FORT LAUDERDALE, Fla. (11/18/15)--Cash for gold, virtual currencies and nonprofit charity abuse have emerged in the last year to become some of the top threats to anti-money laundering/combating the financing of terrorism (AML/CFT) efforts worldwide.
Michael Edwards, vice president/general counsel of the World Council of Credit Unions, informed attendees of these developments Tuesday at the CUNA/National Association of State Credit Union Supervisors Bank Secrecy Act (BSA) Conference.
U.S. BSA rules are primarily based on the Financial Action Task Force (FATF) AML/CFT regulations. Based in Paris, the FATF uses a risk-based approach that pushes institutions to identify, assess and understand money laundering/financing of terrorism (ML/TF) risks and take appropriate actions to mitigate them.
Gold’s high value, low volume and anonymous nature makes cash-for-gold businesses attractive to organized crime to launder its illicit proceeds, Edwards said. Cash is exchanged for scrap gold purchased from consumers, usually at well-below market value.
Red flags include:
Nonprofit abuse involves using charities that are ostensibly for good causes in high-risk locations such as Syria, Somalia and Pakistan, but are actually funding mechanisms for terrorist organizations.
Edwards gave two examples of charities that claimed to be raising funds for “orphans” or “charity,” but instead went to help the families of fallen terrorists, fund jihadist propaganda and other unsavory activities.
The U.S. Department of the Treasury’s Office of Foreign Assets Control has released a risk matrix document to consult in questionable situations.
When it comes to virtual currencies, the Treasury’s Financial Crimes Enforcement Network (FinCEN) released guidance in March 2013 that states:
According to FinCEN, an administrator or exchanger that either accepts and transmits a convertible virtual currency or buys or sells convertible virtual currency for any reason is a money transmitter under FinCEN's regulations.
In the United States, exchangers and administrators must register with FinCEN and follow BSA “Know Your Customer” record keeping and recording requirements.
Under FATF regulations, exchangers and administrators are defined as financial institutions subject to BSA compliance requirements.
(Editor’s note: For more coverage of CUNA’s BSA Compliance Conference, see the following stories in today’s issue: BSA Conference: Trafficking survivor hails compliance staff ‘crime fighters;’ BSA Conference: Prepaid cards, mobile wallet use growing fast; BSA Conference: Serving cash-intensive biz means more due diligence.)