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Guide to the Prevention of Money Laundering

NCJ Number
Date Published
This guide is designed to explain money laundering legislation to those unfamiliar with it; although intended primarily for banks, the guide is also applicable to other financial institutions.
The guide advises that money laundering statutes have broad scope, such that banks and financial institutions have the duty to "know their clients" and to avoid transactions that may assist clients in disguising and concealing the sources of their money. Section 1 of the guide provides an overview of money laundering, its definition, risks, and techniques. Money laundering is defined as "making funds used in, or resulting from, criminal activity appear to be legitimate." The three stages of money laundering techniques are described: placement (moving cash into the financial system); layering (constructing financial transactions to make the audit trail difficult to follow); and integration (giving the laundered funds the appearance of legitimacy by making them difficult to distinguish from legitimate wealth. Section 2 sets out a framework for self-protection, based on best practice procedures, knowledge of business clients and counterparties, and self-analysis using the Compliance Chain Analysis methodology. Section 3 contains case studies that illustrate the issues and procedures raised in the text. Appended supplementary materials