Money laundering and terrorist financing !

Money laundering and terrorist financing are global problems that threaten the integrity of financial systems and the security of our societies. Many measures have been taken around the world to combat these illicit activities. In this article, we will look in detail at the various stages of money laundering and terrorist financing, as well as the professional obligations to which financial sector actors are subject. Understanding these processes and knowing the legal requirements is essential to effectively combat these criminal practices.

Money laundering:

Money laundering is the process of converting funds from criminal activities into legal money by disguising their illegal origin. It consists of several key steps:

Placement/opening of a bank account: The first step is to place the money in the financial system by opening bank accounts. This allows criminals to give their illicit funds the appearance of legitimacy.
Layering / Dissimulation: At this stage, funds are moved and circulated between different financial institutions in order to disguise their criminal origin. This stage involves complex transactions and movements of funds in order to cover their tracks.
Integration: This is the final stage of money laundering. Funds are reintroduced into the legal economy by investing in bank securities, buying property or making other legitimate purchases. These activities give the laundered funds a veneer of legality.

Terrorist financing:

Terrorist financing is the reverse process of money laundering, where legal or illegal financial assets are used to support criminal or terrorist activities. It also has three stages:

Placement: Financial assets are placed into the financial system, whether the money is from legitimate or illegitimate activities. The purpose of this step is to introduce funds into the system to finance criminal or terrorist activities.
Layering / Dissimulation: At this stage, funds are transferred between different financial institutions in order to disguise their origin and make them difficult to trace. Terrorists often use sophisticated techniques to avoid detection.
Distribution: The funds are then distributed to finance criminal or terrorist activities. This can include the payment of salaries, the purchase of weapons, logistical support, etc. The aim is to make the money available to terrorist groups.

Professional obligations to combat money laundering and terrorist financing

Professionals in the financial sector, such as banks, real estate agents, notaries and lawyers, have strict legal obligations to prevent and detect money laundering and terrorist financing activities. Here are some of these obligations:

Due diligence measures:

Identify the customer and verify their identity at first contact.
Identify the beneficial owner, i.e. the natural person who owns or controls a legal entity.
Checking names against watch lists to assess the risk associated with customers, transactions and services.
Maintain constant vigilance throughout the relationship.
Maintain documentation relating to customer identification and transactions.

Client identification:

The Know Your Customer (KYC) principle requires professionals to gather information about the client, his activities, the purpose of the proposed transaction and the economic and geographical origin of the funds.
For individual clients, documents such as an identity card, passport, photograph, signature and recent proof of residence are required.
For corporate customers, triple identification is required, including the company's articles of association, a recent extract from the Trade and Companies Register (RCS), and verification of the signing authority and legal status of the legal entity.

Screening names with watch lists: Professionals should assess the risk associated with their clients using criteria such as geography, the clients themselves and the transactions/services. Particular attention should be paid to politically exposed persons (PEPs), such as heads of state, ministers, ambassadors, parliamentarians, military officers, politicians and their immediate family members. Appropriate procedures must be in place to determine whether a customer is a PEP and to obtain line authority before entering into a business relationship.
Ongoing vigilance and documentation: It is essential to maintain constant vigilance and regularly update customer information based on the project and the risk involved. In addition, documents related to money laundering must be retained for at least 5 years, while business documents must be retained for 10 years.
Appropriate internal organization: It is essential to establish an adequate internal organization to combat money laundering and terrorist financing. This includes the appointment of a control officer, the awareness and training of employees, the implementation of specific continuous training programs, the adoption of appropriate recruitment procedures and the prevention of the misuse of new technologies.
Cooperation with the authorities: Professionals must actively cooperate with the relevant anti-money laundering authorities. This includes immediately and voluntarily informing the authorities of any suspicions and providing all necessary information without delay. It is also important not to disclose to the client or third parties that a report has been made.

The fight against money laundering and terrorist financing is a major concern in the financial sector. The stages of money laundering and terrorist financing, as well as professional obligations, must be fully understood and followed in order to prevent and detect these criminal activities. By complying with these obligations, financial sector participants help to maintain the integrity of financial systems and keep our societies safe.

Questions and Answers

What is money laundering?

a) The diversion of legitimate funds to criminal activities.
b) The reuse of criminal proceeds to disguise their illegal origin.
c) The laundering of food.
d) The use of capital for legitimate investment.

