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The revision kit of BPP: Question 1 Lark (06/12)
The question states that the owner made some payments to foreign bank accounts without supporting documents available. By this way, the money laundering could not be traced. However, I wonderred if such approach is taken, the settlement is certainly spotted by the auditor and in case of no sufficient supporting documents, the supiciousness can be heightened.
As such, why the person who takes money laundering prepared some supporting documents such as service contracts with overseas companies/persons live overseas and explains such overseas transfers as service fees related to business activity. They may pay foreign contractor tax on such service fees transferred but could provide arguments/explanation to address the challenges from the auditor and competent authority?
Regarding the layering process: Is the overseas transfer the perfect way for the integration of the dirty money. Are they any way in respect of layering which may be applied to money laundering process?
This is a past exam Q (J12). If you look at the syllabus and study guide the relevant LO is:
f) Recognise potentially suspicious transactions and assess their impact on reporting duties.
The Q is not going to mention the term “money laundering” but give you a scenario which points to the possibility of money laundering – and note that the requirement said “any reporting”. The mere fact that payments are to overseas does not mean that this is suspicious – and if, as you suggest, management had fabricated documentation, the auditor may not have identified it as suspicious – but that would negate the question. So you have to look at the situation the examiner is giving you – no supporting documentation and, in the scenario as a whole, references to “strange”, “odd”, “refusd to give an explanation”, “lack of evidence”, “became quite aggressive”.
As the exam is not about how to launder money – but the auditor’s responsibilities where money laundering is suspected – I can only say that layering typically entails the international movement of the funds – you will find more details and examples if you browse the web.
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