatstiftung). Liechtenstein - The Liechtenstein Family Foundation (Stiftung). The Netherlands - A foundation in the Netherlands is known as Stichting. It is a legal person created through a legal act. Netherlands Caribbean - Foundation legislation provides for the Netherlands Antilles Private Foundation (Stichting Particulier Fonds). Panama - The Panama Private Interest Foundation modelled on the Liechtenstein Family Foundation. Sweden - A private foundation in Sweden is known as Stiftelse is formed by a letter of donation from a founder donating funds or assets to be administered for a specific purpose.

Funds or other assets

The term funds or other assets mean financial assets, property of every kind, whether tangible or intangible, movable or immovable, however acquired. It also includes legal documents or instruments in any form, i.e electronic or digital, evidencing title to, or interest in, such funds or other assets. Including, but not limited to, bank credits, travellers cheques, bank cheques, money orders, shares, securities, bonds, drafts, or letters of credit. It also includes any interest, dividends or other income on or value accruing from or generated by such funds or other assets.3

Futures

Contracts that require delivery of a commodity of specified quality and quantity at a specified price on a specified future date.


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Gatekeepers

Professionals such as lawyers, notaries, accountants, investment advisors, and trust and company service providers who assist in transactions involving the movement of money, and are deemed to have a particular role in identifying, preventing and reporting money laundering. Their role is important because they can block or facilitate the entry of illicit money into the financial system.

Giro House

See Remittance Services.

Global Program against Money Laundering (GPML)

Key instrument of the United Nations Office of Drug Control and Crime Prevention in its fight against organized crime. Through GPML, the UN helps member states introduce legislation against money laundering and helps the countries develop and maintain mechanisms that combat the crime. The program encourages anti-money laundering policy development, monitors and analyzes problems and responses, raises public awareness, and acts as a coordinator of joint anti-money laundering initiatives between the UN and other international organizations.

Grantor

Creator and fund provider of a trust, usually for the benefit of another.

Hawala Banking or (Informal Value Transfer Systems)

Hawala dealers, arrange money transfers that are often backed only by trust, family connections or regional relationships. Hawala originated in South Asia during ancient times, and is used throughout the world today, as an alternative means of conducting funds transfers. In certain parts of the world Hawala is frequently referred to as underground banking, which is a misnomer because Hawala services often operate openly and legitimately.

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Hedge Funds

A hedge fund is a private investment fund that participates in a range of assets and a variety of investment strategies intended to protect the fund’s investors from downturns in the market while maximizing returns on market upswings.

They offer their investment capabilities primarily to very wealthy individuals or to professional investors such as insurance companies and pension funds.Most hedge funds are domiciled offshore for tax reasons.

The difference between Hedge Funds and Mutual Funds is that Hedge Funds are engaged in a wider range of investment activities such as portfolio of securities, commodity futures contracts or other assets.

Hundi

See Hawala.

Identity Theft

The assumption of another person’s identity without authorization for use in fraudulent transactions that results in a loss to the financial institution or the victim whose identity was used.

Informal Value Transfer System (IVTS)

See Alternative Remittance System.

Insider Dealing

Normally illegal share dealings by employees of a company, where they have used confidential price-sensitive information for their own gain or the gain of their associates. The inside dealer does not have to work for the company for his dealing to be an offence. So a stockbroker, or merchant banker, who knows about an impending takeover offer who buys shares in the target company with the intention of making a profit, could be guilty and or if he gets a friend to buy the shares, he could also be liable.

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Integration

The integration phase, the third and last stage of the classic money laundering process, places laundered funds back into the economy by re-entering the funds into the financial system and giving them the appearance of legitimacy.

Intermediary Financial Institution

Receives funds from a wire transfer transmitter’s financial institution and relays or transmits the order of payment to the recipient’s financial institution. In an international funds transmission, intermediary financial institutions are usually located in different countries.

International Business Companies/ International Business Corporations (IBC)

Also called “exempt companies”. IBC’s are companies established in offshore jurisdictions. The main features of IBC’s are that they do not pay tax or a lower rate of tax. They are not permitted to conduct business in the jurisdiction in which they are incorporated.

IBC’s are most commonly used for offshore banking to conduct international trade, investment activities, by professionals and for asset protection. Offshore companies can be involved in buying and selling goods and services, holding bank accounts and operating businesses.

