1. Anti-Money Laundering
This presentation designed for:
Polar Investment Counsel, Inc.
Firm Element Continuing Education Program
Created By: Sherry’s Web Services LLC
Copyright © 2005

2. Money Laundering Overview
Money laundering is the process by which one conceals the existence, illegal source, or illegal application of income
Not only a crime to participate, but also to be “willfully blind”
U.S. vs. Heyman
Current legislation- USA PATRIOT Act
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3. Detecting Money Laundering
Be aware of “red flags”
Types of red flags:
Customer Clues
Investing Strategy
Money Movement
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4. Customer Clues
Exhibits unusual concern about government reporting requirements
Provides false or misleading information about source of funds
Questionable background
Seems unconcerned about risks or costs
Agent for another customer, but reluctant to provide information
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5. Customer Clues… Continued
Lacks knowledge of their industry
Is from a non-cooperative country
Requests transactions to be processed to avoid tax reporting
Maintains multiple accounts for no apparent reason
Inflow of funds well beyond known income
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6. Investing Activity Clues
Transactions lack business sense
Purchases long-term investment, then immediately liquidates position and transfers funds
Engages in transactions involving certain types of securities (penny stocks, Reg S stocks, bearer bonds)
High level of account activity, yet very few securities transactions
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7. Cash Activity Clues Insists on dealing in cash equivalents
Transactions are structured to avoid $10,000 government reporting requirement
Multiple accounts with a large number of inter-account or third party transfers
Unexplained or sudden extensive wires
Numerous cashiers check transactions
Large number of wires to unrelated third parties
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8. Cash Activity Clues... Continued
Wires to or from a country identified as a money laundering risk
Large or frequent wires immediately withdrawn by check or debit card
Deposit immediately followed by wiring funds to a third party
Excessive journal entries between unrelated accounts without an apparent purpose
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9. Preventing Money Laundering-Your Role
You are expected to make a reasonable effort to prevent and detect money laundering
Identify customers using Customer Identification Procedures
Know your customer
Review Anti-Money Laundering reports
Be aware of red flags
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10. Know Your Customer
Consider the following factors when assessing the risk posed by a customer:
Type of customer (Ex: individual, corporation)
How long the customer has been with your firm
How the client became a customer of your firm
The type of business the customer has
The customer’s home country, current residence, or country the customer is incorporated in
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11. Know Your Customer… Continued
Depending on the risk imposed, additional due diligence may be required:
Source of the customer’s assets and income
Customer’s likely trading pattern
Owners of accounts and their respective citizenship
Require street addresses for all accounts
Periodically contact businesses to verify the accuracy of addresses
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12. Anti-Money Laundering Reports
CSS Report Distribution
Anti-Money Laundering Reports by Entity
Anti-Money Laundering No Physical Address
Anti-Money Laundering High Risk Jurisdiction
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