Money Laundering: Detection, Prevention, and the Role of Financial Intelligence Authorities
Money Laundering :A practical
approach to Detection &
Prevention
ESTHER AIKIRIZA KAGIRA ,
MANAGER, STRATEGIC ANALYSIS AND STATISTICS
FINANCIAL INTELLIGENCE AUTHORITY -UGANDA
Structure of Presentation
1)
Role of Financial intelligence Authority
2)
Money Laundering (ML) and Terrorism Financing
(TF)/PF
3)
Effects of Money Laundering
4)
NRA 2017
5)
Accountable persons and their Obligations in AML/CFT
6)
Offences & Penalties
7)
Conclusion
FIA Uganda.
The Financial Intelligence Authority (FIA) is a
gov’t agency established under section 18 of the
Anti-Money Laundering Act (AMLA), 2013 to
combat money laundering and terrorist
financing in Uganda.
FIA works with other Law Enforcement
Agencies (LEAs) to protect financial sector
from being abused by criminals seeking to
launder proceeds of crime or fund terrorist
activities.
FIA’s role makes it a central point between
the reporting entities, supervisory
bodies/Regulators, LEAs and prosecutors.
FIA’s mandate
Enhance the identification of the proceeds of crime and the
combating of money laundering
• Ensure compliance with the Anti money Laundering Act
• Enhance public awareness and understanding of matters
related to money laundering
• Make information collected by it available to competent
authorities and to facilitate the administration and enforcement
of the laws of Uganda; and facilitate spontaneous sharing of
information upon request
Money Laundering (ML)?
Money Laundering (ML); is the process of conversion or transfer
of funds or property, knowing that such funds/property is derived
from an offence involving crime or of assisting any person who is
involved in the commission of such an offence.
The conversion may involve changing the true nature, source,
location, disposition, movement rights with respect to or
ownership of property and money.
When criminals generate substantial proceeds (Dirty Money) e.g.
from Corruption, they must find ways to control the funds
without attracting attention to the underlying activity or the
persons involved.
Terrorism Financing
TF is the act of providing financial support to
terrorists or terrorist organizations to enable them
to carry out terrorist acts.
•
Financiers of Terrorists use similar methods as
launderers to disguise and conceal their support to
terror activities
Proliferation Financing
Is the act of providing funds or financial services
which are used, in whole or in part for the
manufacture, acquisition ,possession and development
of weapons of mass destruction.
Money Laundering Vs Terrorism Financing
The most basic difference between ML&TF is the origin
of the funds.
The individuals responsible for raising funds are not
the beneficiaries of the laundered funds. The money
benefits a terrorist activity.
However the methods used by Terrorists and Launders
are technically the same.
Effects of ML
.Economic Consequences:
Undermining the legitimate private sector.
Undermining the integrity of financial markets
.
Loss of control of economic policy.
Economic distortion and instability.
Loss of government tax revenue.
Risks to privatization efforts.
Reputation risk.
Effects…
.Sociopolitical Consequences:
Allowing drug traffickers, smugglers, and other criminals to expand
operations.
Transfer of economic power from the market, government, and citizens to
criminals.
Organised crime can infiltrate financial institutions, acquire control of large
sectors of the economy through investment, or offer bribes to public officials and
indeed governments. The economic and political influence of criminal
organisations can weaken the social fabric, collective ethical standards, and
ultimately the democratic institutions of society. In countries transitioning to
democratic systems, this criminal influence can undermine the transition. Most
fundamentally, money laundering is inextricably linked to the underlying criminal
activity that generated it. Laundering enables criminal activity to continue (FATF)
Stages of Money Laundering .
1.
Placement -
This is the first stage where proceeds
from the illegal
activity are introduced into the financial system in a manner that avoids
detection by the banks and the LEA’s or
turned into a form, less
suspicious and more convenient for the criminal.
2.