IBC’s are provided for in the legislation of the following jurisdictions: Antigua and Barbuda, Anguilla, British Virgin Islands, the Bahamas, Belize, Dominica, Gibraltar, Nevis and the Seychelles.

It is important to note the use of trusts and IBC’s can create some very complicated structures that make it very difficult to establish who the beneficial owner is.

Internet Banking

A banking business model that uses the Internet to execute its business plan, and whose marketing efforts, execution of transactions and customer service functions are heavily reliant on advanced electronic technology. The main money laundering concern

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that arises in Internet banking is the difficulty of identifying the “faceless” customer that establishes a relationship with a financial institution, and in applying Customer Due Diligence procedures.

Internet Protocol (IP) Address

A numerical label assigned to each device connected to a computer network that uses the Internet Protocol for communication. An IP address serves two principal functions: host or network interface identification and location addressing.

Investment Banking

Self-standing department or unit within a financial institution that provides strategic capitalizations, amassing huge amounts from diverse sources for corporate deal making, and other alternatives to traditional banking instruments.

IVTS

Informal Value Transfer System. See Alternative Remittance System.

Know Your Customer (KYC)

Due diligence and bank regulation that financial institutions and other regulated companies must perform to identify their clients and ascertain relevant information pertinent to doing financial business with them. Know your customer policies are becoming increasingly important globally to prevent identity theft fraud, money laundering and terrorist financing. Beyond name matching, a key aspect of KYC controls is to monitor transactions of a customer against their recorded profile, history on the customer’s account(s) and with peers.

This helps to determine whether a transaction or activity is suspicious and therefore requires reporting to the authorities.

Know Your Employee (KYE)

Anti-money laundering policies and procedures for acquiring a better knowledge and understanding of the employees of an institution for the purpose of detecting conflicts

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of interests, money laundering, past criminal activity and suspicious activity. KYE is a key tool in detecting suspicious activity because employees can be accomplices of money launderers.

Layering

The second phase of the classic three-step money laundering process between placement and integration, layering involves distancing illegal proceeds from their source by creating complex levels of financial transactions designed to disguise the audit trail and to provide anonymity.

Legal Arrangements

Legal arrangements refer to express trusts4 or other similar legal arrangements.

Legal Persons

Legal persons refer to bodies corporate, foundations, partnerships, or associations, or any similar bodies that can establish a permanent customer relationship with a financial institution or otherwise own property.

It is important to note that Legal Persons are separate entities from natural persons; therefore they can be sued or prosecuted the same as a natural person.

Letter of Credit

An arrangement with a bank to make money available to a customer abroad. The customer’s account is debited with the appropriate amount, and the bank then instructs its relevant correspondent bank (See below) to make the money available wherever the customer requires it.

Loan Back Method of Money Laundering

With a loan-back, the criminal puts the illicit funds in an offshore entity that he owns and then “loans” them back to himself or a company he owns. This technique works because it is hard to determine who actually controls offshore accounts in some

4 See Trusts

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countries. This process allows the launderer to “clean” illicit money and to generate tax benefits by deducting purported interest payments.

Lockbox

Service offered by banks to companies in which the company receives payments by mail to a post office box and the bank picks up the payments several times a day, deposits them into the company’s account, and notifies the company of the deposits. The service enables the company to put the money to work as soon as it is received, but the amounts must be large in order for the value obtained to exceed the cost of the service. In the insurance industry there is also widespread use of “lock boxes” for payment of life insurance and annuities products.

Mail-Forwarding or Mail-Drop Service

A legal commercial enterprise that uses a stable, physical address as a delivery destination for letters or parcels on behalf of fee-paying clients who do not live on the premises. Mail can be held or forwarded at the client’s request. Some mail-drops provide similar services for faxes as well. Money launderers often use mail drop addresses as their address, sometimes referring to their box number as either a “suite” or an “apartment” number. Often, “shell” or unlicensed banks are found to have mail drop addresses.

Malware

Software used or created by hackers to disrupt computer operation, gather sensitive information or gain access to private computer systems. Short for malicious software, it is often contained within a website link or attachment.

Manipulation of Import and/or Export Prices

A money laundering method that uses the overpricing or under-pricing of products or services traded in international commerce to move money from one country to another.

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Meta Data

Metadata is data about data. It can include, author, time/date, device name or device type. It may have been removed or edited. Useful evidence and Intelligence. Simple to locate, in documents, email headers and digital images. May need to be produced forensically if used in a prosecution as evidence.

