- Bank Draft
- Vulnerable to money laundering because it represents a reputable international monetary instrument drawn on a reputable institution, and is often made payable—in cash— upon presentation and at the issuing institution’s account in another country.
- Bank for International Settlements (BIS)
- An international organization that serves as a bank for central banks and which fosters international monetary and financial cooperation with the purpose of attaining stability in the world economy. It hosts the Secretariat of the Basel Committee on Banking Supervision. The Committee has formulated broad supervisory standards and guidelines on Know Your Customer issues. See www.bis.org.
- Bank Secrecy
- Refers to laws and regulations in countries that prohibit banks from disclosing information about an account—or even revealing its existence—without the consent of the account holder. Impedes the flow of information across national borders among financial institutions and their supervisors. One of FATF’s 40 Recommendations states that countries should ensure that secrecy laws do not inhibit the implementation of the FATF Recommendations.
- Bank Secrecy Act (BSA)
- The primary U.S. anti-money laundering regulatory statute (Title 31, U.S. Code Sections 5311-5355) enacted in 1970 and most notably amended by the USA Patriot Act in 2001. Among other measures, it imposes money laundering controls on financial institutions and many other businesses, including the requirement to report and to keep records of various financial transactions.
- Bank Secrecy Act (BSA) Compliance Program
- A program that U.S.-based financial institutions—as defined by the Bank Secrecy Act—are required to establish and implement in order to control money laundering and related financial crimes. The program’s components include at a minimum: the development of internal policies, procedures and controls; the designation of a compliance officer; ongoing employee training; and an independent audit function to test the program.
- Bare Trust
- Also known as a dry, formal, naked, passive, or simple trust, in which the trustees have no duties other than to convey the trust property to beneficiaries when called upon to do so. Bare trusts are vulnerable to money laundering because the final beneficiary is unknown.
- Basel CDD Paper
- A guidance paper on Customer Due Diligence (CDD) for banks issued by the Basel Committee on Banking Supervision (BCBS) in October 2001. The paper includes sound Know Your Customer policies and procedures that, according to the Committee, are critical to protecting the safety and soundness of banks and the integrity of banking systems. In February 2003, the Basel Committee on Banking Supervision issued “General Guide to Account Opening and Customer Identification.” This document is an attachment to the Basel CDD Paper. See www.bis.org/bcbs.
- Base Committee on Banking Supervision (Basel Committee)
- The Basel Committee was established by the G-10’s central bank of governors in 1974 to promote sound supervisory standards worldwide. Its secretariat is appointed by the Bank for International Settlements in Basel, Switzerland. It has issued, among others, papers on customer due diligence for banks, consolidated KYC risk management, transparency in payment messages, due diligence and transparency regarding cover payment messages related to cross-border wire transfers, and sharing of financial records among jurisdictions in connection with the fight against terrorist financing. See www.bis.org/bcbs.
- Batch Processing
- A type of data processing and data communications transmission in which related transactions are grouped together and transmitted for processing, usually by the same computer and under the same application.
- Batch Transfer
- Transfer comprising a number of individual wire transfers that are sent to the same financial institution, and which may be ultimately intended for different persons.
- Bearer Form
- In relation to a certificate, share transfer or other document, a bearer form enables a designated investment or deposit to be sold, transferred, surrendered or addressed to a bearer without the need to obtain further written instructions.
- Bearer Negotiable Instruments
- Include monetary instruments in bearer form such as: negotiable instruments (including checks, promissory notes and money orders) that are either in bearer form, are endorsed without restriction, are made out to a fictitious payee, or are otherwise in such form that title thereto passes upon delivery.
- Negotiable instruments that accord ownership in a corporation to the person who is in physical possession of the bearer share certificate.
- A negotiable corporate share certificate made out to “Bearer” and not in the name of an individual or organization.
- Benami Account
- Also called a nominee account. Held by one person or entity on behalf of another or others, Benami accounts are associated with the hawala underground banking system of the Indian subcontinent. A person in one jurisdiction seeking to move funds through a hawaladar to another jurisdiction may use a Benami account or Benami transaction to disguise his/her true identity or the identity of the recipient of the funds.
