Exempt Entities

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Exempt Entities

There are a number of exempt entities from the BSA and AML requirements. Chief amongst these are government and quasi-government accounts.

This is a surprise to many, but not to the criminals.  Criminals, where they have a government contact are using the government contacts to open accounts in the name of a government entity.   Where the criminal lacks a contact inside the government, they will use a government name and work with someone inside the financial institution to open the account and register the account inside the bank as an exempt account.

There has also been a push for a few NGOs funded by a government to be considered exempt.

The reality is that we are finding more and more government accounts used to launder money.  The most recent two we have seen was a military account from a Latin American country as well as a municipal account from a small community in Colorado.

The failure in both was a failed intake process and KYC.  There were zero efforts by compliance, compliance function over and above the client intake persons, to extent any effort to verify the accounts.   The money laundering was not discovered by the banks but as a result of criminal prosecutions in the respective locations.

It is a form of camouflage.  The criminals try their best to look like anything but what they are.   Zebras try to look like shrubs, tigers disappear into the woodlands and tasty yellow jackets (so we have been told by our sparrow friends) try to look like dangerous bees.  Criminals try to look not just legitimate but hyper legitimate and even exempt from your scrutiny.

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