Money Laundering

The process of concealing or disguising the existence, source, movement, destination or illegal application of illicitly- derived property or funds to make them appear legitimate. It usually involves a three part system: Placement of funds into a financial system, layering of transactions to disguise the source, ownership and location of the funds, and integration of the funds into society in the form of holdings that appear legitimate. The definition of money laundering varies in each country where it is recognized as a crime.

Money Laundering Reporting Officer

A Money Laundering Reporting Officer (MLRO) is the officer nominated within a firm or practice to make disclosures to the Financial Intelligence Unit. In most jurisdictions each entity within the regulated sector is required to appoint an MLRO.

The MLRO responsibilities will include:

• Receipt and consideration of internal disclosures relating to suspected money laundering/terrorist financing;

• Decide whether there are sufficient grounds for suspicion to pass the disclosures to the FIU;

• File a Suspicious Activity Report (SAR) with FIU where the grounds for suspicion are sufficient; and engage in ongoing liaison with FIU.

Money mule

Someone recruited by fraudsters to transfer money illegally gained in one country to another country where one of the criminal mastermind lives. Organised gangs can have

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armies of mules transferring small amounts of money swiftly to other mules to avoid detection.

Mutual Funds

Mutual Funds are professionally managed collective investment schemes. Money is collected from many investors to buy stocks, bonds, and other securities.

Mutual Legal Assistance Treaty (MLAT)

A mutual legal assistance treaty is a formal agreement between two countries for the purpose of gathering and exchanging information in an effort to enforce public or criminal laws. This assistance may take the form of examining and identifying people, places and things, custodial transfers, and providing assistance with the immobilization of the instruments of criminal activity. Prior to commencing this process you are advised to contact your counterpart in the country/territory in question to discuss your enquiry, where you will almost certainly receive valuable advice as to the way forward.

Naked Trust

See Bare Trust.

Nesting

The practice that involves the use of a foreign correspondent bank account by another foreign bank to conduct its own transactions.

Nominee Account

See Benami Account.

Nominee Company

A corporation that is formed for the express purpose of holding securities and other assets in its name on behalf of others, or providing nominee directors and/or officers on behalf of clients.

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Offshore

Literally, away from one’s own home country—if one lives in Europe, the U.S. is “offshore.” In the money laundering lexicon, the term refers to jurisdictions deemed favourable to foreign investments because of low or no taxation or strict bank secrecy regulations.

Offshore Banking

An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax jurisdiction that provides financial and legal advantages.

These advantages typically include:

• Greater privacy/secrecy

• Low or no taxation

• Easy access to deposits at least in terms of regulation

• Protection against local political or financial instability

The two key jurisdictions involved in offshore banking are Switzerland and the Cayman Islands. It is estimated that 3 trillion Swiss Francs are held on deposit in Swiss banks. It is estimated that the Cayman Islands has 1.9 trillion United States dollars on deposit in 281 banks, including 40 of

the world’s top 50 banks.

Offshore Trusts

See Trusts and Trust Companies

Passive Trust

See Bare Trust

Placement

The first phase of the money laundering process: The physical disposal of cash proceeds derived from illegal activity.

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Pharming

Where criminals take over a computer’s software so that users are redirected to a fake website even though they enter an address correctly.

Phishing

Phishers attempt to steal your personal information. They send out e-mails that appear to come from legitimate websites such as eBay, PayPal, or other banking institutions. The e-mails state that your information needs to be updated or validated and ask that you enter your username and password, after clicking a link included in the e-mail. Some e-mails will ask that you enter even more information, such as your full name, address, phone number, social security number, and credit card number. However, even if you visit the false website and just enter your username and password, the phisher may be able to gain access to more information by just logging in to your account.

Politically Exposed Person (PEP)

PEPs are individuals who are or have been entrusted with prominent public functions in a foreign country, for example Heads of State or of government, senior politicians, senior government, judicial or military officials, senior executives of state owned corporations, important political party officials and in other cases their family members. Business relationships with family members or close associates of PEPs involve reputational risks similar to those with PEPs themselves.

