Question Tag: Money laundering

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  • 1 Marks

BL – May 2016 – L1 – SA – Q9 – Law Relating to Banking

Identify the maximum amount allowed for cash payment without financial institution involvement.

The Money Laundering (Prohibition) Act provides that no individual person shall make or accept cash payment, EXCEPT through a financial institution, of an amount of money exceeding the sum of
A. ₦1,500.00
B. ₦2,000.00
C. ₦4,000.00
D. ₦3,000.00
E. ₦5,000.00

Answer:
E. ₦5,000.00

Explanation:
Under the Money Laundering Act, any cash transaction exceeding ₦5,000 must be conducted through a financial institution to prevent illegal activities.

  • 1 Marks

BL – May 2015 – L1 – SA – Q13 – Nigerian Legal System

Identify the attribute that does NOT apply to money laundering laws in Nigeria.

The basic laws relating to money laundering in Nigeria have the following attributes EXCEPT
A. Codification
B. Certainty of the law
C. Penal provisions for sanctions
D. Enacted by legislation
E. Written in local languages

Answer: E

Explanation:
The correct answer is “E. Written in local languages.” Nigerian money laundering laws are codified, certain, and contain penal provisions, but they are not written in local languages; instead, they are drafted in English, the official language of Nigeria.
  • 6 Marks

AFM – May 2016 – L3 – Q4c – Emerging issues in finance and financial management, Regulatory framework and processes

Describe money laundering and identify risk-based approaches companies can use to combat it.

c) The growth of globalization has created more opportunities for free movement of capital/funds, which has resulted in a global canker called “money laundering.” There have been global efforts from governments and international institutions to combat the menace.

Required:
i) Describe in simple terms the concept of money laundering. (2 marks)
ii) Identify THREE risk-based approaches companies can adopt to combat the risk of money laundering. (4 marks)

i) Concept of Money Laundering

  • Money laundering refers to the process of concealing the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses. The goal is to make the proceeds of criminal activities appear to have been derived from a legal source. It is often associated with activities such as drug trafficking, terrorism financing, and organized crime.
    (2 marks)

ii) Risk-Based Approaches to Combat Money Laundering

  1. Identify Relevant Risks
    • Companies should assess the specific risks that are relevant to their business, such as customer behaviors, geographic areas of operation, and the nature of the business. Identifying risks at the onset allows for more targeted anti-money laundering (AML) measures.
      (1 mark)
  2. Conduct Detailed Risk Assessments
    • Companies should carry out detailed risk assessments on customer activities and delivery channels. This involves scrutinizing high-risk areas, such as large cash transactions or dealings with politically exposed persons (PEPs). Risk assessments help in determining the areas where stricter controls are required.
      (1 mark)
  3. Implement Effective Controls
    • After identifying and assessing risks, companies must design and implement robust internal controls. These controls should be aimed at managing and mitigating the identified risks. This could include customer due diligence (CDD) processes, ongoing monitoring of transactions, and reporting suspicious activities.
      (1 mark)
  4. Monitor and Update Controls Regularly
    • Continuous monitoring and updating of risk management controls is essential to keep up with evolving risks. Companies must ensure that their AML processes are effective and adapt to new threats or changes in the regulatory environment.
      (1 mark)
  • 10 Marks

BCL – Apr 2022 – L1 – Q1b – Public sector entities, Contract Law

Explain money laundering, its stages, and list anti-corruption institutions in Ghana.

Pepo Ghana Ltd operated three accounts at the Arena branch of Coin Bank Ltd. On 27 May 2020, the Financial Intelligence Centre (FIC) in a letter, directed Coin Bank Ltd to freeze all the accounts of Pepo Ghana Ltd.

i) Explain money laundering and explain TWO (2) stages of money laundering. (6 marks)

ii) List TWO (2) anti-corruption institutions in Ghana.

(4 marks)

i) Money Laundering is the act of transferring illegally obtained money through legitimate people or accounts so that its original source cannot be traced. The offence of money laundering is established if the person knows or ought to have known that a particular property is or forms part of the proceeds of an unlawful activity and the person:

  • Converts, conceals, disguises or transfers the property,
  • Conceals or disguises the unlawful origin of the property, or
  • Acquires, uses or takes possession of the property.

