CSI COMPLIANCE AWARENESS TRAINING

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CSI COMPLIANCE AWARENESS TRAINING
Confidential Sample Attachment For Reference Only

• ANTI MONEY LAUNDERING

July 2004
This is confidential proprietary and trade secret
information of American Express Travel Related
Services Company, Inc.
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Objectives of todays session
To raise your understanding of

• What money laundering is

• How the card merchant business could be used

• The obligations on American Express and you
  personally

• The red flags for the business

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Question

• What is Money Laundering?

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Money Laundering is.

• The process by which the proceeds of criminal
  activity are moved through the financial system
  in order to hide all traces of their criminal
  origin.
• Definition from American Express General
  Management Policy 23 July 2002

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Question

• How much money do you think is laundered each
  year worldwide?

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The United Nations Office of Drug Control and
Crime Prevention estimate

• World-wide more than 500 billion is laundered
  annually.

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Question

• What crimes do you think are covered by money
  laundering laws?

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Crimes covered by Money Laundering laws include..

• Smuggling

• Drug related crimes

• Fraud

• Terrorism

• Prostitution

• Tax Evasion

• Public Corruption

• Extortion

• Robbery

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Money Laundering and Terrorist Financing

• Terrorist financing shares most of the
  fundamental attributes of money laundering (e.g.
  fundraising funds transfer) but the primary
  motivation for terrorism is not financial.

• The source of the funds may be legal but the
  objective is criminal.

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The three stages of the Money Laundering process

• Placement
• The physical placement of cash into the financial
  system.

• Layering
• Creating complex layers of financial transactions
  in order to hide the true source.

• Integration
• Putting the laundered funds back into the economy
  in such a way that they re-enter the financial
  system as legitimate funds.

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A Typical Money Laundering Cycle
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Anti Money Laundering Laws and Regulations

• Internationally, money laundering legislation has
  been enacted and is in place.

• Since events of September 11 2001, money
  laundering has an increased focus.

• Evolving legislation continues to place
  additional regulatory and legal requirements upon
  us.

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USA PATRIOT ACT
USA Patriot Act

• This is comprehensive U.S Anti-Terrorism
  Legislation.

• For the first time, Operators of Credit Card
  Systems are included.

• American Express is applying similar standards of
  the USA Patriot Act to the proprietary business.

• We are likely to see the expansion of AML Laws to
  meet or exceed the requirements of the USA
  Patriot Act.

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Anti money Laundering Laws and Regulations

• Financial Institutions are required by law to
  establish an anti-money laundering program that
  includes, at a minimum

• The development of internal policies, procedures
  and controls, including a Customer Identification
  Program

• The designation of a Compliance Officer

• An ongoing employee training program

• An independent audit function to test programs

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Importance of compliance with the laws and
regulations

• To guard against the possibility of our products
  being used for money laundering purposes.

• To guard ourselves and the business against the
  possibility of legal or regulatory action
  including fines and/or imprisonment.

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What the Law Requires

• You must.

• Know Your Customer

• Monitor Transactions

• Report Suspicious Transactions

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What the Law Requires

• You must not.

• Assist anyone you know or suspect of money
  laundering

• Tip Off anyone who is under suspicion of money
  laundering

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Where is the Risk for Credit Card Operators?

• The primary risk lies within the movement of
  money.

• The fundamental purpose of a credit card
• system is to effect payment from one person
• (The Cardmember) to another (The
• Merchant).

In other words
our job is to move money.
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Reputational Risk Why is it so important to
protect our business?

• Do you know the value of the Brand?

• Amex ranked 15th in the top 100 Brands

• Estimated value - 16.8bn
• Source Business Week/Interbrand Annual rating

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Where is the Risk for the Card Business?

• Do we really know our Customers?

• Do we really know our
• Merchants?

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What do we in CSI need to do?

• Know Your Customer (KYC)

• The identity of all our
• cardmembers and
• merchants must be verified (as appropriate)
• at the time of entering into a business
  relationship, i.e. when the account is opened.

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What do we in CSI need to do?

• Monitor/Report Suspicious Transactions

- Robust monitoring programs must be in place to
identify suspicious transactions. Examples
Transaction Monitoring, Credit Balance Refund and
Reporting, Limit Cash Payments etc.
- Procedures must be followed. Report suspicions
to your Market Compliance Officer or CSI
Compliance Officer.
If in doubt report it!
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Some examples of how Amex could be used to
facilitate Money Laundering

• Buying goods on the Card, paying the Card in cash
  then returning goods to the Merchant for a
  refund. This creates a credit balance on the Card
  Account for which the C/M could request a refund.
  

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Examples of how a Merchant account could be used
to facilitate Money Laundering

• Merchant submitting rocs through another Merchant
  account i.e. a charge incurred at one Merchant
  but submitted through another.

Do we really know where charges are coming from?
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Layering
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Integration
Do we really know who runs the business?
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How a Card or Merchant account could be used to
facilitate Terrorist Financing

• A customer may request a donation to be made to a
  charitable organisation. Do we really know the
  true identity of the organisation?

• Purchase of small goods with high
• intrinsic value can be used to
• transfer wealth e.g. gold bullion
• melted down and disguised as
• everyday objects.

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Red Flags for the CSI Business

• Reluctance to provide requested documentation at
  account opening.

• Identification documents that cannot be readily
  verified.

• Out of Pattern Account Activity transaction
  inconsistent with customer or industry type.

• Transactions that are financially illogical.

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Red Flags for the CSI Business

• High concentration of charges made by one
  Cardmember at one Merchant.

• Factoring.

• High volume of disputes and chargebacks.

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You should now know..

• The money laundering process.

• How the Card GES Business could be used.

• The obligations on American Express and you
  personally.

• The red flags for the business.

Make sure you are alert to the red flags
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Anti Money Laundering Key Contacts

• Market AML Compliance Officer

• Vacant Regional AML Compliance Officer

• Thomas George CSI Compliance Manager J/APA
• (612) 9271 8825