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The fair mile
Contents:
  1. chapter and author info
  2. Examples of Money Laundering Investigations Fiscal Year | Internal Revenue Service
  3. Follow the Author
  4. 1. Introduction
  5. Examples of Money Laundering Investigations - Fiscal Year 2015

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Word Wise: Enabled. Enhanced Typesetting: Enabled. The World Bank is attempting to develop more sophisticated models for the estimation of money laundering at the national level. For an early effort with Colombia see Villa et al.

Examples of Money Laundering Investigations Fiscal Year | Internal Revenue Service

Michel Camdessus, then the Managing Director of the IMF, did not claim that the IMF had produced the estimate but only that such estimates had been made by others: however this refinement has been lost in the subsequent narratives. For analogies elsewhere, see the valuable collection edited by Andreas and Greenhill [ 19 ], which deals only very lightly with laundering and fraud. This leads to the aggregation of large amounts of funds deemed unpaid, on which notional interest has to be paid, artificially creating an ever-higher unredeemable attrition rate Home Affairs [ 24 , 25 , 26 ].

It is important to focus on gross revenues because estimating net revenues requires information about what DTOs pay to produce or purchase the drugs, and data are far too poor to permit this. One complexity points in the other direction, to under estimates of the demand for money laundering services in the drug trade. Each level of the trade has to deal with total revenues, not just value added, so there is a cascading effect; however that covers only the high levels of the trade and does not include retailing or low level wholesaling.


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In addition to existing mental element requirements, a source of potential variation is the inclusion of currency export violations as a predicate crime in money laundering totals. We are grateful to Peter Alldridge for this point. This section draws on Halliday et al. We focused particular attention to three national MERs Germany, Netherlands and Mauritius for which we were able, with IMF assistance, to obtain interviews with national officials. The extent to which this succeeded in preventing backscratching differed across FSRBs.

In addition to open source and specially commissioned studies, there are other official sources of information about money laundering in Brazil and other countries. The OECD transnational bribery evaluations also provide information. The Brazilian MER does not neglect the issue of corruption, but perhaps understandably did not focus in it in its criticisms, since most revelations came to light after its MER, as was also the case with scandals involving Cyprus and Panama. Even after having access to individual case files, the analysts were unable to make decisions about one third of the homicides.

Another effort was made by the UK [ 31 ], which found a small number and proportion of homicides were plausibly organized-crime related, perhaps — in our view — because guns are hard to get in the UK and because shootings receive a very high police priority there. They also indicate that Germany has relatively higher incidence of drug-related crimes, burglaries, embezzlements, and frauds.

Crimes against the person are proportionally less prevalent. See for example Kleemans et al. See the Netherlands MER [ 39 ]: 24— This includes Suspicious Activity Reports, a term that is often used interchangeably.

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In many countries, it is unknown how many of these are disseminated or analyzed for investigative purposes. There will be some overlap in the SARs as each reporting institution reports on activities that may be carried out by the same individuals or networks using different institutions. However, except for those jurisdictions that collate all wire transfers or those — like Switzerland — that have relatively few but high value reports, it would be a laborious process to add up the dollar amounts of all reports. We note that the Netherlands [ 41 ]: 4 now does so.


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For an analysis of differences in reporting standards for filing an STR amongst European countries see Ferwerda [ 42 ]. This is likely to be a universal finding unless STRs are quite few or entail automatic freezing, as in Liechtenstein and Switzerland.

1. Introduction

One experienced assessor noted that the SARs analyses are not central to the actual ratings. Bankers interviewed subsequently commented that the German FIU later complained to them about the deterioration in the average quality and utility of their SARs, which illustrates the counter-productive risks from a focus on numbers. For example, the Singapore NRA listed 15 agencies involved in its preparation p. These were updated in In some cases, there are other unpublished versions with classified or confidential information in them.

Moreover, in some countries the more detailed version will be in the national language and thus not comprehensible to the evaluation team. The industry makes voluntary efforts. One official challenged this conclusion, arguing that tighter guidelines could not be specified at the global level, given differences among countries in capacity. This is an important point — better no data than invented data — but it does show the limitations of reliance on quantitative evidence.