It is also a crime to aid and abet money laundering activities where a person, knowing that another person has obtained proceeds from an unlawful activity, assists them.

Stages of Anti-Money Laundering:

  1. Placement: This is the first stage in money laundering. At this stage, ‘dirty’ money is placed into the legal financial systems. The movement of cash from its source and placing it in circulation through financial institutions, casinos, businesses, disguised shops, forex bureaus, transfers both locally and abroad, etc.
  2. Layering: This is meant to make the trailing of illegal proceeds difficult for the law enforcement agencies, making it difficult to detect and uncover laundering activity. This involves creating a complex web of transactions to obscure the audit trail and conceal the original source and ownership of the illegal funds.
  3. Integration: This is the movement of previously laundered money into the economy, mainly through the banking system, thus legitimizing it. The money is now absorbed into the economy. Once the money has been placed and layered, the funds will be integrated back into the legitimate financial system as legal tender.

(6 marks)

ii) Anti-Corruption Institutions in Ghana:

  • Economic and Organized Crimes Office (EOCO)
  • Financial Intelligence Centre (FIC)
  • Securities and Exchange Commission (SEC)
  • Internal Audit Agency (IAA)
  • Public Procurement Authority (PPA)
  • Office of the Special Prosecutor
  • Commission for Human Rights and Administrative Justice (CHRAJ)

(Any 2 points @ 2 marks each = 4 marks)

  • 9 Marks

BCL – July 2023 – L1 – Q1c – Public Sector Entities

Explain the three main stages of money laundering.

Explain the THREE (3) main stages of money laundering. (9 marks)

The stages of money laundering include Placement, Layering, and Integration.

Placement: Placement is when “dirty money” is introduced into the financial system. This is often done by breaking up large amounts of cash into less conspicuous smaller sums to deposit directly into a bank account or by purchasing monetary instruments such as cheques or money orders that are collected and deposited into accounts at other locations. Other placement methods include:

  • Adding illicit cash from a crime to legitimate takings of a business, particularly those with little or no variable costs.
  • False invoicing.
  • Smurfing, where amounts of money below the anti-money laundering threshold are inserted into bank accounts or credit cards and used to pay expenses among others.
  • Taking small amounts of cash below the customs declaration threshold abroad and lodging it in foreign bank accounts before being re-sent.

Layering: In the layering stage, the launderer moves money through a series of financial transactions with the goal of making it difficult to trace the original source. The funds could be channeled through the purchase and sales of investments, a holding company, or simply moved through a series of accounts at banks around the globe. Widely scattered accounts are most likely to be found in jurisdictions that do not cooperate with Anti Money Laundering investigations. In some instances, the launderer could disguise the transfers as payments for goods or services or as private loans to another company, giving them a legitimate appearance.

Integration: The integration stage of money laundering is the final step in the laundering process. This is when the launderer attempts to integrate illicitly obtained funds into the legitimate financial system. To use the funds to buy goods and services without attracting attention from law enforcement or tax authorities, the criminal may invest in real estate, luxury assets, or business ventures.

Common integration tactics include:

  • Fake employees, namely a way of getting the money back out. Usually paid in cash collected.
  • Loans, namely to directors or shareholders which will never be repaid.
  • Dividends, namely paid to shareholders of companies controlled by criminals.
  • 10 Marks

AAA – May 2021 – L3 – Q5a – Current issues | Professional responsibility and liability

Assess the global threat of money laundering and discuss Ghana’s efforts to combat money laundering.

a) Money laundering has become a significant threat to the world’s political and economic order. World leaders are collaborating and cooperating in fighting money laundering. However, criminals are maliciously clever and, in some cases, ahead of law enforcement agencies. Every human being has to contribute to the fight against money laundering.

