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Offshore Bank
These are primarily banks that are domiciled in an offshore financial centre and conduct their business with non-residents of that jurisdiction. At their extreme, in some of the more dubious locations, they have no physical presence in the jurisdiction; very little regulation; zero or low tax rates; little or no capital reserve requirements. Because of these factors they are an ideal money laundering vehicle. However, it should be appreciated that there are many legitimate offshore banks – the real danger group are shell banks (see below).
Offshore Company
A company registered in an Offshore Financial Centre; normally but not exclusively an International Business Company.
Offshore Financial Centre
There is some ongoing discussion as to how an Offshore Financial Centre or OFC can be defined. In broad terms it is a jurisdiction where a concerted governmental effort has been made to attract foreign business and investment through tax incentives, confidentiality and investor friendly regulations. In most cases the provision of financial services in an OFC is to non-residents only.
Patriot Act
The United and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (' USA Patriot') Act of 2001. The Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 is Title III of the Patriot Act, signed into law by President Bush on 26 October 2001 . Rightly claimed by the US administration as 'the most significant legislation of its kind since 1970'.
Peso Exchange
Has been described as the ‘the single most efficient and extensive money laundering scheme in the Western Hemisphere ’ involving the washing of funds from Colombia .
Phantom Bank
A bank which simply does not exist, as it is not registered or licensed anywhere; rather it is merely a front for criminal or laundering activity.
Placement
The initial and most difficult stage of the money laundering process where the direct results and proceeds of crime need to be inserted into the business and banking system. There is a vast variety of methods used but the key objective is to make all amounts resemble legitimate business transactions.
SAR
Suspicious activity report or reporting: generic term that may have a different title in individual countries. The report(s) submitted by financial institutions and other bodies subject to AML regulations to the FIU when suspicious money laundering activity is suspected. In the United States (as an example) there are SARs for financial institutions, SARC (Suspicious activity report for casinos) and SAR-S (Suspicious activity report for securities brokers and dealers).
Shelf Company (or off the shelf company)
A pre-formed company which has not normally started trading and can be bought from a third party provider of company management services. There is also the possibility in some jurisdictions to buy shelf companies that have previously traded but are now dormant or appear to have been legitimately in existence for a number of years because the company was established many years previously. These companies provide the easiest way to start trading but simultaneously create money laundering risks, particularly when the identity of the beneficial owner(s) is hidden.
Shell bank
A specific money laundering risk, particularly via correspondent banking relationships established by shell banks. A shell bank is generally defined as 'a foreign bank without a physical presence in any country'.
Smurfing
A technique used in the placement of funds that are being laundered, where the funds are divided into smaller amounts so that such amounts will fall below the threshold at which the relevant financial institution (or other body) is required to file a suspicious transaction report.
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