Ponzi Scheme

Ponzi scheme also known as a Pyramid Scheme is an investment fraud that involves the payment of purported returns to existing investors from funds contributed by new investors. Ponzi scheme organizers often solicit new investors by promising to invest funds in opportunities claimed to generate high returns with little or no risk. In many Ponzi schemes, the fraudsters focus on attracting new money to make promised payments to earlier-stage investors and to use for the scheme’s organisers personal expenses, instead of engaging in any legitimate investment activity. The scheme is named after Charles Ponzi, who deceived thousands of New England (USA) residents into investing in a postage stamp speculation scheme back in the 1920s. The annual interest

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rate for bank accounts was 5%, Ponzi promised investors that he could provide a 50% return in just 90 days. In two federal indictments, Ponzi was charged with 86 counts of mail fraud. He was sentenced to five years in federal prison.

A recent example being the case of Bernard Madoff born in 1938 is probably the most famous PONZI scheme organiser since PONZI himself. Madoff was charged with Securities fraud, mail fraud, wire fraud, money laundering, and perjury. June 2009 he was sentenced to 150 years imprisonment and ordered to forfeit 17.179 billion USD.

Madoff’s modus operandi - Rolling Credit. Accept investor A’s invested dollars and show it as investor B’s profit, this is essentially the concept of a Pyramid scheme. The scheme successfully works by attracting more investors as long as investors do not attempt to redeem their gains en masse’. A few redemptions here-and-there would be fulfilled by the investments of fresh investors.

How did the Fraud get exposed? The Pyramid Fraud works as long as redemptions do not exceed fresh investments. Investors in Madoff’s firm were happy seeing their profits rise regularly, consistently and significantly. This is usually a trap to lure customers to remain invested and pre-empt redemption. The scheme panders to the human vice - Greed. The growing profits bolster the ego of existing investors and draw in new ones who share another human weakness - naïveté!

Predicate Crimes

“Specified unlawful activities” whose proceeds, if involved in the subject transaction, can give rise to prosecution for money laundering. Most anti-money laundering laws contain a wide definition or listing of such underlying crimes. Predicate crimes are sometimes defined as felonies or “all offenses in the criminal code.”

Private Banking

A department in a financial institution that provides high-end services to wealthy individuals. Private banking transactions tend to be marked with confidentiality, complex beneficial ownership arrangements, offshore investment vehicles, tax shelters and credit extension services. Private banking is viewed by many governments as highly vulnerable to money laundering.

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Private Investment Company (PIC)

Also known as a Personal Investment Company, a PIC is a type of corporation that is often established in an offshore jurisdiction with tight secrecy laws to protect the privacy of its owners. In some jurisdictions, an international business company or exempt company is referred to as a private investment company. PICs are viewed as prime money laundering vehicles.

Pyramid scheme

See Ponzi Scheme.

Private Banks

Originally a bank owned by a limited number of partners each bearing unlimited liability for the debts of the bank.

More recently this term has come to refer to any bank that offers services primarily to the more wealthy individuals. Many large commercial banks now have a private banking division.

Protective Trusts

See Trusts

Ransomware

Ransomware is a type of malware, often distributed as a Trojan, that prevents you from using your computer or accessing certain files unless you pay a ransom. It often encrypts files so that they cannot be opened. Examples of ransomware include Reveton, CryptoLocker, and CryptoWall.

Red Flag

A warning signal that should bring attention to a potentially suspicious situation, transaction or activity.

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Regulatory Agency

A government entity responsible for supervising and overseeing a category of domestic institutions. The agency generally has authority to issue regulations, to conduct examinations, to impose fines and penalties, to curtail activities and, sometimes, to terminate charters of institutions under its jurisdiction. Most financial regulatory agencies play a major role in preventing and detecting money laundering and other financial crimes.

Remittance Services

Also referred to as giro houses or casas de cambio, remittance services are businesses that receive cash or other funds that they transfer through the banking system to another account. The account is held by an associated company in a foreign jurisdiction where the money is made available to the ultimate recipient.

Respondent Bank

A bank for which another financial institution establishes, maintains, administers or manages a correspondent account.

Retrospective Due Diligence

Examining the identity and activity of existing customers and their accounts to confirm their legitimacy. Some jurisdictions, when adopting their anti-money laundering frameworks, require financial institutions to perform due diligence on existing customers.

Safe Harbour

Legal protection for financial institutions, their directors, officers and employees from criminal and civil liability for breach of any restriction on disclosing information imposed by contract or by any legislative, regulatory or administrative prohibition, if they report their suspicions in good faith to the Financial Investigation Unit (FIU), even if they did not know precisely what the underlying criminal activity was, and regardless of whether illegal activity actually occurred.