Required:

i) Assess why money laundering poses a big threat to the world’s political and economic order. (5 marks)

ii) Discuss FIVE (5) ways in which Ghana is contributing towards fighting money laundering globally. (5 marks)

i) Why Money Laundering Poses a Big Threat to the World’s Political and Economic Order:

  • Destabilization of Economies: Money laundering puts large sums of illegal money into the hands of criminals, which can destabilize economies. When these funds are introduced into the economy without a corresponding rise in goods and services, it can lead to hyperinflation. Weak economies, particularly in developing countries, may not be able to absorb such shocks, leading to economic collapse.
  • Undermining Financial Systems: Money launderers often set up fraudulent schemes, such as Ponzi schemes, which entice people to withdraw their savings from legitimate financial institutions and invest in these illegal operations. This can undermine the official financial and banking systems of the countries in which they operate, leading to loss of public confidence in financial institutions.
  • Funding of Terrorism: Money laundering has been identified as a significant source of funds for international terrorist organizations. These funds are used to finance terrorist activities that lead to the destruction of human lives and property, creating political instability and insecurity in affected regions.
  • Political Corruption: Money launderers may use their illicit funds to influence political processes, such as financing coups or corrupting public officials. This can lead to the erosion of democratic institutions and the rule of law, particularly in countries with weak governance structures.
  • Global Financial Crime: Money laundering is a transnational crime that affects multiple countries. It enables criminals to operate across borders, making it difficult for individual countries to combat it effectively. This global threat requires international cooperation and collaboration to address, and failure to do so can lead to significant geopolitical tensions.

ii) Ghana’s Contribution to Fighting Money Laundering Globally:

  1. Legislation and Regulation: Ghana has enacted comprehensive anti-money laundering laws, including the Anti-Money Laundering Act, 2008 (Act 749) and its amendments. These laws provide a legal framework for combating money laundering and financing of terrorism.
  2. Membership in International Bodies: Ghana is a member of the Financial Action Task Force (FATF) and the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA). These memberships ensure that Ghana adheres to international standards and collaborates with other nations in the fight against money laundering.
  3. Establishment of the Financial Intelligence Centre (FIC): Ghana’s FIC is responsible for analyzing financial transactions and identifying suspicious activities related to money laundering and terrorism financing. The FIC works closely with financial institutions and law enforcement agencies to track and report illegal financial activities.
  4. Cross-Border Cooperation: Ghana has entered into treaties and agreements with other countries to facilitate the exchange of information, joint investigations, and the prosecution of money laundering offenses. This international collaboration helps to tackle money laundering on a global scale.
  5. Public Awareness and Training: Ghana has implemented public awareness campaigns and training programs for financial institutions, law enforcement agencies, and the judiciary. These initiatives aim to increase understanding of money laundering risks and strengthen the capacity to detect and prevent such activities.
  • 10 Marks

AAA – Nov 2023 – L3 – Q5a – Current Issues, Audit Evidence

Explain the stages of money laundering and audit obligations in a scenario involving suspicious transactions.

a) You have commenced the audit of Atika Ltd, a company involved in the importation and sale of plumbing materials. As part of the audit, you have noticed the following:

  1. Atika Ltd does not pay its suppliers in Germany through the bank. It relies mostly on the black market for the transfer of funds to its suppliers.
  2. Atika only sells its goods in Ghana.
  3. On 25 March within the audit year, there was a cash deposit of US$2,500,000.00 into the forex account of Atika Ltd.
  4. On 30 March the company transferred the following:
    • US$499,999.99 to an unknown account in Cameroon
    • US$399,999.99 to an unknown account in Kenya
    • US$499,999.99 to an unknown account in Niger
    • US$250,000.00 to the personal account of the Managing Director
    • US$150,000.00 to an unknown company.
  5. The company’s general ledger shows a revenue of GH¢1,560,000.00.
  6. The import documentation shows purchases of GH¢36,000,000.00. There is no evidence of payment for the goods from Atika Ltd’s bank accounts.
  7. The closing inventory amounted to GH¢2,145,200.00.

The Audit Manager has raised the issue of money laundering considering the nature of the transactions above.

Required:

i) Explain to the team members the various stages of money laundering and show how the above transactions confirm the client’s engagement in money laundering. (6 marks)

ii) What are the obligations on the firm for money laundering? (4 marks)

i) The three stages of money laundering are as follows:

  • Placement: This is when the criminal places illegal cash in what appears to be a legitimate business transaction. The deposit of US$2,500,000 into the forex account of the company may suggest the placement of illegal proceeds into the company.
  • Layering: In this stage, the funds move through several transactions or ‘layers’. The transactions will be complex and may move the funds between different countries to make the source of the illegal funds more difficult. The transfers on the 30 March suggest the layering of the funds.
  • Integration: In this final stage, the funds are moved back into the economy to convert them into a legitimate form. The purchase of goods suggests the integration of the funds back into the economy.

