Forms and Methods of Money Laundering Through Banks

Intellectual property, including the fight against money laundering, is always a top priority. The criteria for assessing a country that actively fights against money laundering are that the country must: (i) Recognize and sign international conventions on anti-money laundering; (ii) Have a legal system on anti-money laundering built on FATF recommendations; (iii) Have a specialized organization on anti-money laundering and organize this fight well. Without the above conditions and allowing money laundering activities to develop, that country is not a reliable partner and cannot participate in the world financial market in a comprehensive manner.

1.2.2. Forms and methods of money laundering through banks

Researching money laundering methods and tricks is very useful for bank managers, helping bank managers understand whether their customers have suspicious signs so that they can take timely preventive measures.

Money can be laundered in a number of ways: by depositing small amounts into seemingly ordinary bank accounts (for later transfer); by buying and selling expensive items such as cars, antiques, and jewelry; or by moving them through a series of complex international financial transactions, using sophisticated and flexible methods.

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Money laundering can be considered from three perspectives: Space, behavior and money laundering stages.

In terms of space, methods and tricks of money laundering are shown in 5 cases:

- Case 1: Money sources are laundered and used within the country. This is the money laundering process in which illegal money is collected, laundered and reinvested through the financial system of that country.

- Case 2: The amount of "dirty" money originates domestically, then is transferred abroad to be laundered in other financial systems and finally brought back into circulation in the domestic market.

- Case 3: “Dirty” money is created abroad, laundered there or in another country and finally invested in developing countries.

- Case 4: Money is laundered and withdrawn from the financial system of a developing country for use elsewhere, without being reinvested in that country.

- Case 5: The laundered money is transferred to a developing country, but not for investment but is circulated and consumed everywhere.

Money laundering behaviors, methods and tricks are very diverse, closely linked to loopholes in each country's legal system, especially criminal law, financial and banking laws...

From the practice of preventing and combating money laundering in many countries, we can identify the methods and tricks of money laundering crimes through banks as follows:

- Money laundering through direct cash transactions: This is the traditional and main method of money laundering for criminals. In 1999, a money exchange office in Paris discovered the suspicious behavior of a Frenchman who had briefly exchanged 1.7 million French Francs for German Marks. Investigation results showed that the suspect had connections with a group of drug traffickers in Spain, Germany, and France, and was trying to exchange money for German Marks for consumption.

- Money laundering through the purchase of gold, silver, diamonds ... are lightweight, high-value assets that can be bought and sold anywhere, anytime in the world. This is the most commonly used money laundering method by criminals because it is simple and easy to implement, but is easily detected by investigative agencies.

- Money laundering through investment in savings, buying treasury bills, bonds : Criminals will deposit savings in banks or buy treasury bills, bonds... to keep the money idle for a period of time in accordance with the regulations of each country. After that, the depositor can withdraw all the principal and interest or withdraw a part, turning that money into legal money.

- Money laundering through the “underground” banking system: In some countries, the banking system is inefficient, expensive and bureaucratic. Therefore, in the expatriate community in these countries, there exists an unofficial banking system called “underground” banking. This underground banking system operates and circulates finances like official banks, but with cheaper service costs and more secrecy than legal banks. Underground banks have representatives in many different countries to perform money transfer services from one country to another, or from one city to another within the same country. The operation of this bank is mainly based on trust between the bank and the customer, so the paperwork is simple. Criminals take advantage of the secrecy principle of these banks to deposit money and request to receive it back in another city. The addresses that need to receive laundered money are usually countries that are eager for financial investment, but pay little attention to the origin of the money, payment through banks is not yet a mandatory and common requirement, the legal system on preventing and combating money laundering is not strict...

The process of money laundering through the banking system is similar to the money laundering process described above.

1.2.3. Main tools to combat money laundering through banks

In order to prevent the enormous harm caused by the exploitation of the banking system for money laundering, countries often implement the following anti-money laundering tools:

1.2.3.1. Promulgate laws and regulations related to anti-money laundering.

Currently, most developed countries have enacted anti-money laundering laws. The time of enactment of the law in each country is different, depending on the scale and level of harm caused by money laundering to that country. However, anti-money laundering laws in countries have some common characteristics, such as: Always aiming to comply with FATF recommendations; listing all crimes

related to money laundering; requiring credit institutions to implement customer identification rules; regulating the level of transactions to be reported; signs of suspicious transactions; responsibilities and powers of specialized agencies in charge of preventing and combating money laundering.

1.2.3.2. Establish a specialized agency for anti-money laundering.

Most countries have established a specialized agency to prevent and combat money laundering. The task of this agency is to monitor the implementation of anti-money laundering laws.

There are two basic operating models:

- The first model , the anti-money laundering agency is a unit under the government apparatus, usually under the central bank, assisting the government in implementing anti-money laundering work. In addition to performing the function of supervising the implementation of anti-money laundering laws, this agency also performs the function of collecting information from credit institutions, processing suspicious transaction reports and proposing measures related to anti-money laundering work.

- The second model , the anti-money laundering agency is a unit that is completely independent of the government apparatus, not subject to the control of any unit in the government apparatus. It has broader powers, functions, and scope of operations. The outstanding advantage of this model is to ensure independence and objectivity in money laundering investigations.

1.2.3.3. Establish anti-money laundering procedures at commercial banks; attach importance to customer assessment and risk classification.