- Beneficial Owner
- The natural person who ultimately owns or controls an account through which a transaction is being conducted. It also incorporates those persons who exercise ultimate effective control over a legal person or arrangement.
- All trusts (other than charitable or statutory-permitted non- charitable trusts) must have beneficiaries, which may include the settlor. Trusts must also include a maximum time frame, known as the “perpetuity period,” which normally extends up to 100 years. While trusts must always have some ultimately ascertainable beneficiary, they may have no defined existing beneficiaries. Trusts may only have objects of a power until some person becomes entitled as beneficiary to income or capital on the expiry of a defined period, known as the “accumulation period.” The latter period is normally co- extensive with the trust perpetuity period, which is usually referred to in the trust deed as the “trust period.”
- The science of identifying features that distinguish one person from another. Fingerprinting, voice recognition and iris (eye) scans are three forms of biometrics technology that may someday render pen-to-paper signatures outdated. Certain institutions use biometrics to verify the identity of their customers. With the advent of customer identification regulations, biometric tools may become more common in financial institutions.
- Black Market Peso Exchange (BMPE)
- The Colombian Black Market Peso Exchange (BMPE) is an example of a complex method of trade-based money laundering. The BMPE originally was driven by Colombia’srestrictive policies on currency exchange. To circumvent those policies, Colombian businesses bypassed the government levies by dealing with peso brokers that dealt in the black market or parallel financial market. Colombian drug traffickers took advantage of this method to receive Colombian pesos in Colombia in exchange for U.S. drug dollars located in the United States. According to the U.S. State Department’s 2007 INCSR, similar black market exchange systems are found in Venezuela and in the tri-border region of Argentina, Brazil, and Paraguay. Trade goods in Dubai, as well as Chinese and European manufactured trade items, are being purchased through narcotics-driven systems similar to the BMPE. The
Black Market Peso Exchange system operates through brokers who purchase narcotics proceeds in the United States from the cartels and transfer pesos to the cartels from within Colombia.
The dollars are placed — that is, “laundered” — into the United States financial system by the peso broker without attracting attention.
The dollars are then “sold” by the brokers to businessmen in Colombia (or other country) who need dollars to buy United States goods for export.
Goods ready for export are often actually paid for by the peso broker, using the purchased narcotics dollars, on behalf of the Colombian (or other country’s) importer.
- Blank Check Company
- A type of company designed to be used by private corporations intending to issue publicly traded shares through “reverse mergers” without the high expenses involved in making their own initial public offering. Blank check companies often have few assets, engage in little business activity, and have no business plan or experienced management.
- A bookmaker accepts bets from individuals on a variety of matters, mostly sporting events. Bookmakers are vulnerable to money laundering, since launderers may offer their customers money for winning betting slips, often 7 to 10 percent above the value of the winnings. The launderer then collects clean money from the bookmaker.
- A place of business that forms a legally dependent part of a financial institution and carries out directly all or some of the transactions inherent in the business of that financial institution.
- Bureau de Change
- Also called “casa de cambio” or “exchange office,” a bureau de change offers a range of services that are attractive to money launderers: currency exchange and consolidation of small denomination bank notes into larger ones; exchange of financial instruments such as travelers checks, money orders
and personal checks; and telegraphic transfer facilities. In some countries, such businesses are not as heavily scrutinized for money laundering as are traditional financial institutions. Also, their customers are often occasional, making it more difficult for these businesses to “know their customers.”
- A scheme in which the use or extension of credit is obtained and is increased fraudulently while the perpetrators avoid having to pay back the illegally obtained credit or goods. Typically, a bust-out ring will operate a shell or front business that accepts credit purchases on stolen or fraudulently obtained credit cards. The criminals run the cards or numbers through credit card terminals, but either do not provide any goods or services or provide stolen or non-licensed goods. The innocent credit card company credits the account of the front business. Before the transactions can be reversed, the criminals have moved the funds from the accounts of the front business.
The cardholders who knowingly participate in these bust-out schemes generally refuse to pay the credit card companies for their “purchases.” These people have either obtained cards with fraudulent or stolen identification or otherwise cannot be found. Bust-out schemes have been very popular in creating large bankruptcy frauds in which business entities secure loans in excess of the actual value of the company or property and then disappear with the money, leaving the lender to take a substantial loss.