Transcript Presentation Skills

Annual Anti-Money Laundering (“AML”) /
Counter Terrorism Financing (“CTF”)
Training
2013
Objectives
By the end of this training, you will be able to:

Recognize the (3) stages of money laundering

Understand SS&C’s role in combating money laundering and terrorist financing

Increase awareness of SS&C’s regulatory requirements

Recognize your role in fighting money laundering and terrorist financing

Identify potential suspicious activity and how to escalate your suspicions

2
Understand the offenses which relate to money laundering and terrorist
financing
A Brief
History of
Money
Laundering
3
What is Money Laundering & Terrorist Financing?
Money Laundering: The process of changing the identity of money gained from illegal
activities into “clean” money, thus concealing the true origin and ownership of the money.
Terrorist Financing: The process by which terrorists fund their operations in order to
perform terrorist acts; usually involves money laundering.
While illegal activities such as these have
undoubtedly been going on for hundreds, if
not thousands, of years, it’s only in the 20th
century that money laundering, as a crime,
has really attracted interest.
‘Money laundering’ as an expression is one
of fairly recent origin. The original sighting
was in newspapers reporting the Watergate
scandal in the United States in 1973.
Let’s take a look at two of the most infamous money launderers!
4
5
6
Typically, a money laundering operation will have 3 key stages……
7
The Three Stages of Money Laundering
Placement
• Money initially placed into the financial system
• Example: Drug traffickers proceeds are broken up into smaller
sums and deposited into a bank account over a period of time
Layering
• Money is converted or moved through the financial system, in multiple transactions, in order to
break the audit trail of the money’s original source
• Proceeds are used to purchase an investment instrument or may be wired to multiple bank
accounts across several jurisdictions
Integration
• Money is no longer distinguishable from it’s original source and has re-entered the legitimate
economy
• Proceeds are re-invested into legitimate business ventures, used to purchase luxury items, real
estate, etc.
8
The Three Stages of Money Laundering
Placement
• Money initially placed into the financial system
• Example: Drug traffickers proceeds are broken up into smaller
sums and deposited into a bank account over a period of time
Layering
• Money is converted or moved through the financial system, in multiple
transactions, in order to break the audit trail of the money’s original
source
• Example: Proceeds are used to purchase an investment instrument or
may be wired to multiple bank accounts across several jurisdictions
Integration
• Money is no longer distinguishable from it’s original source and has re-entered the legitimate
economy
• Proceeds are re-invested into legitimate business ventures, used to purchase luxury items, real
estate, etc.
9
The Three Stages of Money Laundering
Placement
• Money initially placed into the financial system
• Example: Drug traffickers proceeds are broken up into smaller
sums and deposited into a bank account over a period of time
Layering
• Money is converted or moved through the financial system, in
multiple transactions, in order to break the audit trail of the
money’s original source
• Example: Proceeds are used to purchase an investment instrument or
may be wired to multiple bank accounts across several jurisdictions
Integration
• Money is no longer distinguishable from its original source
and has re-entered the legitimate economy
• Example: Proceeds are re-invested into legitimate business
ventures, used to purchase luxury items, real estate, etc.
10
Case Study – General Noriega
Placement: the money

Former military dictator of Panama, Generalintroduced
Noriega, to the finan
misappropriated approximately $23 million of funds fromsystem
the
Panama National Guard.

The funds were deposited into various accounts he opened
with the Bank of Credit and Commerce International in
Luxembourg and London. From there, $11.5 million of the
funds were transferred to an account in the name of “Finlay
International” at the Union Bank of Switzerland in Zurich.

The whole of the funds were then transferred to the Middle
Eastern Bank in London. Finlay International instructed the
Middle Eastern Bank to transfer the funds to several brokerage
accounts opened at a commodities brokerage firm. Multiple
transactions took place through the Finlay accounts set up at
Integrati
the brokerage firm, involving trades on the Chicago and
is unreco
London commodities markets.
Layering: the money is
moved through the
financial system
its ori

Gradually, the money was withdrawn from the brokerage
accounts and used to buy luxury items in Paris, e.g. yacht,
apartment in Europe, etc.
Can you see the various stages of money laundering in this scenario?
11
SS&C’s Role
12
SS&C’s Role



13
As part of its administrative services,
SS&C conducts certain AML reviews on
behalf of Fund clients, as designated in
their Services Agreement
Our clients and their counterparties rely
on SS&C to conduct the appropriate
AML/Know Your Customer Checks on
the money which is used to fund trading
accounts
SS&C must ensure that sufficient
AML/CTF procedures and controls are in
place in those jurisdictions in which the
Company operates
SS&C
Investment
Managers
&
Fund
Counterparties
Fund Clients
SS&C’s Regulatory Jurisdictions
Ireland
Luxembourg
Bermuda
Cayman Islands
14
Curacao
What does it mean to “Know Your Customer?”