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Safe Depository

Safe Depositories are found in many places including banks, private companies and certain large department stores. They are used by many for legitimate reasons. They are also used by criminals to hide their ill-gotten gains and or documentation used by them in fraud or other crimes. They are also used to hide firearms or drugs. It is possible to obtain warrants to search these depositories and the searches can be carried out overtly or covertly. If you are intending to carry out a covert search in an effort not to alert the suspect, choose your time and date carefully i.e. when it is unlikely the box holder will be visiting the depository AND ensure you photograph the box contents immediately you open it and prior to commencing your search and then you can return the contents exactly as you found them in order not to alert your suspect. In Serbia information about deposit boxes can be transmitted to the Financial Investigation Unit on the order of the public prosecutor. The public prosecutor can also permit the Financial Investigation Unit to undertake automatic data processing on the status of the owner’s safety deposit box. In one recent UK case Milton Woolf and Jacqueline Swan funded wealthy lifestyles by charging criminal gangs tens of thousands of pounds each to store more than £50million in cash, along with firearms and child pornography linked with contract killers, drug dealers and human traffickers. Woolf, of Golders Green was given four years and six months imprisonment after admitting 14 offenses including money laundering and possession of a firearm. Swan, of Barnet, was given a one year term for seven counts of failing to disclose acts of money laundering. Police later seized nearly 7,000 safety deposit boxes in a £10million operation.

Secondary Market

Secondary market is a market in which investors purchase securities or assets from other investors rather than directly from the issuing companies; exchanges such as the New York Stock Exchange are secondary markets.

Seize

To prohibit the transfer, conversion, disposition or movement of funds or other assets on the basis of an action initiated by a competent authority or a court under a freezing mechanism. However, unlike a freeze, a seizure allows the competent authority to take

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control of specified funds or other assets. The seized assets remain the property of the person(s) or entity(ies) that held an interest in them at the time of the seizure, although the competent authority will often take over possession, administration or management of the seized assets.

Settlor (Trustor or Donor)

Settlors are persons or companies who transfer ownership of their assets to trustees by means of a trust deed. Where the trustees have some discretion as to the investment and distribution of the trust’s assets, the deed may be accompanied by a non-legally binding letter setting out what the settlor wishes to be done with the assets.5

Share(s) Certificate

A word used to denote part ownership of a company, many people now own shares in companies, whether they own small or large numbers of shares. They indicate their ownership by possession of a share certificate which they receive upon payment of the appropriate fee to the entity selling the share(s)

Shell Bank

Shell bank means a bank that has no physical presence in the country in which it is incorporated and licensed. Physical presence means meaningful mind and management located within a country. The existence simply of a local agent or low level staff does not constitute physical presence.6

Smurfing

The transfer of many small sums of money from various bank accounts into a single account, frequently offshore. Often used as a means of money laundering in an attempt to disguise/hide the true sources of their cash. In countries /territories where automatic reports are generated when cash movement exceed say $10,000.00 USD the smurfed transfers will be in amounts of less than $10K in order to stay below the radar.

5 Methodology to FATF 40 Recommendations6 Methodology to FATF 40 Recommendations

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Smurfs

Individuals hired by money launderers to go from financial institution to financial institution purchasing monetary instruments or depositing currency or monetary instruments in amounts under the reporting threshold.

Split Deposits

A series of deposits in which a customer splits a sum of money and makes smaller deposits into two or more accounts that add up to the original amount.

Spoofing

When an unauthorised person makes a message (typically an email) appear to come from a legitimate sender by using either the genuine or a very similar address.

SSL

Stands for “Secure Sockets Layer.” SSL is a secure protocol developed for sending information securely over the Internet. Many websites use SSL for secure areas of their sites, such as user account pages and on-line checkout. Usually, when you are asked to “log in” on a website, the resulting page is secured by SSL.

SSL Certificate

An SSL (Secure Socket Layer) certificate, or secure certificate, is a file installed on a secure Web server that identifies a website. This digital certificate establishes the identity and authenticity of the company or merchant so that on-line shoppers can trust that the website is secure and reliable. In order to verify that these sites are legitimate (they are who they say they are), the companies and their websites are verified by a third party, such as Verisign.

Stored Value Card

Pre-paid payment card that stores a monetary value from which purchase amounts are deducted each time the card is used.