For some countries, partial updates are required on specific issues identified in the MER. Skip to main content Skip to sections. Advertisement Hide. Download PDF. Can the AML system be evaluated without better data? Open Access. First Online: 12 December The individual MERs are listed in a separate section of the References. Middleton, D.


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  8. Let sleeping lawyers lie: Organized crime, lawyers and the regulation of legal services. British Journal of Criminology, 55 4 , — CrossRef Google Scholar. Sharman, J. The money laundry: Regulating criminal finance in the global economy. Ithaca: Cornell University Press. Artingstall, D. Google Scholar. Unintended consequences of anti-money laundering policies for poor countries.

    Obermaier, F. The Panama papers Rev ed. London: Oneworld Publications. Basel Institute of Governance. Basel AML index report. Levi, M. The impacts of organised crime in the EU: Some preliminary thoughts on measurement difficulties. Contemporary Social Science, 11 4 , — Assessing the trends, scale and nature of economic cybercrimes. Crime, Law and Social Change, 67 1 , 3— Tusikov, N. Measuring organised crime-related harms: Exploring five policing methods. Crime, Law and Social Change, 57 1 , 99— Alldridge, P. What went wrong with money laundering law?

    London: Palgrave. Reuter, P. Chasing dirty money. Washington: Institute for International Economics. Walker, J. Cheltenham: Edward Elgar. Unger, B. Estimating illicit financial flows resulting from drug trafficking and other transnational organized crime. Vienna: United Nations. Villa, E. Illicit activity and money laundering from an economic growth perspective: a model and an application to Colombia policy research working paper World Bank.

    Caulkins, J. Cocaine's fall and marijuana's rise: Questions and insights based on new estimates of consumption and expenditures in US drug markets. Addiction, 5 , — Nitsch, V. Trillion dollar estimate: illicit financial flows from developing countries Darmstadt discussion papers in economics, Darmstadt: Darmstadt Technical University. Dirty laundry. Andreas, P. Sex, drugs and body counts.

    Draining development? Controlling illicit flows from developing countries. Washington: World Bank Press. Money laundering. Tonry Ed.

    Meet the scammers breaking hearts and stealing billions online - Four Corners

    Chicago: Chicago University Press. Home Office. Action plan for anti-money laundering and counter-terrorist finance. London: Home Office. National strategic assessment of serious and organised crime London: National Crime Agency. Committee, H. Proceeds of crime fifth report of session — London: House of Commons. Confiscation orders: progress review seventh report of session — Wood, H.

    Enforcing criminal confiscation orders: From policy to practice. London: Royal United Services Institute. Kilmer, B. Reducing drug trafficking revenues and violence in Mexico: Would legalizing marijuana in California help? Santa Monica: Rand. Matrix Knowledge Group. Halliday, T. Global surveillance of dirty money: Assessing assessments of regimes to control money-laundering and combat the financing of terrorism.

    Goldstein, P. Crack and homicide in new York City, A conceptually based event analysis. Contemporary Drug Problems, 16 , — Hopkins, M. Homicide and organized crime in England. Homicide studies, 17 3 , — Aebi, M. European sourcebook of crime and criminal justice statistics The Hague: Boom Juridische Uitgevers. European sourcebook of crime and criminal justice statistics Kleemans, E.

    Hafner, M. European parliamentary research service. Money laundering in Europe. Ultimately there was no basis for assessors to reach a judgment about whether Proceeds of Crime domestic and international were large enough to constitute a major ML problem for that country or for others. The focus here is on STRs as an example, but similar comments can be made about the prosecution and conviction figures. While it is valuable and even necessary to undertake careful analysis of STRs as the assessors intend, the presentation of data here has problems which make inferences highly questionable.

    As the German MER noted, nations differ in their approach to reporting by financial institutions. Some use a low threshold; a report should be filed if there is any concern at all. Others favor a high threshold, putting on the reporting institution the burden of an initial assessment of the credibility of the claim, an especially important issue where the law freezes the reported suspicion for a short period given to prosecutors to decide whether or not to open a money laundering case. There is no known empirical basis in outputs or outcomes for choosing between these approaches, especially when there is no measurement of what effort including speed the public authorities put into analyzing or disseminating the reports if and when received, or with the results that effort brings.

