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FATF Report: Professional Money Laundering and Related Threats

The Financial Action Task Force (“FATF”) recently released a special report on professional money launderers (“PMLs”) who provide money laundering expertise and services to their crime-committing clients. The Report describes the functions and characteristics of a PML and the services they provide. Although the FATF has issued many reports on potential vulnerabilities in anti-money laundering efforts, this Report focuses on the affirmative threats posed by money laundering regimes.

The Report is primarily descriptive, and contains examples of enforcement actions involving PMLs across the globe. A non-public version of the Report, available to Members of the FATF and the FATF Global Network, sets forth practical recommendations for the detection, investigation, prosecution, and prevention of PML-related laundering, including “appropriate regulation,” law enforcement coordination, and international co-operation and information exchange. Presumably, the Report will provide additional fuel to efforts across the world to close perceived regulatory gaps involving the collection of beneficial ownership information, and the potential role of professionals, including lawyers, in assisting others to launder illicit funds.

Who is a Professional Money Launderer (“PML”)?

A PML is an individual, organization, or network (allegedly like these folks) that knowingly – rather than passively or unwittingly – provides third‑party money laundering services to the direct earners of illicit proceeds in exchange for a commission, fee, or other type of profit. PMLs use some specialized knowledge to help move the money to a safe place for their clients. Notably, individual PMLs usually have a legitimate professional background which they leverage in creating distance between the criminal activity generating the funds and the funds themselves.

The Report describes how PMLs set their fee structure (which the Report assumes is set by the PML and not under Ozark-esque circumstances), advertise their services, and keep financial accounting records.

What Services Do PMLs Provide?

PMLs have various levels of involvement in the laundering process. Some act more as consultants; others handle discrete, specialized services like providing false documentation or setting up sham companies. Recognizing that the individual PMLs may perform a unique function or perform several roles simultaneously, the Report recognizes the following, non-exhaustive list of functions performed by a given PML:

  • Leading and controlling the direction of the money laundering activities;
  • Introducing and promoting PMLs to prospective clients;
  • Establishing, managing, and maintaining a money laundering infrastructure;
  • Managing documentation necessary to facilitate the laundering process;
  • Transporting goods;
  • Investing or purchasing assets;
  • Collecting illicit funds; and
  • Transmitting illicit funds.

The Report provided the following illustration to demonstrate the typical business model of a PML organization or network:

The Report goes into greater detail about each of these three stages, but we note here that virtual currency has joined the ranks of cash and bank accounts as the forms in which criminal proceeds are generated. This comes as no surprise to our readers, as we recently blogged about an unlicensed bit coin exchange operator nabbed for attempted money laundering.

Complicit, if not Criminal, Professional Service Providers

Although we typically report on financial institutions paying the price for allegedly failing to prevent money laundering, this Report singles out certain professionals as being active in the PML industry. Naturally, this includes bankers (and their places of business), financial advisers, money value transfer services (MVTS) providers, lawyers, accountants, trust and company service providers, and real estate professionals (recent targets of FinCEN). The Report notes that “[t]he use of occupational professionals can provide a veneer of legitimacy to criminals” and organized crime groups.

Top Secret: The Non-Public Version of the Report

The Report indicates that a “non-public version” is available to members of the FATF and FATF Global Network upon request. The non-public version provides practical recommendations for the detection, investigation, prosecution, and prevention of money laundering. According to the Report’s Executive Summary, the non-public version emphasizes the following:

Combatting these adaptable PMLs requires concerted law enforcement and supervisory action at the national level, appropriate regulation and effective international co-operation and information exchange. This report emphasises the need for a more co-ordinated operational focus on this issue at a national level, and the importance of effective information sharing between authorities at an international level. The report also identifies the information and intelligence required to successfully identify, map, and investigate PMLs, with the objective of disrupting and dismantling those involved in PML and their criminal clientele.

Copyright © by Ballard Spahr LLP

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About this Author

Juliana Carter, Litigator, Civil, Criminal Disputes, Philadelphia, Ballard Spahr Law Firm
Associate

Juliana B. Carter is an associate in the Litigation Department. Ms. Carter has trial experience with a range of civil and criminal disputes. She has also defended clients in tort litigation and arbitration proceedings.

Ms. Carter completed internships in the offices of the Philadelphia District Attorney, the Education Law Center of Pennsylvania, and the Southeastern Pennsylvania Transportation Authority (SEPTA). Ms. Carter was also appointed a mediator within the Philadelphia Municipal Court, helping to facilitate the settlement of small-claims and landlord-tenant disputes between...

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