Layering - This stage involves the separation of proceeds from the illegal
source through the use of complex transactions designed to obscure the
audit trail and hide the proceeds. Launderers frequently use shell
companies, offshore banks or other countries for this purpose.
3.
Integration.
Illegal
proceeds are converted to appear as Legitimate
business earnings through normal operations.
At this stage Funds appear as clean and legitimate assets.
ML Stages
Collection of “Dirty” Money
PLACEMENT
LAYERING
INTEGRATION
Uganda ML/TF National Risk Assessment 2017
NRA Findings
NRA Findings
The analysis of the ML threat showed that, at domestic level,
the most proceeds-generating predicate offences are;
Corruption
Fraud
Tax crimes, and;
Counterfeiting of goods
Who is an accountable person
“Accountable Person” means any person listed in the
Second Schedule of the AMLA, 2013 as amended;
Accountable persons
Reporting to FIA
Reports To FIA
1.
Large Cash and Monetary Transactions Reports.
2.
Suspicious Transactions Reports.
3.
Cross boarder declarations of cash & Bearer
Negotiable Instruments .
Role of Accountable Persons & KYC/CDD.
1.
Carry out Customer Due Diligence (CDD) on all clients with focus
on High risk clients and transaction monitoring.
2.
Establishing
Internal
AML/CFT
Policies and Procedures
. These
should clearly articulate the Companies policy and list the
mechanisms through which the firm manages any potential Money
Laundering or Terrorism Financing
3.
Monitoring and reporting suspicious activities and Large Cash
Transactions.
4.
Training and communicating AML policies.
5.
Maintaining AML/CFT records for a max period of 10yrs etc.
Red flags
1.
Activities or transactions deviating from the normal ones
2.
Unwillingness to provide business information including
information about the owner, clients or beneficial business
partners
3.
Constant huge bank balances of unjustified cash deposits
4.
Unverified documents or inconsistent information e.g. Multiple IDs
5.
Complex transactions to conceal or hide the source and owner of
the funds
6.
Split transactions in form of deposits amounting to large
transactions etc.
Mitigation measures
Risk-Based Approach
Monitoring and reporting suspicious activities and Large Cash
Transactions
Training and communicating AML policies
Maintaining AML records.
Financial institutions should pay special attention to any ML threats
that may arise from new or developing technologies that might favor
anonymity and carry out risk assessments before Rolling them ou
t
ML Offence & Penalties
1.
A person commits the offence of ML if the person knowing or having rea
sonable grounds to believe that any property in whole or in part, directly
or indirectly represents proceeds of crime
1.
For breach of s3 & s116(1)
a)
Natural Persons
Fine ≤ 100,000 currency Pts (UGX 2,000,000,000)
Imprisonment ≤ 15 years
Or both
b)
Legal Persons
Fine ≤ 200,000 curr. Pts (UGX 4,000,000,000)
24
Way forward
You must not assist, facilitate a money launderer to conceal, retain or invest
funds acquired from proceeds of crime.
You must
not Tip-off and inform
a person suspected and being investigated for
money laundering. You must also
not reveal
in any way to another staff or a
friend that a customer is being investigated for suspicious transactions, except
to your Supervisor, Compliance Officer or as guided by your internal AML/CFT
Policy.
You must
report
any transaction which is suspected to involve proceeds of
crime to your supervisor, Compliance Officer or MLCO as guided by your
AML/CFT Policy .
Conclusion
Money Laundering is an Acquisitive crime i.e. for every conviction
(including plea bargains) of an acquisitive crime such as fraud, corruption,
illegal wildlife trade, tax evasion, contract killings, aggravated robbery,
cybercrime, among many others, there is money laundering
And the fight against ML/TF is an enormous challenge that cannot be won
by one person or organization - it needs concerted effort
All financial institutions are responsible for monitoring whatever activity
that they observe and should not rely on others plays in discharging this
responsibility
Thank you for listening
Explore the practical aspects of detecting and preventing money laundering, with a focus on the role of the Financial Intelligence Authority in Uganda. Learn about the effects of money laundering, the obligations of accountable persons in anti-money laundering efforts, and the penalties associated with offenses. Gain insights into terrorism financing and how organizations like FIA work to combat financial crimes.