    There is no comparative analysis to show that STRs in countries that apply more stringent criteria e. Country officials asserted they were not comparable and further stated, rightly or wrongly, that the IMF assessors failed to grapple adequately with this lack of comparability. Prosecutions for money laundering are the consequence of investigative follow up and prosecution attitude, competence and resources, not just of the number of STRs.

    The lack of qualitative insight into the nature and seriousness of prosecutions is also a major issue. To avoid criticisms for low prosecution rates, some countries might choose to prosecute more self-laundering cases, whereas for a strategic impact on laundering behavior, it might be preferable to prioritize a smaller number of prosecutions or other interventions against key enablers. Though there is no evidence of such strategic behavior having occurred in the 3rd round evaluations, the Reports certainly make that a possibility; see Deleanu [ 46 ] for a study suggesting strategic manipulation.

    By the end of the 3rd round there was general agreement on the necessity for developing more meaningful methods of evaluation, to go beyond the focus on formal compliance. FATF set up many working groups that produced a variety of documents providing guidance for the fourth round of evaluations. For the first time, the Methodology articulates goals and objectives.

    This has become a major activity, highlighted in the MERs themselves and assessed critically in the first of the Technical Appendices at the back of each Report. Risk is seen as the intersection of threats, vulnerabilities and consequences. The NRA is presumed to require collaboration among many different government agencies and also various private sector stakeholders. The guidelines are refreshingly candid about the limits of quantitative data in this field. Moreover information on all relevant factors may not be expressed or explained in numerical or quantitative form and there is a danger that risk assessment relying heavily on available quantitative information may be biased towards risks that are easier to measure and discount than those for which quantitative information is not readily available.

    This skeptical view about quantitative data is consistent with a contemporary critique in social sciences that the emphasis on quantification trades precision for validity [ 48 , 49 , 50 ]. We examined five published NRAs to assess the kinds of data and analysis that were used to implement the risk assessments.

    Thus, we assume that they are likely to be well above average in their presentation and analysis of data. Unfortunately, neither the Dutch nor the German NRAs are completed and published at the time of writing. What is striking is how little data or analysis of data played in most of the NRAs we reviewed. Singapore and the US simply used this document as an opportunity to describe the ways in which money is laundered; each type of money laundering was illustrated with a summary of a specific case.

    The Reports provided minimal quantitative data; estimated proceeds of crime in the US Report and the number of cases for three kinds of offenses in the Singapore Report. No basis is provided for justifying that claim to the skeptical reader, who may perhaps be disturbed by the flow of large judgments and regulatory penalties in the U. Given the role of the U. The Japanese Report contained numerous Tables and Figures with detailed data on enforcement actions; illustrative are Tables with data on the number of restraining orders issued and amounts confiscated before prosecution under drug laws and on the number of STR-initiated cases by crime type.

    No effort was made to collect or present any other kind of data. There was no summary assessment of the risks of particular products, sectors or services, merely descriptions of what was currently being done to mitigate risks. It acquired data from experts and subjected them to peer review p. It provided detailed quantitative estimates, showing the components of the final risk assessments. The Canadian NRA also methodically collected and analyzed expert judgment to provide consistent relative risk assessments across sectors.

    Our point here is that if data are to be used at all, more effort needs to be made to ensure that they are reasonably relevant and valid. By mid, neither Japan nor the UK has had its 4thround Mutual Evaluation, scheduled for and respectively. The focus of the comments was on the soundness of the process, rather than on the adequacy of the methodology.

    The Canadian Report was positively assessed in the MER: the estimates of POC were repeated without comment, and the Report para 15 complimented Canada on its judgements of the magnitude of different threats, its distinguishing of foreign from domestic ML threats. The MER also was complimentary that the NRA broke these down by types of crime, asserting that tax evasion and corruption ML were bigger threats than assessed, and that asset recovery is low.

    Otherwise, most of the data discussed were process data of a kind little different from the third round. The U.

    Examples of Money Laundering Investigations - Fiscal Year 2015

    MER made little comment on the data, citing the UNODC estimates without criticism and not using other cost of crime data that were available. In all three cases, there was more material on crime context than in previous evaluations, but the substantial data were about money flows, FIU caseloads, criminal justice and asset recovery, which were not substantially related to the extent of money laundering. Fighting terrorism finance is a goal about which there is little controversy among the major powers, and any countries with reservations about this objective generally remain silent.