In general, commercial banks consider customer evaluation and classification as the top priority. Customer evaluation and classification is of decisive importance, because through this, commercial banks will have appropriate risk management measures. Normally, commercial banks in the world often divide customers into 3 categories as follows:

- High-risk customers: Regular and mandatory monitoring and investigation of customer information.

- Medium risk customers: Check, monitor at normal level and find out customer information when requested.

- Low risk customers: Monitoring is simple and only requires routine customer information.

1.2.3.4. Control suspicious transactions

Suspicious transactions are transactions with unusual signs, related to money laundering, specifically regulated in legal documents of each country. Some countries in the world such as the US, Japan, UK ... consider unusual signs based on the value level (threshold) of the regulated transactions (usually transactions with a value exceeding 10,000 USD or equivalent will be on the list of transactions that need to be noted and reported). However, in some other countries, attention is paid to transactions with unusual signs through the nature, characteristics of the transaction, customer information ... without paying too much attention to the transaction value, a typical case of this is Malaysia.

When suspicious transactions are detected, the responsible bank staff will handle them and report to superiors for review. After verifying the authenticity of customer information, the bank will decide to transfer suspicious transaction information to the Anti-Money Laundering Agency. For this to be done well, banks must be guided to develop a process for reporting suspicious transaction information, while still ensuring the principle of customer information confidentiality.

1.2.3.5. Keeping customer records

Commercial banks strictly maintain records and information about customers. Information about customer identification and transaction information is kept for a minimum period of 5 years or longer according to regulations.

requests from authorities, especially records related to investigation and prosecution. According to the Anti-Money Laundering Act of Malaysia, the retention period for customer records is 6 years, if not involved in any other cases.

1.2.3.6. Comply with FATF recommendations and implement international cooperation on anti-money laundering.

Nowadays, money laundering is not only carried out within a country but can also be carried out from one country to another. Therefore, the work of preventing and combating money laundering requires cooperation between countries in exchanging information and experience.

1.1.4. International experience in anti-money laundering

Currently, there are many countries in the world with good anti-money laundering systems. To learn about international experience in anti-money laundering, I chose the US and China because the US can be considered the country with the most comprehensive and strict anti-money laundering legal system in the world, all financial institutions and employees must comply, and China is a country with many similarities with Vietnam in the organization of the anti-money laundering agency.

1.1.4.1 American experience

The United States can be considered the country with the most comprehensive and strict anti-money laundering legal system in the world, which all financial institutions and employees must comply with.

One of the most important laws related to anti-money laundering is the Bank Secrecy Act (BSA) of 1970 and its regulations. The purpose of the BSA is to create a legal document that facilitates the investigation of money laundering, tax evasion, etc. by requiring financial institutions to keep records related to transactions over $10,000. Then

The amended law allows the Government and relevant agencies to lower the $10,000 standard in cases where investigation is deemed necessary.

Some other important laws in preventing and combating money laundering in the US include the Comprehensive Crime Control Act of 1984, the Money Laundering Control Act of 1986, the Anti-Drug Trafficking Act of 1988, and the Annunzio Anti-Money Laundering Act.

– Wylie in 1992. The US Money Laundering Control Act of 1986 marked a major turning point in the fight against money laundering, from then on money laundering was considered a criminal act, instead of just one element of an entire crime as before. Next, the Money Laundering Prevention Act of 1994 required banks to establish task forces to eliminate suspicious activities in their organizations. The Patriot Act of 2001 established mandatory identity checks for customers of US banks, providing resources to monitor transactions in the underground banking system that terrorists often use. In addition, law enforcement forces also increased their actions. Anti-money laundering laws and regulations in the US are always supplemented and amended to suit changes in money laundering crimes.

The US Anti-Money Laundering Act imposes obligations on all entities, from individuals to organizations, when they are found to be involved in any money laundering activity and is the basis for the seizure and forfeiture of money and assets related to money laundering activities. Failure to comply with the rules and regulations related to anti-money laundering activities by employees of credit institutions can result in civil and criminal penalties. On the civil side, bank employees can be fined up to $100,000 for willfully violating the BSA's reporting and recordkeeping requirements. On the criminal side, violators can be fined up to $250,000, imprisoned for 5 years, or both.

The US agency responsible for anti-money laundering is the Department of Treasury. This agency is responsible for enforcement.

works to combat all aspects of money laundering, both domestically and internationally, through the work of the Office of Terrorism and Financial Intelligence (TFI). TFI uses resources that include a diverse range of law enforcement agencies, financial experts, operational resources and extensive relationships with the private sector, inter-agency agencies and international organizations to identify and attack money laundering vulnerabilities and networks in the domestic and international financial system.

The most important unit within TFI is the Financial Crimes Enforcement Network (FinCEN). FinCEN is organized as a bureau-like unit within TFI within the U.S. Department of the Treasury. The Director of FinCEN is appointed by the U.S. Secretary of the Treasury and reports directly to the Under Secretary for Terrorism and Financial Intelligence of the Treasury. FinCEN's primary mission is to enhance the integrity of the financial system by facilitating the detection and prevention of financial crimes. FinCEN accomplishes this mission by acquiring and maintaining financial transaction data, analyzing and disseminating that data for law enforcement purposes, and building global cooperation with partner organizations in other countries and with international agencies. FinCEN is authorized by the U.S. Congress to perform the following responsibilities:

- Support and enforce the provisions of law on anti-money laundering and terrorist financing;

- Support, synthesize and analyze data related to compliance inspection functions of other state management agencies;

- Manage the collection, processing, storage, dissemination, and protection of data submitted pursuant to FinCEN reporting requirements;