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Structuring

Illegal act of splitting cash deposits or withdrawals into smaller amounts, or purchasing monetary instruments, to stay under a currency reporting threshold. The practice might involve dividing a sum of money into lesser quantities and making two or more deposits or withdrawals that add up to the original amount. Money launderers use structuring to avoid triggering a filing by a financial institution. The technique is common in jurisdictions that have compulsory currency reporting requirements. See Smurfing.

Subpoena

Compulsory legal process issued by a court to compel the appearance of a witness at a judicial proceeding, sometimes requiring the witness to bring specified documents.

Suspicious Activity

Irregular or questionable customer behavior or activity that may be related to a money laundering or other criminal offense, or to the financing of a terrorist activity. May also refer to a transaction that is inconsistent with a customer’s known legitimate business, personal activities, or the normal level of activity for that kind of business or account.

Suspicious Activity Report (SAR)

See Suspicious Transaction Report.

Suspicious Transaction Report (STR)

A government form that includes a financial institution’s account of a questionable transaction. Many jurisdictions require financial institutions to report suspicious transactions to relevant government authorities on a suspicious transaction report, also known as a suspicious activity report or SAR.

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Trusts

Asset Protection Trusts

The principle of “asset protection” is for a person to distance themselves from assets they own. The intention is that future creditors will not be able to sue for those assets. Asset protection trusts have been used to protect against the consequences of divorce, medical negligence suits and other litigation. The most common method of asset protection is the creation of a discretionary trust, of which the settlor (See below) may be the protector (See Below) and a beneficiary, but not the trustee and not the sole beneficiary. In such an arrangement the settlor may be in a position to benefit from the trust assets, without owning them and without them being available to the settlor’s creditors. Such a trust will usually preserve anonymity with a name completely unconnected to the settlor.

Countries that provide the services of asset protection trusts are the Cook Islands, Nevis, Belize, the Bahamas, Guernsey, Jersey, Switzerland and Liechtenstein.

Bare Trust

Also known as dry, formal, naked, passive, or simple trust, in which the trustees have no duties other than to convey the trust property to beneficiaries when called upon to do so. Bare trusts are vulnerable to money laundering because the final beneficiary is unknown.

Blind trust

A blind trust is a trust in which the trustees have full discretion over the assets. The trust beneficiaries have no knowledge of the holdings of the trust and no right to intervene in their handling. Blind trusts are generally used when a settlor wishes to keep the beneficiary unaware of the specific assets in the trust, in order to avoid conflict of interest between the beneficiary and the investments.

Blind trusts have been used to provide funding for political parties.

Express Trust

Express trust refers to a trust clearly created by the settlor, usually in the form of a document e.g. a written deed of trust. An express trust contrasts with trusts that come

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into being through the operation of the law and do not result from the clear intent or decision of a settlor to create a trust or similar legal arrangements (e.g., constructive trust).

Protective Trusts

A protective trust is a life interest which terminates on the happening of a specified event such as the bankruptcy of the beneficiary or any attempt by him to dispose of his interest.

Spendthrift Trusts

A Spendthrift trust is a trust put into place for the benefit of a person who is unable to control their spending. It gives the trustee the power to decide how the trust funds may be spent for the benefit of the beneficiary.

Trusts

In common law legal systems, a trust is a relationship between three parties where property is transferred by one party to be held by another party for the benefit of a third party. A trust is created by a settlor, who transfers some or all of his property to a trustee, who holds that trust property for the benefit of the beneficiaries.

The trustee has legal title to the trust property, but the beneficiaries have equitable title to the trust property.

Trusts can be found in all Common Law jurisdictions.

A common example of a trust is:

Grandparents giving money to grandchildren to be held on trust until the children reach the age of 18 years. The Grandparents are the settlors, who make a gift to the Grandchildren by placing money in a trust fund. The trust fund is controlled by a trustee. When the Grandchildren are 18 years of age, the trustee will make distributions to them as the beneficiaries under the trust. The distributions will be made in accordance with the original letter of wishes.

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Trust Companies

A trust company is a corporation, especially a commercial bank that takes responsibility for trusts. It is normally owned by one of three types of structures: an independent partnership, a bank, or a law firm, each of which specialises in being a trustee of various kinds of trusts and in managing estates.

Trustee

Trustee, who may be paid professionals or companies or unpaid persons, hold the assets in a trust fund separate from their own assets. They invest and dispose of them in accordance with the settlor‘s trust deed, taking account of any letter of wishes. There may also be a protector, who may have power to veto the trustees’ proposals or remove them, and/or a custodian trustee, who holds the assets to the order of the managing trustees.7 A simple example would be Barclays.