(3 points @ 2 marks each = 6 marks)

ii) Obligations on firms regarding money laundering:

  1. Appoint a Money Laundering Reporting Officer: The firm must appoint a Money Laundering Reporting Officer (MLRO) whose responsibility is to receive reports on suspected money laundering activities from other employees and report them to the appropriate authorities.
  2. Establish Reporting Procedures: The firm should establish procedures within the firm for reporting any suspicion of money laundering by client companies.
  3. Training and Education: The firm must provide training and education to staff on procedures for detecting and reporting suspicions of money laundering activities.
  4. Implement Systems and Controls: The firm should put in place systems, controls, and procedures to ensure that the firm is not used for money laundering purposes.

(4 points @ 1 mark each = 4 marks)

  • 10 Marks

AAA – Nov 2017 – L3 – Q3a – Current Issues, Professional Responsibility and Liability

Evaluate potential money laundering issues in an audit client and discuss the need for ethical guidance for accountants on money laundering.

Sampa Sawmill Ltd. is a company located in the Eastern Region of Ghana, involved in the exportation of wood products to overseas countries. Sampa Sawmill Ltd. is of late being accused of involvement in money laundering. Sampa had been an audit client of Tetteh and Associates, a firm of Chartered Accountants for the past three years.

Required:

i) As an Audit Manager of Tetteh and Associates in charge of Sampa Sawmill Ltd., evaluate the issues you will consider to prove or disprove the allegation. (5 marks)

ii) Discuss the need for ethical guidance for professional accountants on money laundering.

(5 marks)

i) Issues to Consider to Prove or Disprove Money Laundering Allegation:

  • Inconsistent Transactions:
    • Evaluate transactions that appear inconsistent with Sampa Sawmill Ltd.’s known legitimate business activities or means. This includes unusual deviations from normal account and transaction patterns.
  • Complex or Obscure Identity:
    • Investigate situations where the personal identity of those involved in transactions is difficult to determine or deliberately obscured.
  • Improper or Unrecorded Transactions:
    • Look for unauthorized or improperly recorded transactions and inadequate audit trails that could indicate money laundering activities.
  • Large Cash Transactions:
    • Pay special attention to large currency transactions, especially those involving the exchange for negotiable instruments or the purchase of funds transfer services.
  • Structured Transactions:
    • Identify whether transactions are structured to avoid detection by regulatory authorities or to bypass record-keeping and reporting thresholds.
  • Use of Intermediaries:
    • Assess the use of intermediaries in transactions for no apparent business reason, which could be indicative of money laundering.

(5 marks)

ii) Need for Ethical Guidance for Professional Accountants on Money Laundering:

  • Conflict Between Confidentiality and Reporting:
    • Ethical guidance is necessary because there is an inherent conflict between an accountant’s duty of confidentiality towards their clients and the legal obligation to report suspicions of money laundering to authorities.
  • Legal Obligations:
    • Accountants are required by law to report any knowledge or suspicion of money laundering to the appropriate authorities, and ethical guidance ensures they understand their obligations.
  • Protection Against Liability:
    • Professional accountants need guidance to understand that they are not in breach of their professional duty of confidentiality when they report money laundering in good faith. Statutory protection often applies in such cases.
  • Avoiding Repercussions:
    • Without proper ethical guidance, accountants might fear legal repercussions or being sued for breach of confidence, which could deter them from reporting suspicious activities.
  • Clarification of Professional Duty:
    • Ethical guidance helps clarify that the duty to report overrides confidentiality in cases of money laundering, ensuring that accountants act in compliance with both legal and professional standards.

(5 marks)

  • 10 Marks

AAA – Nov 2018 – L3 – Q3a – Professional responsibility and liability

Discussion on the auditor's duty under money laundering laws and confidentiality requirements.

It was reported in both the print and electronic media that “the hidden wealth of some of the world’s most prominent leaders, politicians, and celebrities including former Tory MPs and six peers have been released in a massive leak. The leak came from the database of lawyer Mossack Fonseca, who was alleged to have aided the people involved to form offshore companies, which enabled them to evade tax and indulge in money laundering. This revelation has implications for professional accountants who are required to report suspicious transactions and activities of clients.”