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Presentation Transcript
Money Laundering :A practical approach to Detection & Prevention ESTHER AIKIRIZA KAGIRA , MANAGER, STRATEGIC ANALYSIS AND STATISTICS FINANCIAL INTELLIGENCE AUTHORITY -UGANDA
Structure of Presentation 1) Role of Financial intelligence Authority 2) Money Laundering (TF)/PF 3) Effects of Money Laundering 4) NRA 2017 5) Accountable persons and their Obligations in AML/CFT 6) Offences & Penalties 7) Conclusion (ML) and Terrorism Financing
FIA Uganda. The Financial Intelligence Authority (FIA) is a gov t agency established under section 18 of the Anti-Money Laundering Act (AMLA), 2013 to combat money laundering financing in Uganda. and terrorist FIA works with other Law Enforcement Agencies (LEAs) to protect financial sector from being abused by criminals seeking to launder proceeds of crime or fund terrorist activities. FIA s role makes it a central point between the reporting bodies/Regulators, LEAs and prosecutors. entities, supervisory
FIAs mandate Enhance the identification of the proceeds of crime and the combating of money laundering Ensure compliance with the Anti money Laundering Act Enhance public awareness and understanding of matters related to money laundering Make information collected by it available to competent authorities and to facilitate the administration and enforcement of the laws of Uganda; and facilitate spontaneous sharing of information upon request
Money Laundering (ML)? Money Laundering (ML); is the process of conversion or transfer of funds or property, knowing that such funds/property is derived from an offence involving crime or of assisting any person who is involved in the commission of such an offence. The conversion may involve changing the true nature, source, location, disposition, movement rights with respect to or ownership of property and money. When criminals generate substantial proceeds (Dirty Money) e.g. from Corruption, they must find ways to control the funds without attracting attention to the underlying activity or the persons involved.
Terrorism Financing TF is the act of providing financial support to terrorists or terrorist organizations to enable them to carry out terrorist acts. Financiers of Terrorists use similar methods as launderers to disguise and conceal their support to terror activities
Proliferation Financing Is the act of providing funds or financial services which are used, in whole or in part for the manufacture, acquisition ,possession and development of weapons of mass destruction.
Money Laundering Vs Terrorism Financing The most basic difference between ML&TF is the origin of the funds. The individuals responsible for raising funds are not the beneficiaries of the laundered funds. The money benefits a terrorist activity. However the methods used by Terrorists and Launders are technically the same.
Effects of ML .Economic Consequences: Undermining the legitimate private sector. Undermining the integrity of financial markets. Loss of control of economic policy. Economic distortion and instability. Loss of government tax revenue. Risks to privatization efforts. Reputation risk.
Effects .Sociopolitical Consequences: Allowing drug traffickers, smugglers, and other criminals to expand operations. Transfer of economic power from the market, government, and citizens to criminals. Organised crime can infiltrate financial institutions, acquire control of large sectors of the economy through investment, or offer bribes to public officials and indeed governments. The economic and political influence of criminal organisations can weaken the social fabric, collective ethical standards, and ultimately the democratic institutions of society. In countries transitioning to democratic systems, this criminal influence can undermine the transition. Most fundamentally, money laundering is inextricably linked to the underlying criminal activity that generated it. Laundering enables criminal activity to continue (FATF)
Stages of Money Laundering . 1. Placement - This is the first stage where proceeds from the illegal activity are introduced into the financial system in a manner that avoids detection by the banks and the LEA s or turned into a form, less suspicious and more convenient for the criminal. 2. Layering - This stage involves the separation of proceeds from the illegal source through the use of complex transactions designed to obscure the audit trail and hide the proceeds. Launderers frequently use shell companies, offshore banks or other countries for this purpose. 3. Integration. Illegal proceeds are converted to appear as Legitimate business earnings through normal operations. At this stage Funds appear as clean and legitimate assets.