Also known as ‘KYC’

Involves conducting a due diligence review on clients

Verification of true identity, address, source of funds, nature of business
etc

Involves risk assessment - source of wealth, type of client, location of
client

Required identity verification documents may include:
– Passport or other government-issued proof of identification
– Official formation documents or other governing agreements
– Documents which verify the nature of the client’s business
15
AML/CTF Procedures at a Glance
Financial Services providers such as SS&C must implement certain
procedures in order to effectively combat money laundering, terrorist
financing, and other financial crimes. These procedures include:
Client identification procedures, including
where appropriate, identification of beneficial
owners, and the nature of the client’s business
Staff training procedures regarding applicable
AML/CTF regulations and company policies
Recognition of “suspicious activity” and
reporting of such activity to the appropriate
person(s)
On-going monitoring of business arrangements
Retention of documents for not less than 5
years
Internal Audit procedures
Designation of a Money Laundering Reporting Officer (“MLRO”) and Money Laundering Compliance Officer
16
Why is all of this important to you?
Under the laws in the jurisdictions in which
we operate, it is a criminal offense of
money laundering if a person possesses,
conceals, disguises, transfers, converts,
removes, acquires, or, in any way, handles
the proceeds of criminal conduct
A person commits a criminal offense if he
or she knows or suspects, or has
reasonable grounds for knowing or
suspecting, that another person is
engaged in criminal conduct, and he or she
does not make the required disclosure to
the Money Laundering Reporting Officer in
their company.
Only the Money Laundering Reporting
Officer should make a report to SS&C’s
regulator/local Financial Intelligence Unit
(‘FIU’) if they suspect or know about
suspicious activity or money laundering.
17
Tipping Off
It is important to ensure you do
not discuss any suspicions of
money laundering or other
criminal conduct or any
reporting of such conduct with
anyone but the Company’s
Money Laundering Reporting
Officer (“MLRO”).
In the event that you make a report of suspicious activity to the MLRO, you will be
given specific instructions on how to proceed.
It is a criminal offense if a person knows or suspects a disclosure of money
laundering is about to take place, is taking place, or has taken place, and he or
she makes a disclosure which is likely to prejudice an investigation.
18
Knowledge Check
A prospective corporate investor wishes to subscribe into ABC Fund
Limited, however they reside in a country not recognized by our
regulators. In order to conduct the appropriate KYC checks, SS&C’s
Investor Services representative requests documentation in order to
identify the investor and its shareholders.
The investor is reluctant to provide data relating to its shareholders and
after many weeks, the Investor Services representative instructs the
investor that they cannot process the subscription without this
documentation. The investor states on a call, “this is ridiculous, I
have invested in many funds and none of them have given me a hard
time. I am going to withdraw my subscription immediately!”
Keeping in mind the “tipping off” offense, which one of the below actions
would be best practice to pursue?
A. Tell the Fund Manager of your suspicions. Let them deal with the investor. Hey, maybe they’ll
have better luck?
B. Say nothing. No harm no foul. The investor didn’t provide the documentation, so you couldn’t
process. Simple as that.
C. Coordinate a discussion to speak with the company MLRO.
19
If you said “C” you are correct!
It is best practice to discuss the matter directly with
your company MLRO who will instruct you on how
to proceed. By no means should any of your
suspicions be discussed with the investor, client, or
co-workers.
20
Suspicious Activity
21
What is Suspicious Activity?
22

Refers to types of activity
that can be construed as
questionable or suspect

Important to “Know Your
Customer” so you are
better able to identify
activity which is unusual
or not in the normal range
of activity for that client

