Money launderers use wire transfers daily to move dirty cash between countries and bank accounts[1]. They also use wire transfers to distance illegal funds from their original source. The objective is to move the dirty money from one bank account to another and from one jurisdiction to another. This makes it difficult for Law Enforcement Agencies (LEA) to trace the origin of the money.
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In executing their correspondent banking services and daily payment operation banks are now exposed to wire stripping which impacts on cross-border banking activity. The failure on the part of Financial Institutions (FI) to monitor or prevent wire stripping will render FIs unable to screen and stop payments to designated entities and individuals[2].
Wire Stripping defined
It is the deliberate act of changing or removing material information from wire payments or instructions, thus making it difficult if not impossible to identify and restrict payments to and from sanctioned individuals, entities or countries.
How is it done
FIs may conceal or simply removing true originators from transactions processed through US banks in order to avoid the sanctions-monitoring programs put in place by those institutions. The FI may weed out, tamper, or even alter the payment details of the transfer with respect to[3]:
-the ordering client;
-The beneficiary client details such as (country, address, name);
-the origin of goods and
-sea ports involved.
Some FIs even advised originating banks on how to format their transfers in a manner that would allow the transactions to avoid detection completely[4].
Result
These FIs were subjected to regulatory fines and suffered irreparable reputational damage.
About the Author: Antoinette Sydney LLB LEC CAMLFC CFRMP, Bar No. SYA2015211, Attorney at Law. The author is the first Online Lawyer based in Trinidad and Tobago She has clients in Guyana, St Vincent, Barbados, the British Virgin Islands and North America. She specializes in Corporate Law and Anti-Money Laundering Compliance. She helps clients to start their Online Business Empire.
ANTOINETTE SYDNEY LAW OFFICE: MONTROSE MAIN ROAD CHAGUANAS, TRINIDAD AND TOBAGO
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Sources
[1] https://www.riskscreen.com/kyc360/article/implementing-sanctions-screening-and-due-diligence-methods-for-products-and-payments/
[2] https://www.ey.com/Publication/vwLUAssets/Understanding_sanctions:_wire_stripping_-_managing_compliance_risk/%24File/1308-1124709_Wire%20Stripping%20.pdf
[3] https://www.riskscreen.com/kyc360/article/implementing-sanctions-screening-and-due-diligence-methods-for-products-and-payments/
[4] https://www.ey.com/Publication/vwLUAssets/Understanding_sanctions:_wire_stripping_-_managing_compliance_risk/%24File/1308-1124709_Wire%20Stripping%20.pdf
