Title Details

JONATHAN E. TURNER, CFE, CII, is a Managing Director with Wilson & Turner Incorporated, where he specializes in the prevention and detection of sophisticated financial fraud and employee crime issues. Prior to cofounding WTI, he served in investigations management positions with regional, national, and international investigations firms, with operational responsibility for thousands of investigations. He is a court-recognized expert in the investigation, documentation, and resolution of financial fraud matters. Turner is a commentator on fraud-related topics, including financial fraud schemes, employee fraud issues, and complex fraud schemes. He has been interviewed by the Wall Street Journal, the New York Times, and has appeared on ABC News, CNBC, and CNN programs.

Preface xi

Acknowledgments xix

CHAPTER 1 Understanding the Process of Money Laundering 1

What Is Money Laundering? 1

Money Laundering Defined 2

Why Do People Launder Money? 4

The Money Laundering Cycle 6

Money Laundering Is a Criminal Business 10

Money Laundering Is Global 11

Money Launderers Adapt Technology 13

The Role of Technology 14

The Role of Banks 15

The Role of Nations 17

Regional Hotspots 18

The Birth of the Financial Action

Task Force (FATF) 20

Conclusion 22

CHAPTER 2 Motivations for Getting Involved 23

Involvement Is Personal 23

People Weigh the Odds of Success 24

Where Do Laundered Funds Come From? 26

The Impact of Corruption 27

Why Is Corruption Increasing? 28

Corruption Always Begins Small 30

Bribery and Corruption of Your Employees 31

Bribery and Corruption by Your Employees 33

Evolution of Government Attitudes 34

Official Corruption Impacts Individual Corruption 35

Tax Evasion as a Gateway to Money Laundering 36

Moving from Taxes to Criminal Activity 37

The Rise of Regional and Multinational AML Organizations 38

The Connection between Fraud and Money Laundering 40

Money Laundering as a Do-It-Yourself Activity 42

The Service Providers: Bankers, Accountants, and Lawyers 42

Conclusion 45

CHAPTER 3 Mechanisms for Moving Money 47

Money Laundering Requires Movement through the System 47

Broken Windows Encourage Other Crimes 48

Look Local, Think Global 49

Expanding International Requirements 51

Financial Havens Are Expanding 52

Money Laundering Is a Growth Industry 53

Law Enforcement Gets a Big Boost 54

Profit Drives Criminal Activity 56

Structuring the Scheme to Succeed 57

Why Use a Bank, When You Can Own One? 58

Learning from the Big Fraud Schemes 59

Confronting the Inevitable 60

Balancing Security and Cost 61

Effective Fraud Prevention Strategies 62

The Fraud Triangle 63

Where to Start 64

Mitigating Improper Behavior 67

Conclusion 68

CHAPTER 4 Going Global 71

Taking Money around the World 71

Moving the Money Offshore 72

Avoiding Detection 74

Historical Basis for Money Laundering 75

Role of Private Banking 76

Enhanced Regulations 77

The Black Market Peso Exchange 79

Increasing Cooperation in Regulation 80

Regional Distinctions 81

Global Efforts 83

The Law Enforcement Focus 84

Conclusion 87

CHAPTER 5 Technology and Tomorrow 89

The Impact of Technology 89

The Next Phase of Money Laundering 91

Everything Old Becomes New Again 92

Being Anybody You Want to Be 93

Welcome to the Future 94

So What Is the AML Response? 94

Evolution of AML Controls 96

Adjusting to Rapidly Increasing Scale 97

A Highly Flexible Methodology Results in Processes that Are Difficult to Stop 99

AML Is a Process, Not a Destination 100

All Countries’ Regulatory Programs Are Not Equal 101

Technology and Offshore Havens Intersect 103

The Cost vs. the Benefit 104

Consider the Pace of Change and Progress 105

Conclusion 106

CHAPTER 6 Discovery and Prevention 109

Early Warning Is Essential to AML 109

Proactive Means Active 110

By the Numbers 111

Paradigm Shift 112

Testing Your Own AML Systems 114

Expanding the Business Comparison 115

The Regulatory Framework 116

High-Risk Areas 117

Money Laundering Meets Terror Financing 119

Hiding in Plain Sight 121

Criminalizing the Concealment Activities 122

Creating Financial Fronts 124

Keeping the Money Moving 125

Keeping the Tax Man Happy 126

Conclusion 128

CHAPTER 7 Terror Financing 131

Terrorists Use Money Laundering Techniques 131

Similarities and Distinctions 132

Application of the Methodology to Terror Financing 133

Global Impact of Financial Crimes 135

Alternative Laundering Mechanisms 137

Regulatory Responses 139

Conclusion 141

CHAPTER 8 Identifying Risk Exposures 143

AML Exposures: Assessing Financial Institution Risk 143

Language, Culture, and Ethnicity 144

The Legal Landscape 145

Geography: Distance Matters 147

The Goal of the Launderer Is to Hide 147

The United States Takes a Different Approach 149

Laundering Groups Seek to Evade Detection 151

A Fractured Enforcement and Regulatory Picture 152

The Regulatory Position on Cyber Risks 152

Simple Fraud, Still Successful 154

Conclusion 158

CHAPTER 9 Investigating Money Movement 159

Money Laundering Is Now Transnational Organized Crime 159

Succeeding in the Investigative Process 160

Government Access to Information 161

Mining Data for Money Laundering 163

Some Products Help the Perpetrators 164

Investigating Virtual Payment Technologies 165

Looking to the Future Investigative Issues 167

Putting an Investigative Plan in Motion 169

People Are Essential to Proof 170

Finding Money Laundering Abroad 172

Money Laundering Exposure during the Financial Industry Consolidation 173

Conclusion 177

CHAPTER 10 Reporting and Recovery 179

Reporting to Law Enforcement 179

Honest People Act Differently 180

Anticipating Challenges with Cyber Recoveries 181

Building Appropriate Controls into Online Payment Systems 183

Global Coordination on Future Issues 185

Weighing Access vs. Privacy 185

Compliance Issues 187

Putting Recovery Plans into Action 188

Conclusion 191

CHAPTER 11 Conclusion 193

About the Author 197

Index 199