All SS&C personnel must
monitor activity in client
or investor accounts and
always be alert to
unusual or inconsistent
transactions
Types of Suspicious Activity
Some examples of Suspicious Activity
may include:

Reluctance for a client to provide
additional information or documentation

Requests from a client to remain
anonymous

Swaps or other transactions with a non
traditional counterparty, e.g. other than a
recognized bank or brokerage house

Excessive frequency of contributions and
withdrawals by a client or investor,
especially where there is no financial gain
or other benefit

Unusually high volume transactions
Let’s take a look at a scenario to test your recognition of suspicious activity!
23
Knowledge Check
An Operations employee at SS&C is requested to send out a wire for a Fund expense by one
of the Operations Managers at the Fund who he speaks to everyday and has a great
working relationship with.
The Operations Manager at the Fund says the expenses occurred during a business trip and
he’d really appreciate a prompt turnaround. When the employee requests documentation
to substantiate the wire, the Manager jokes around, saying how foolish he is because he
accidentally threw out the receipts.
The employee tells him that it’s no problem, he’ll just need the Director’s sign off on the
expenses. The Manager immediately withdraws the requests to submit the expenses and
tells the SS&C employee not to worry about it, he’ll just have his boss pay him directly.
Could this situation be construed
as ‘suspicious activity’?
24
YES!
Although the Operations Manager at the Fund may really have legitimately
misplaced the receipts to support the expense wire and didn’t want to
create trouble or make things difficult for the Operations employee, it is
worth the Operations employee checking into it further to ensure the
expense would have been legitimate and approved by the Fund’s
Director.
Each employee is responsible for being the first line in defense against
money laundering and terrorist financing. It is your responsibility to
report any activity which isn’t the norm and could be construed as
“suspicious!”
25
How to Report Suspicious Activity
Suspicious Activity should be reported to the
Company’s MLRO
Suspicious Activity should be reported using
the form available on the intranet
The MLRO will provide the employee with
further instructions on how to proceed
26
Case Study - The Black Market Peso Exchange
Ever wondered how drug traffickers could possibly deposit tremendous amounts of illegal proceeds into U.S. bank
accounts without arising suspicion by banks and regulators? The truth is, they don’t! Lets take a look at this common
scenario.
The majority of drug traffickers in Columbia don’t want the U.S.
dollars they earn from drug sales because they rarely leave
Columbia. They need their local currency to live their lives,
purchase homes and other luxuries and pay for the operations of
their drug trafficking business. So instead they have found a
method to convert their ill gotten gains back to their native
currency, the peso, through a series of transactions with a black
market broker.
Drug Proceeds in
USD
Goods are paid
for by peso
broker, using
purchased drug
proceeds
27
Brokers sell USD
to businessmen
in Columbia who
want $ for goods
Known as “The Black Market Peso Exchange,” this process
involves a money broker who will purchase U.S. dollars derived
from drug sales, negotiate an exchange rate of Columbian pesos
for the U.S. dollars (usually 40% below the official exchange rate)
and deliver those pesos to the drug traffickers in the Columbian
bank accounts. This very successful and prevalent process of
money laundering is even used by legitimate successful
businessmen in Columbia who have pesos but want to buy cheap
U.S. dollars to purchase goods in the U.S.
The U.S. dollars from traffickers are often swapped with the pesos
the legitimate businessmen want to convert and the money broker
then receives the commissions from the difference in the
exchange. It is estimated that the “black peso exchange” launders
$5 billion dollars of drug money per year!
Summary
28

There are (3) distinct phases of money laundering to be aware of: placement,
layering & integration

SS&C has a regulatory obligation to adhere to certain AML/CTF standards, which
include the process of knowing your customer (“KYC”)

The better you know your customer, the better equipped you will be to identify
suspicious activity should it occur

Money laundering is a serious offense but not reporting money laundering or
suspicious activity is just as serious

It is also an offense to “tip off” any outside parties to suspected or known money
laundering activity by sharing your suspicions

There are different types of suspicious activity and every employee must share in the
responsibility for the firm to identify suspicious activity and report it to the company
MLRO

Money laundering is and has been an abundant problem in society and requires
vigilance from everyone to protect the integrity of the financial system
You have now completed SS&C’s Annual Anti-Money
Laundering & Counter Terrorism Financing Training
29
THANK
YOU!