PLACEMENT B A N K Collection of Dirty Money LAYERING False Invoice Payment by Y to X Transfer on the Bank A/C of X Loan to Y INTEGRATION Offshore Bank B A N K
NRA Findings The analysis of the ML threat showed that, at domestic level, the most proceeds-generating predicate offences are; Corruption Fraud Tax crimes, and; Counterfeiting of goods
Who is an accountable person Accountable Person means any person listed in the Second Schedule of the AMLA, 2013 as amended;
Accountable persons Advocates NGOs, Churches Trust Companies All Licensing Authorities Casinos Uganda Investment Authority Real Estate Agents FIA Registrars of Land Dealers in Precious Metals & Stones Trust & Company Service Providers Registrar of Companies Insurance Companies Financial Institutions Firms Licensed by the CMA
Reporting to FIA Reports To FIA 1. Large Cash and Monetary Transactions Reports. 2. Suspicious Transactions Reports. 3. Cross boarder declarations of cash & Bearer Negotiable Instruments .
Role of Accountable Persons & KYC/CDD. 1. Carry out Customer Due Diligence (CDD) on all clients with focus on High risk clients and transaction monitoring. 2. Establishing Internal AML/CFT Policies and Procedures. These should clearly articulate the Companies policy and list the mechanisms through which the firm manages any potential Money Laundering or Terrorism Financing 3. Monitoring and reporting suspicious activities and Large Cash Transactions. 4. Training and communicating AML policies. 5. Maintaining AML/CFT records for a max period of 10yrs etc.
Red flags 1. Activities or transactions deviating from the normal ones 2. Unwillingness information about the owner, clients or beneficial business partners to provide business information including 3. Constant huge bank balances of unjustified cash deposits 4. Unverified documents or inconsistent information e.g. Multiple IDs 5. Complex transactions to conceal or hide the source and owner of the funds 6. Split transactions in form of deposits amounting to large transactions etc.
Mitigation measures Risk-Based Approach Monitoring and reporting suspicious activities and Large Cash Transactions Training and communicating AML policies Maintaining AML records. Financial institutions should pay special attention to any ML threats that may arise from new or developing technologies that might favor anonymity and carry out risk assessments before Rolling them out
ML Offence & Penalties 1. A person commits the offence of ML if the person knowing or having rea sonable grounds to believe that any property in whole or in part, directly or indirectly represents proceeds of crime 1. For breach of s3 & s116(1) a) Natural Persons Fine 100,000 currency Pts (UGX 2,000,000,000) Imprisonment 15 years Or both b) Legal Persons Fine 200,000 curr. Pts (UGX 4,000,000,000) 24
Way forward You must not assist, facilitate a money launderer to conceal, retain or invest funds acquired from proceeds of crime. You must not Tip-off and inform a person suspected and being investigated for money laundering. You must also not reveal in any way to another staff or a friend that a customer is being investigated for suspicious transactions, except to your Supervisor, Compliance Officer or as guided by your internal AML/CFT Policy. You must report any transaction which is suspected to involve proceeds of crime to your supervisor, Compliance Officer or MLCO as guided by your AML/CFT Policy .
Conclusion Money Laundering is an Acquisitive crime i.e. for every conviction (including plea bargains) of an acquisitive crime such as fraud, corruption, illegal wildlife trade, tax evasion, contract killings, aggravated robbery, cybercrime, among many others, there is money laundering And the fight against ML/TF is an enormous challenge that cannot be won by one person or organization - it needs concerted effort All financial institutions are responsible for monitoring whatever activity that they observe and should not rely on others plays in discharging this responsibility