Unit Trust

A unit trust is a trust where the beneficiaries each possess a certain share (called units) and can direct the trustee to pay money to them out of the trust property according to the number of units they have.

A unit trust is a vehicle for collective investment as the person who gives the property to the trustee is also the beneficiary.

Offshore Trusts

An Offshore Trust is a conventional Trust that is formed under the laws of an offshore jurisdiction. The trust is established in a jurisdiction other than the residence of the settlor

Trojan

A Trojan horse or Trojan is a type of malware that is often disguised as legitimate software. Trojans can be employed by cyber-thieves and hackers trying to gain access to users’ systems. Users are typically tricked by some form of social engineering into loading and executing Trojans on their systems.7 Methodology to FATF 40 Recommendations

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Vishing

The practice of attempting to obtain personal or financial information via a telephone call in order to commit fraud or identity theft. Often callers will pretend to be computer engineers wanting to take over your PC remotely to make imaginary repairs while searching for passwords and bank details.

VPN

Stands for “Virtual Private Network” (not a successor to the UPN television network). VPN is a network term that most computer users don’t need to know, but at least you can impress your friends by talking about it. A virtual private network is “tunnelled” through a wide area network WAN such as the Internet. This means the network does not have to be located in one physical location like a LAN. However, by using encryption and other security measures, a VPN can scramble all the data sent through the wide area network, so the network is “virtually” private.

VAT Fraud also known as MTIC/Carousel Fraud

The simplest form of Multi trader intra community fraud (MTIC) is where goods are imported VAT free into an EU country from countries in the region. Once the goods have been sold on in the UK, the importer goes missing taking with him the VAT collected as part of the UK sale.

The more elaborate version of this fraud is known as ‘carousel ‘fraud. Goods are imported say into the UK VAT free and are sold through a series of companies in the UK, each liable for VAT, before being exported. The goods going round in a carousel, the first link in the chain goes missing without accounting for the VAT and the final link in the chain reclaims the VAT it has paid before disappearing.

Vehicles crossing into northern Kosovo from Serbia (and back) are believed to be involved in VAT fraud. There is concern that trucks that are documented to be carrying fuel may in fact be empty or full of water, with the fuel being resold in Serbia after the VAT and excise taxes have been refunded for export (inter alia depriving Serbia of millions of euros a year in lost revenues).

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First Curacao International Bank (FCIB) was shut down in 2006 after it was found that every individual arrested and charged in the UK & Holland with so-called carousel fraud in the preceding two years had an account there. In 2004 FCIB’s volume of business was equivalent to

$60m before the bank was effectively closed in 2006 it had rocketed to $6.5bn.

Wire Transfer

The term wire transfer refers to any transaction carried out on behalf of an (originator person) (both natural and legal) through a financial institution by electronic means with a view to making an amount of money available to a beneficiary person at another financial institution. The originator and the beneficiary may be the same person.

WHOIS

WHOIS (pronounced “who is”) is an Internet service used to look up information about a domain name. While the term is capitalized, “WHOIS” is not an acronym. Instead, it is short for the question, “Who is responsible for this domain name?”. The record also provides hosting, DNS and technical information.

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http://www.world-check.com/ Individuals, entities, Politically exposed persons, PEP’s

http://www.lexisnexis.com/ Law enforcement supporthttp://www.dtsearch.com/ Searches large volumes of text

extremely quickly i.e. data recov-ered from criminal computers.

http://www.192.com/?gkw=192+people

Search telephone numbers

http://www.whitepages.co.uk/ Search vehicle registration num-bers

http://www.companieshouse.gov.uk/

Search individuals /companies

http://800notes.com/ Free reverse phone number lookup

https://www.cia.gov/ Central Intelligence Agency – good for finding information about countries

http://www.assetrecovery.org Camden Asset Recovery In-ter-Agency Network- good web-site to trace assets

http://www.baselgovernance.org/icar/

International Centre for Asset Recovery – good materials on asset recovery cases

http://www.justice.gov/ US Justice Department – good information on asset recovery cases

http://www.fco.gov.uk/en/ UK Foreign & Commonwealth Office –much information including treaties etc.

https://osint.tools/course-web-sites#financial

Financial, Business and related websites

WEBSITES TO OBTAIN INFORMATION ON ASSET RECOVERY

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Notes

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