    Whether the FATF regime has accomplished much in the fight against terrorism beyond enabling easier tracing of networks of donors and supporters and freezing of modest amounts of assets of banned organizations is disputable [ 51 , 52 ]. However, the political risk of being labeled as supporters of terrorism is great enough that criticism of the CTF regime has been confined to the margins [ 53 ], most recently focused on counter-productive consequences of the threat to the flow of remittances to developing countries with terrorism risks [ 4 ].

    The sanctions regime — an important tool of financial foreign policy - is discussed elsewhere in this volume. We are by no means the first scholars to comment on the failure of the AML system to produce credible evidence of the effectiveness of the system. Jason Sharman [ 2 ] noted that the failure to provide any positive evidence of effectiveness has proven no barrier to the rapid dissemination of the FATF regime to all parts of the globe. His inquiry focused on how the system has diffused in the absence of evidence that it worked.

    Official documents represent an analytic challenge in understanding the system because they include statements that have rhetorical rather than substantive goals. Thus the statement is not to be taken at face value but rather as an exhortation to governments to take AML seriously and to do their bit for the global community. This is perhaps an appropriate goal for a global standard-setting body to set for one of its flagship documents. But once that is conceded, the analyst is left wondering which statements are to be taken at face value.

    Though it is always arguable that scarce operational staff time is displaced to accountability exercises, a global system that thought AML important would find ways of producing more frequent evaluations. It might also revisit the sort of expertise that is brought to these evaluations and whether the benefits from the additional cost of expert assessment systems are outweighed by the possibly greater legitimacy of peer assessments though detailed consideration of such issues lies outside this paper.

    However, data and existing crime data collection efforts exemplify the superficiality of the claims that these are truly evaluations. The Methodology document for the fourth round evaluations makes sensible recommendations about both the nature of the data to be used for evaluation and ways in which they might be analyzed. However, the evidence from early 4 th Round MERs suggests that despite efforts to generate much better FIU and other process data, neither quantitative nor qualitative data on serious criminality have yet found a well-defined place in the evaluation process.

    Data will always require interpretation: Gold and Levi [ 43 ] found that many STRs followed arrests rather than led to them, so simple correlation is not enough. Hong Kong and Singapore - reflect enormous frustration that the inadequately measured huge and growing cost of compliance has so little observable effect and seems highly cost-inefficient. We may expect different targets to have different susceptibilities to partial or complete deterrence by financial interventions. The extent to which Grand Corruption will truly be reduced by anti-PEP measures and ex post facto asset confiscation is an open question [ 55 ]; likewise, after confiscation, some organized criminals may work harder at crime to get back to their earlier wealth or lifestyle expenditures.

    We are not suggesting that the conceptualization and generation of relevant data is at all an easy task but in its absence, claims that countries have less or more effective systems will be open to allegations that judgments about the effectiveness of their AML regimes are merely ad hoc, or impressionistic, or even politicized.

    Such allegations reduce the legitimacy of the evaluations and the institutions being evaluated. We are happy to acknowledge detailed and helpful comments from Steve Dawe, Kuntay Celik, Emile van der Does de Willebois, as well as two anonymous referees and Mark Nance. Horror stories of mistaken identity abound; for example, a Middle Eastern immigrant in the Netherlands was suddenly denied access to his bank account because his very common name was on one of the lists.

    In the aftermath of European court rulings that the rights of the defense were infringed, appeals procedures were instituted in the UNSEC designation process which permitted de-listing. For example, there were FBI press releases referring to money laundering mid See further A. We recognize that this is a narrow view of the concept of financial integrity, but there is little clarity on how we can tell what integrity means or does not mean. In pre-AML days, bankers would have accepted proceeds of crime without being bribed, because they thought taking client deposits was their job!

    See Alldridge [ 10 ] for a principled objection to the widening of the concept. If Costa said this, he confused drugs profits with drugs revenues, which the sum cited more accurately represents. The World Bank is attempting to develop more sophisticated models for the estimation of money laundering at the national level. For an early effort with Colombia see Villa et al. Michel Camdessus, then the Managing Director of the IMF, did not claim that the IMF had produced the estimate but only that such estimates had been made by others: however this refinement has been lost in the subsequent narratives.

