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DETECTING AND PREVENTING MONEY LAUNDERING. Understanding the Environment An Introduction from the Chairman. Tragic events of 9/11/01 resulted in enactment of anti-terrorism and anti-money laundering legislation

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  2. Understanding the EnvironmentAn Introduction from the Chairman • Tragic events of 9/11/01 resulted in enactment of anti-terrorism and anti-money laundering legislation • “Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001” (USA PATRIOT Act ) signed into law October 26, 2001 • Imposes stricter anti-money laundering requirements on companies in the financial services industry

  3. Your Role • Producers and administrative associates will be trained to identify potential money laundering indicators and suspicious activities • Producers are on the front lines of the battle against money laundering and terrorism

  4. Your Role • Administrative and New Business organizations also have a critical role to play. Associates must know our policy and be wary of unusual and suspicious activity that might indicate possible money laundering

  5. What is Money Laundering? • Traditional Focus: transactions used to transform the proceeds from illicit activities into funds with apparently legal source. • Current Additional Focus: legitimate funds being funneled through organizations to fund illegitimate activities, i.e. terrorism

  6. The Money Laundering Problem • Estimated $500 billion to $1.5 trillion laundered annually worldwide • No business wants complicity with terrorist activities • Questionable transactions must be investigated and reported where appropriate • Companies and associates found to be intentionally involved in or willfully blind to money laundering may face federal criminal charges, including imprisonment for individuals

  7. Elements of Money Laundering 1. Placement 2. Layering 3. Integration

  8. Placement • Introduction of funds from criminal activity into a financial institution • Placement is the most vulnerable stage of the money laundering process • The deposit of cash and purchase of cash equivalents (money orders, cashier checks, travelers checks, etc.) with cash are often used in this introductory phase

  9. Layering • Involves distancing the money from its criminal source through a series of transactions - making it increasingly difficult to detect the origin of funds • Premium payments with cash equivalents followed by policy cancellation • Quick movement of funds into and out of different accounts, from company to company, and to different countries or jurisdictions

  10. Integration • Distributing “cleaned” money back to the criminal or organization • Taking loans out against a policy and reinvesting laundered money in legitimate business or transaction • The appearance of legitimate wealth is created

  11. Know Your Customer • In addition to the standard background information captured in conjunction with suitability documentation, producers must now verify the identity of their clients by recording information contained on a government issued photo ID (such as driver’s license, passport, etc.)

  12. Know Your Customer • Revisions will be made to the application to capture information pertaining to the verification of the customer’s identity • Application also captures the source of funds for customer transactions

  13. Know Your Customer • Administrative Offices must cross-reference client names and account ownership with the Office of Foreign Assets Control (OFAC) and other published lists of known terrorists and suspected aliases • True “Hits” against the OFAC lists must be investigated and reported by the Compliance Department to OFAC; other hits should be reported to FinCEN or law enforcement

  14. Know Your Customer • Knowing your customer enables you to identify and report known and suspected crimes and suspicious activities to your manager and Compliance Department • The USA PATRIOT Act provides a “safe harbor” for companies and producers who report suspicious activity

  15. Know Your Customer • Producers must establish valid reasons for account establishment • Producers need to establish expected trading/transaction patterns • Producers need to inquire about the source of funds for all payments funneled through them

  16. Beware of Money Laundering Indicators • Unusual account requests or activities • Attempts to avoid reporting & record-keeping requirements • Insufficient or suspicious client information

  17. Unusual Account Requests or Activities • Deposits or premium payments made with multiple money orders, travelers checks or cashiers checks purchased from the same and/or different financial institutions • Accounts with large volume of deposits or wire transfers • Brokerage accounts that have large, frequent transactions (deposits and withdrawals) without a business rationale • Premium payments made by third parties unrelated to the owner

  18. Unusual Account Requests or Activities • Accounts that send/receive wire transfers to bank secrecy haven territories (e.g. Cayman Islands) without business rationale or inconsistent with client business or history • Accounts receiving small incoming wire transfers or cash equivalent deposits almost immediately transferred out to other accounts or companies, without apparent business reason or inconsistent with client history - or expectation

  19. Unusual Account Requests or Activities • Accounts for clients at address far removed from any representative’s place of business or mailing address outside US • Clients who suddenly pay down large policy loans with no reasonable explanation of the source of funds • Clients who exhibit a lack of concern regarding risks, commissions, or other transaction costs

