CAFCA
What is financial crime? - answer Illegal activities that are usually economically
motivated
Examples include money laundering, terrorist financing, and tax evasion.
What is the impact of financial crime? - answer Certain countries are more prone to
financial crimes
Impact of crime has increased globally
Threatens financial systems and economies
Money Laundering - answer Engaging in financial transactions to conceal the identity,
source, or destination of illegally gained funds.
"The process of making illegal funds appear legitimate"
Three stages of Money Laundering - answer1. Placement
2. Layering
3. Integration
What is placement? - answerPutting "dirty money" into the financial system
What is Layering? - answerConcealing the origin of the "dirty money"
What is integration? - answerUsing the "dirty money" in the legitimate economy
Terrorist Financing - answerTerrorist financing (proceeds for crime)
provides funds for terrorist activity.
Can be legal and/or illegal activity
Sanctions - answerForeign policy and security tool
Target individuals, organizations, jurisdictions, vessels
Main types: Financial, economic, trade
What are the features of fraud? - answerAn intentional act of criminal deception in order
to obtain an unjust advantage
, Results in financial or personal gain
Can be committed by one or more individuals
What are the three reasons someone commits fraud? - answerReferred to as the Fraud
Triangle
Pressure
Opportunity
Rationalization
Tax avoidance vs tax evasion - answerTax avoidance uses legal practices to reduce
taxes owed
Tax evasion uses illegal practices to evade paying taxes owed
Tax evasion includes hiding taxable assets from the authorities
Panama Papers (Case example) - answerA classic example of the use of shell
companies to conceal customer wealth
Millions of secret documents were leaked to the press
Over 200,000 shell companies set up by law firm in Panama
What is a negative impact of financial crime? - answerFinancial crime jeopardizes the
soundness of financial institutions
What is the primary purpose of money laundering? - answerTo make criminally derived
property or funds appear to be legitimate
What is a feature of terrorist financing - answerThe money is not necessarily derived
from illicit proceeds
What is a red flag of fraud? - answerA sense of urgency and pressure to act
immediately is a common red flag of fraud.
True or False: Some industries are at higher risk for bribery than others, especially
those in which commercial success is driven by getting approval, authority, or contracts
from government entities. - answerTrue
What is sign of a jurisdiction that facilitates tax evasion? - answerThey levy low or
minimal taxation on the income of non-residents, and provide tax advantages to non-
residents
What is an example of higher risk? - answerCustomer: Non-resident, complex owner
Jurisdiction: Low regulation, tax haven
Product: Prepaid card, private banking
Channel: No direct relationship with customer
What is financial crime? - answer Illegal activities that are usually economically
motivated
Examples include money laundering, terrorist financing, and tax evasion.
What is the impact of financial crime? - answer Certain countries are more prone to
financial crimes
Impact of crime has increased globally
Threatens financial systems and economies
Money Laundering - answer Engaging in financial transactions to conceal the identity,
source, or destination of illegally gained funds.
"The process of making illegal funds appear legitimate"
Three stages of Money Laundering - answer1. Placement
2. Layering
3. Integration
What is placement? - answerPutting "dirty money" into the financial system
What is Layering? - answerConcealing the origin of the "dirty money"
What is integration? - answerUsing the "dirty money" in the legitimate economy
Terrorist Financing - answerTerrorist financing (proceeds for crime)
provides funds for terrorist activity.
Can be legal and/or illegal activity
Sanctions - answerForeign policy and security tool
Target individuals, organizations, jurisdictions, vessels
Main types: Financial, economic, trade
What are the features of fraud? - answerAn intentional act of criminal deception in order
to obtain an unjust advantage
, Results in financial or personal gain
Can be committed by one or more individuals
What are the three reasons someone commits fraud? - answerReferred to as the Fraud
Triangle
Pressure
Opportunity
Rationalization
Tax avoidance vs tax evasion - answerTax avoidance uses legal practices to reduce
taxes owed
Tax evasion uses illegal practices to evade paying taxes owed
Tax evasion includes hiding taxable assets from the authorities
Panama Papers (Case example) - answerA classic example of the use of shell
companies to conceal customer wealth
Millions of secret documents were leaked to the press
Over 200,000 shell companies set up by law firm in Panama
What is a negative impact of financial crime? - answerFinancial crime jeopardizes the
soundness of financial institutions
What is the primary purpose of money laundering? - answerTo make criminally derived
property or funds appear to be legitimate
What is a feature of terrorist financing - answerThe money is not necessarily derived
from illicit proceeds
What is a red flag of fraud? - answerA sense of urgency and pressure to act
immediately is a common red flag of fraud.
True or False: Some industries are at higher risk for bribery than others, especially
those in which commercial success is driven by getting approval, authority, or contracts
from government entities. - answerTrue
What is sign of a jurisdiction that facilitates tax evasion? - answerThey levy low or
minimal taxation on the income of non-residents, and provide tax advantages to non-
residents
What is an example of higher risk? - answerCustomer: Non-resident, complex owner
Jurisdiction: Low regulation, tax haven
Product: Prepaid card, private banking
Channel: No direct relationship with customer
