APG YEARLY TYPOLOGIES REPORT 2016 Methods and Trends of Money Laundering and Terrorism Financing Asia/Pacific Group on Money Laundering Approved and adopted, 8 September 2016 APG Yearly Typologies Report 2016 Applications for permission to reproduce all or part of this publication should be made to: APG Secretariat Locked Bag A3000 Sydney South New South Wales 1232 AUSTRALIA Tel: +61 2 9277 0600 E Mail: [email protected] Web: www.apgml.org © 8 September 2016/All rights reserved 2 CONTENTS INTRODUCTION ................................................................................................................................................. 4 1. WORKSHOPS AND PROJECTS UNDERTAKEN BY APG IN 2015 - 2016 ......................................... 5 1.1 2015 APG Typologies Workshop ............................................................................................................ 5 1.2 Status of current and possible new typologies projects ............................................................................ 6 2. OVERVIEW OF FATF AND FATF-STYLE REGIONAL BODIES’ TYPOLOGY PROJECTS ........ 7 2.1 FATF Typology Projects .......................................................................................................................... 7 2.2 EAG – Eurasian Group on Combating Money Laundering and Financing of Terrorism ......................... 8 2.3 ESAAMLG – The Eastern and Southern Africa AML Group ................................................................. 8 2.4 MONEYVAL – The Committee of Experts on the Evaluation of Anti-Money Laundering Measures and the Financing of Terrorism ................................................................................................................ 9 2.5 The Egmont Group ................................................................................................................................... 9 3. TRENDS IN MONEY LAUNDERING & TERRORISM FINANCING .............................................. 10 3.1 Research or Studies Undertaken on ML/TF Methods and Trends by APG members and observers ..... 10 3.2 Association of Types of ML or TF with Predicate Activities................................................................. 13 3.3 Emerging Trends; Declining Trends; Continuing Trends ...................................................................... 15 3.4 Criminal knowledge of and response to law enforcement / regulations ................................................. 20 4. CASE STUDIES OF ML AND TF ............................................................................................................... 22 4.1 Association with corruption (corruption facilitating ML or TF) ............................................................ 22 4.2 Laundering proceeds from corruption .................................................................................................... 25 4.3 Abuse of charities for terrorist financing ................................................................................................ 27 4.4 Use of offshore banks and international business companies, offshore trusts ........................................ 28 4.5 Use of virtual currencies ......................................................................................................................... 34 4.6 Use of professional services (lawyers, notaries, accountants) ................................................................ 35 4.7 Trade based money laundering and transfer pricing ............................................................................... 38 4.8 Underground banking/alternative remittance services/hawala ............................................................... 40 4.9 Use of the internet (encryption, access to IDs, international banking, etc.) ........................................... 43 4.10 Use of new payment methods / systems ................................................................................................. 47 4.11 Laundering of proceeds from tax offences ............................................................................................. 51 4.12 Real Estate, including roles of real estate agents .................................................................................... 54 4.13 Association with human trafficking and people smuggling ................................................................... 56 4.14 Use of nominees, trusts, family members or third parties ...................................................................... 57 4.15 Gambling activities (casinos, horse racing, internet gambling etc.) ....................................................... 64 4.16 Mingling (business investment) ............................................................................................................. 66 4.17 Use of shell companies/corporations ...................................................................................................... 68 4.18 Currency exchanges/cash conversion ..................................................................................................... 75 4.19 Currency smuggling (including issues of concealment and security) .................................................... 76 4.20 Use of credit cards, cheques, promissory notes, etc. .............................................................................. 77 4.21 Structuring (smurfing) ............................................................................................................................ 79 4.22 Wire transfers/Use of foreign bank accounts ......................................................................................... 80 4.23 Commodity exchanges (barter – e.g. reinvestment in illicit drugs) ........................................................ 82 4.24 Use of false identification ....................................................................................................................... 83 4.25 Gems and Precious Metals ..................................................................................................................... 83 4.26 Purchase of valuable assets (art works, antiquities, race horses, etc) ..................................................... 85 4.27 Investment in capital markets, use of brokers ........................................................................................ 86 4.28 TF and Foreign fighter ........................................................................................................................... 87 5. INTERNATIONAL COOPERATION & INFORMATION SHARING .................................................................... 90 5.1 Cases of Cooperation between jurisdictions ................................................................................................... 90 6. USEFUL LINKS ......................................................................................................................................... 93 7. ACRONYMS .............................................................................................................................................. 95 3 INTRODUCTION Background 1 The Asia/Pacific Group on Money Laundering (APG) is the regional anti-money laundering/combating the financing of terrorism (AML/CFT) regional body for the Asia/Pacific. The APG produces regional typologies reports on money laundering (ML) and terrorist financing (TF) techniques to assist governments and other AML/CFT stakeholders to better understand the nature of existing and emerging ML and TF threats and pursue effective strategies to address those threats. Typologies studies assist APG members to implement effective strategies to investigate and prosecute ML and TF, as well as design and implement effective preventative measures. When a series of ML or TF arrangements are conducted in a similar manner or using the same methods, they are generally classified as a typology. 2 The APG Yearly Typologies Report is provided for under the APG’s Strategic Plan and the APG Typologies Working Group Terms of Reference and includes observations on ML and TF techniques and methods. These observations are intended to assist with identifying instances of suspicious financial activity in the real world. It is hoped that the case studies and indicators included in this report will assist front-line financial institutions and non-financial businesses and professions (casinos, accountants, lawyers, trust and company service providers, real estate agents, etc.) involved in implementing preventative measures, including customer due diligence and suspicious transaction reporting, to detect and combat ML and TF. 3 Each year APG members and observers provide information on ML and TF cases, trends, research, regulatory action and international cooperation. The information collected not only provides the basis for a case study collection but also for selection and design of in-depth studies on particular typology topics. The information also supports the work of the network of typology experts involved in the APG Typologies Working Group. 4 The case studies featured in this report are only a small slice of the work going on across the Asia/Pacific and other regions to detect and combat ML and TF. Many cases cannot be shared publicly due to their sensitive nature or to ongoing investigative or legal processes. The report contains a selection of illustrative cases of various typologies gathered from APG members’ reports as well as open sources. It should be noted that some of the cases included took