  20. Unusual Account Requests or Activities • Clients who, for no apparent reason, have multiple accounts under a single name or multiple names, with a large number of inter-account or third party transfers • Clients from, or receiving funds from, bank secrecy haven territories • Requests for loans to be processed in the name of a beneficiary or other third-party rather than owner • Requests for disbursement of funds to be wired to an offshore company

  21. Unusual Account Requests or Activities • “Layering” of monies through various brokerage account transactions with no apparent benefit to the account • Clients eager to surrender, cancel, or replace annuity contracts or life policies with extremely high surrender or cancellation charges without regard to financial needs or objectives • Healthy clients seeking information about viatical settlements

  22. Unusual Account Requests or Activities • Attempts by a client to purchase a product or make payments in an amount beyond his/her apparent means that has no purpose, or where the source or nature of funds to be used is suspicious • Client shows little concern about the benefits of an insurance or annuity product, but very concerned about early cancellation provisions • No apparent relationship between the owner and the insured/annuitant

  23. Unusual Account Requests or Activities • Client sends or receives frequent or large wire transfers to or from offshore companies or unrelated third parties • Client deposits funds into several accounts, just below reportable amounts, then consolidates into a master account and transfers funds outside the company • Client purchases product then quickly seeks to borrow the maximum value

  24. Unusual Account Requests or Activities • Client makes deposits and immediately withdrawing all but nominal amounts through policy loans, withdrawal provisions, surrenders, or check requests • Client shows patterns of surrender of single premium or other life insurance policies during the free look period

  25. Attempts to Avoid Reporting & Record-keeping Requirements • A trade, business, or new customer that asks to be exempted from currency transaction reporting • Clients who appear to represent the interests of an undisclosed third party & are reluctant to provide information about that party • Clients who refuse to disclose the source of funds or assets

  26. Attempts to Avoid Reporting & Record-keeping Requirements • Clients who are reluctant to provide information needed for a mandatory report, to have the report filed, or to proceed with a transaction after being informed of a reporting requirement • Clients who coerce or attempt to coerce a representative not to file any required report or record-keeping requirement • Clients making cash equivalent payments just under the reportable amount

  27. Insufficient or Suspicious Information • Businesses that are reluctant to provide complete information about the business including Articles of Incorporation, Corporate Resolution, or physical address • Clients unwilling to provide personal background information or identification or physical address • Clients who present unusual or suspicious documentation that cannot be readily verified

  28. Insufficient or Suspicious Information • Clients who have no employment history, but engage in large transactions • Clients with disconnected home phones • Businesses that refuse to provide details about activities or financial statements upon request

  29. Typical Money Laundering Scenarios • “Drug dealer method” • “Loan-back method” • “Money broker shuffle method” • “Viatical Settlement method” • “Free look or immediate surrender method”

  30. Suspicious Activity Reports • The Company must report known and suspected crimes and “suspicious” deposits and withdrawals • The Company must file Suspicious Activity Reports when suspicious activities are detected

  31. Suspicious Activity ReportsWhat does this mean to you? • Producers wary of a client, transaction, request, etc. must contact the Corporate Ethics and Compliance Department immediately • The Corporate Ethics and Compliance Department initiates investigation and takes appropriate action (including the filing of Suspicious Activity Reports where appropriate) • Only FinCEN and law enforcement are informed of the SAR filed

  32. Suspicious Activity Reports • Client must NOT be informed of any SAR filed or that the company is considering filing a SAR - it is a crime to “tip off” a customer • Producers must NOT discuss any suspicions with anyone other than their Corporate Ethics and Compliance Department contact for money laundering • Producers are required to raise suspicions regardless of $ amount in question

  33. Tracking of Cash and Cash Equivalent Payments • The Cash and Cash Equivalent Log helps identify reportable transactions exceeding a cumulative total of $10,000 over a 12 month period • Form 8300 filing is required if cash, or may be required if cash equivalent payments are received exceeding $10,000 - follow the instructions within your distribution channel

  34. Ramifications for Non-Compliance • Failure to comply with MetLife’s anti-money laundering policies and procedures may result in disciplinary action up to and including termination • In addition, failure to comply with the provisions of the USA PATRIOT Act may lead to civil and criminal penalties, including imprisonment

  35. Summary • Money laundering is a crime carrying severe penalties for violators • Money laundering may help terrorists • Know your customer • Beware of suspicious activities • Report any suspicions to the Corporate Ethics and Compliance Department immediately • Cooperate with investigations

  36. Detecting and Preventing Money Laundering Questions & Answers

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