Combating Money Laundering Anil Mathur Merrill Lynch Canada June 2005

2 Agenda The Money Laundering Problem The Money Laundering Problem Regulatory Requirements Regulatory Requirements What Organizations Are Doing About It What Organizations Are Doing About It  Procedures, Roles, Responsibilities  How Information Professionals Can Help  Technology Q&A Q&A

3 Merrill Lynch 35 countries 35 countries Retail and institutional Retail and institutional Diverse financial institution Diverse financial institution  Personal financial planning  Investment banking and advisory services  Trading – equities, debt, commodities  Banking and lending  Insurance  Research

4 The Money Laundering Problem What is money laundering anyway? What is money laundering anyway? “Any act or attempted act to disguise the source of money or assets derived from criminal activity” – United Nations How big a problem? How big a problem?  2 to 5% of world GDP or up to US$1.5 trillion - IMF Why should it concern me? Why should it concern me?  Allows organized crime and terrorists to profit from (or help finance) their activities  Legal obligation

5 The Money Laundering Problem (cont’d) Penalties Penalties  In Canada – 5 years imprisonment, fine $2 million or both Legally liable for - Legally liable for -  Willful ignorance of source of client assets or nature of client transactions  Failing to report suspected money laundering transactions

6 The Money Laundering Problem (cont’d) Money Laundering involves only cash transactions Money Laundering involves only cash transactions Three stages  Placement  Layering  Integration

7 The Money Laundering Problem (cont’d) Money Laundering is a concern not only for Financial Institutions but also other types of organizations Money Laundering is a concern not only for Financial Institutions but also other types of organizations Regulatory obligations cover – Regulatory obligations cover –  Insurance  Casinos  Real estate brokers  Accountants

8 Regulation Regulatory overview Regulatory overview  Procedures covering “Know Your Customer” (KYC) “Know Your Customer” (KYC) Record keeping and reporting of suspicious transactions Record keeping and reporting of suspicious transactions  Independent Review  Establishment of “Watch Lists”

9 What Organizations Are Doing Ownership Ownership Procedures Procedures  KYC New Accounts New Accounts Monitor against regulatory watch lists Monitor against regulatory watch lists Surveillance of account activity Surveillance of account activity Escalation of suspicious transactions Escalation of suspicious transactions  Record keeping

10 What Organizations Are Doing (cont’d) Training Training  Initial  Ongoing Independent Review Independent Review

11 Final Thoughts Role of Information Professional Role of Information Professional  Research Additional Resources Additional Resources

12 Combating Money Laundering Questions?