CHAPTER 9 Funding the Bad Guys—Winning the AML Battle

From a societal perspective, the risk of terrorist networks and drug traffickers utilizing the regulated financial system to launder money is likely the most important one faced by banks. Experts estimate that billions of dollars flow through the banking system from such sources every year, and thousands suffer as a result of the guns and drugs that the money buys. Large penalties and sanctions have been imposed on several of the largest banks for failures in this area.1 In this chapter we trace the origins of anti–money laundering (AML) regulations, why they have not always worked as intended, and what can still be done to address these failures.

Modern Practices of Money Launderers and Undetected Cash Movers

A tremendous amount of money is moved around the world every year that is not part of the official flows of money. Such transactions take place through a number of ways, all of which are outlawed by various rules and regulations from tax to the US Office of Foreign Assets Control (OFAC) sanctions to anti–money laundering. If you are looking for why these transactions continue to take place, despite all the systems of controls put in place by regulators to prevent them, there is one reason: because someone wants these transactions to take place very badly. So badly that they will develop new types of schemes to make them happen.

Two examples have been covered extensively, but it is worthwhile describing them ...

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