    For analogies elsewhere, see the valuable collection edited by Andreas and Greenhill [ 19 ], which deals only very lightly with laundering and fraud. This leads to the aggregation of large amounts of funds deemed unpaid, on which notional interest has to be paid, artificially creating an ever-higher unredeemable attrition rate Home Affairs [ 24 , 25 , 26 ]. It is important to focus on gross revenues because estimating net revenues requires information about what DTOs pay to produce or purchase the drugs, and data are far too poor to permit this.

    One complexity points in the other direction, to under estimates of the demand for money laundering services in the drug trade. Each level of the trade has to deal with total revenues, not just value added, so there is a cascading effect; however that covers only the high levels of the trade and does not include retailing or low level wholesaling.

    In addition to existing mental element requirements, a source of potential variation is the inclusion of currency export violations as a predicate crime in money laundering totals. We are grateful to Peter Alldridge for this point. This section draws on Halliday et al. We focused particular attention to three national MERs Germany, Netherlands and Mauritius for which we were able, with IMF assistance, to obtain interviews with national officials. The extent to which this succeeded in preventing backscratching differed across FSRBs. In addition to open source and specially commissioned studies, there are other official sources of information about money laundering in Brazil and other countries.

    The OECD transnational bribery evaluations also provide information. The Brazilian MER does not neglect the issue of corruption, but perhaps understandably did not focus in it in its criticisms, since most revelations came to light after its MER, as was also the case with scandals involving Cyprus and Panama. Even after having access to individual case files, the analysts were unable to make decisions about one third of the homicides.

    Another effort was made by the UK [ 31 ], which found a small number and proportion of homicides were plausibly organized-crime related, perhaps — in our view — because guns are hard to get in the UK and because shootings receive a very high police priority there. They also indicate that Germany has relatively higher incidence of drug-related crimes, burglaries, embezzlements, and frauds. Crimes against the person are proportionally less prevalent.

    See for example Kleemans et al. See the Netherlands MER [ 39 ]: 24— This includes Suspicious Activity Reports, a term that is often used interchangeably. In many countries, it is unknown how many of these are disseminated or analyzed for investigative purposes. There will be some overlap in the SARs as each reporting institution reports on activities that may be carried out by the same individuals or networks using different institutions. However, except for those jurisdictions that collate all wire transfers or those — like Switzerland — that have relatively few but high value reports, it would be a laborious process to add up the dollar amounts of all reports.

    We note that the Netherlands [ 41 ]: 4 now does so. For an analysis of differences in reporting standards for filing an STR amongst European countries see Ferwerda [ 42 ]. This is likely to be a universal finding unless STRs are quite few or entail automatic freezing, as in Liechtenstein and Switzerland. One experienced assessor noted that the SARs analyses are not central to the actual ratings. Bankers interviewed subsequently commented that the German FIU later complained to them about the deterioration in the average quality and utility of their SARs, which illustrates the counter-productive risks from a focus on numbers.

    For example, the Singapore NRA listed 15 agencies involved in its preparation p. These were updated in In some cases, there are other unpublished versions with classified or confidential information in them. Moreover, in some countries the more detailed version will be in the national language and thus not comprehensible to the evaluation team. The industry makes voluntary efforts. One official challenged this conclusion, arguing that tighter guidelines could not be specified at the global level, given differences among countries in capacity. This is an important point — better no data than invented data — but it does show the limitations of reliance on quantitative evidence.

    For some countries, partial updates are required on specific issues identified in the MER. Skip to main content Skip to sections. Advertisement Hide. Download PDF. Can the AML system be evaluated without better data? Open Access. First Online: 12 December The individual MERs are listed in a separate section of the References. Middleton, D. Let sleeping lawyers lie: Organized crime, lawyers and the regulation of legal services. British Journal of Criminology, 55 4 , — CrossRef Google Scholar. Sharman, J. The money laundry: Regulating criminal finance in the global economy. Ithaca: Cornell University Press.

    Artingstall, D.