Required:
i) Discuss the auditor’s duty under money laundering laws and regulations and the requirement of confidentiality under the IFAC’s Code of Ethics for Professional Accountants. (4 marks)

ii) Recommend elements that should be included in an anti-money laundering programmed for an accounting firm. (6 marks)

i) Auditors’ duty under money laundering laws and regulations:

  • The anti-money laundering laws and regulations require auditors to report suspicious transactions and activities to the Financial Intelligence Centre. However, the code of ethics requires auditors to maintain confidentiality in client relationships. This can result in ethical conflicts, namely the duty to report to the authorities and the duty of confidentiality to the client. This conflict may be particularly sharp where an auditor suspects the client of money laundering.
  • Under the anti-money laundering laws, there is a requirement to report even a suspicion of money laundering, which would likely conflict with the auditor’s duty of confidentiality to the client.
  • The situation is further complicated by the need to avoid “tipping off” the client that the auditors suspect to be engaged in money laundering, which could make it very difficult for an auditor to decide whether they have a duty to report their suspicions, as it would be hard to gather evidence of money laundering without “tipping the client off.”
  • If such an ethical conflict cannot be resolved, then the auditor may consider obtaining professional advice from the ICAG or from legal advisors. This can generally be done without breaching the fundamental principle of confidentiality if the matter is discussed anonymously with the ICAG, or under legal privilege with a legal adviser.
  • The ethical rules also make provision for exceptions under confidentiality where the auditor can disclose information when required by the law, in this case, the anti-money laundering law.

(Any 4 points for 4 marks)

ii) Elements to be included in an anti-money laundering programme for an accounting firm:

  1. Appointment of a Money Laundering Reporting Officer (MLRO): Implementation of internal reporting procedures to ensure suspicious activities are reported appropriately.
  2. Training: Train individuals to ensure they are aware of the relevant legislation, know how to recognize and deal with potential money laundering, and understand how to report suspicions to the MLRO.
  3. Internal Procedures: Establish internal procedures appropriate to forestall and prevent money laundering, and make relevant individuals aware of the procedures.
  4. Client Verification: Verify the identity of new and existing clients and maintain evidence of identification as part of customer due diligence measures.
  5. Record Keeping: Maintain records of client identification and any transactions undertaken for or with the client.
  6. Reporting Suspicious Activity: Report suspicions of money laundering to the Financial Intelligence Centre (FIC).

(4 points @1.5 marks each = 6 marks)

  • 10 Marks

AAA – May 2019 – L3 – Q3a – Audit evidence

Discuss the risks encountered in the audit of a company involved in possible money laundering activities, specifying the risk format and actions required.

Musah Diara is a Malian resident in Ghana. He has established Tagoe Company Ltd (Tagoe) which engages in trading in West African countries; Ghana, Nigeria, and Mali. Musah is always funded by his brother who is also a resident in Ghana. Musah’s brother does not have a bank account in Ghana. He always gives huge cash to Musah who buys goods in Ghana and sells it in Nigeria or Mali. He pays the profit into Tagoe’s account in Ghana and bank the amount given to him by his brother into his brother’s account in Mali.

Required:
You have been engaged to audit Tagoe. Discuss the risk you are likely to encounter in this audit, specifying your expectation of the risk format and the action you have to take.

Likely risk to be encountered by the auditor

The scenario fits Money Laundering activity.

  • Musah is given huge cash to buy his goods by his brother
  • Musah’s brother does not have a bank account in Ghana
  • The proceeds of the transaction is not paid to his brother in Ghana, but paid into his account in foreign country.
  • Though we are not sure how his brother get his money, the modus oprandi, fit money laundering.

Expectation of the risk format

In Money Laundering,

  • There’s placement of illegal funds into the financial system. Here huge cash is given to Musah to buy goods and sell outside Ghana.
  • Layering-Passing the money through a number of transactions, selling the good outside the country which is engagement of economic activity
  • Integration-Integrating the proceeds into legitimate economy by banking in other countries.

Actions to be taken by the auditor
The auditor is then exposed to money laundering activity

  • The auditor has an obligation to know the source of the money being given by Musah’s brother.
  • The auditor must perform due diligence on the customer and the brother to confirm the activity of the brother.
  • If the suspicion is confirmed, the matter should be reported to the authorities.
  • The auditor should avoid tipping of the client during his investigation to confirm the suspicion.

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