Answer: b) The recycling of criminal proceeds to disguise their illegal origin

What is money laundering?

a) The process of cleaning up dirty money.
b) The conversion of foreign currency into local currency.
c) The redistribution of funds within financial institutions.
d) The recycling of money from criminal activities.

Answer: d) The recycling of money from criminal activities

Which stage of money laundering involves opening a bank account?

a) Placing.
b) Layering.
c) Integration.
d) Distribution.

Answer: a) Placement.

What is the stage of money laundering in which money is moved to disguise its origin?

a) Placing.
b) Layering.
c) Integration.
d) Distribution.

Answer: b) Layering.

Which stage of money laundering involves buying bank securities, investing in property and making legitimate purchases?

a) Investment.
b) Layering.
c) Integration.
d) Distribution.

Answer: c) Integration.

Which stage of terrorist financing involves the placement of assets in the financial system?

a) Placement.
b) Layering.
c) Integration.
d) Distribution.

Answer: a) Placement.

At what stage of terrorist financing are funds transferred through several institutions in order to conceal their origin?

a) Placing.
b) Layering.
c) Integration.
d) Distribution.

Answer: b) Layering.

Which stage of terrorist financing involves the distribution of funds to finance criminal or terrorist activities?

a) Placing.
b) Layering.
c) Integration.
d) Distribution.

Answer: d) Distribution.

What is a primary offense in money laundering?

a) A first offense.
b) An offense that does not involve money laundering.
c) A minor offense.
d) An offense that involves money.

Answer: d) An offense that involves money.

Which professionals are affected by the sanctions for money laundering?

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a) Bankers.
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b) Estate agents.
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c) Notaries.
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d) All of the above.
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Answer: d) All of the above.

What is the maximum fine for money laundering in Luxembourg?

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a) 1250 €.
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b) 1 250 000 €.
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c) 1 350 000 €.
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d) 1 250 000 € and/or 135 years in prison.

Answer: b) 1 250 000 €.

What is the maximum penalty for money laundering in Luxembourg?

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a) 2 500 000 €.
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b) 10 years in prison.
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c) €2,500,000 and/or 10 years imprisonment.

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d) €1,250,000 and/or 10 years imprisonment.
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Answer: c) €2,500,000 and/or 10 years in prison.

What is the maximum amount that can be paid in cash in Luxembourg?

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a) 5 000 €.
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b) 10 000 €.
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c) 50 000 €.
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d) No limit.
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Answer: b) 10 000 €.

What is the name of the circular governing professional obligations in the fight against money laundering in Luxembourg?

a) AED Circular No. 764 of 29 April 2013.

b) BCL circular n°567 of 15 June 2015.

c) CSSF circular n°18/686 of 26 September 2018.

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d) CRF Circular N°2012/05 dated 10 May 2012.
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Answer: a) AED Circular N°764 dated 29 April 2013.

What is the first due diligence measure in the fight against money laundering?

a) Identifying the customer and verifying his identity.

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b) Checking names against watch lists.
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c) Constant monitoring of the business relationship.

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d) The obligation to keep records.
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Answer: a) Identifying and verifying the identity of the customer.

What is the triple identification required for legal entity customers?

a) Company, agent and power of attorney.

b) Company, beneficial owner and authorized representative.

c) Beneficial owner, authorized representative and power of attorney.

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d) Beneficial owner, company and authorized representative.
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Answer: b) Company, beneficial owner and authorized representative.

What are the key risk assessment criteria for screening names with watch lists?

a) Geographies / customers / transactions / services.

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b) Transactions/Durations/Countries.
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c) Levels / documents / transactions.
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d) Amounts/people/activities.
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Answer: a) Geographies / customers / transactions / services.

Which individuals are considered high risk on the list of Politically Exposed Persons (PEPs)?

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a) All serving politicians.
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b) Immediate family members of politicians.

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c) Officers in the armed forces.
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d) All of the above.
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Answer: d) All of the above.

What should professionals do before entering into a business relationship with a politically exposed person (PEP)?

a) Have appropriate procedures in place to determine PEP status.

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b) Obtain senior management approval.
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c) Determine the source of the assets and funds involved in the transaction.

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d) All of the above.
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Answer: d) All of the above.

How do you report suspicious money laundering activity?

a) By immediately and voluntarily informing the relevant authorities.

b) By providing any information requested by the relevant authorities.

c) By keeping the report confidential from the customer and third parties.

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d) All of the above.
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Answer: d) All of the above.