Acting on Suspicious Transactions



MONEY LAUNDERING-CONSEQUENTIAL NATURE OF SUSPICIOUS TRANSACTIONS Sonja Cindori, Ph.D., Assistant Professor, Department of Financial Law and Financial Science, Faculty of Law, University of Zagreb, ?irilometodska 4, HR -10000 Zagreb, Croatia, e-mail: sonjacindori@pravo.hrNenad Ran?i?, Ph.D., Assistant Professor, Department of Economics, Faculty of Law, University of Zagreb, Trg Mar?ala Tita 14, HR -10000 Zagreb, Croatia, e-mail: nrancic@pravo.hrOzren Pilipovi?, Ph.D., Assistant Professor, Department of Economics, Faculty of Law, University of Zagreb, Trg Mar?ala Tita 14, HR -10000 Zagreb, Croatia, e-mail: opilipovic@pravo.hrAbstractThis paper highlights the ambiguity of the concept of suspicious transactions and its complex nature. With the basics of the definition of suspicious transactions in the international context as their guidelines, national legislations attempt to accommodate the same content to their local conditions. The results of the chosen legislative will be shown through the statistical analysis of three Western European countries, alongside Croatia. Through the statistical analysis of the reports on suspicious transactions of the banking and non-financial sector, we wish to acknowledge the importance of suspicious transactions in the relationship between competent authorities and financial intelligence units, and their role in the further stages of the treatment of reported transactions where there is a suspicion of money laundering and financing of terrorism. Doing so inevitably raises the question of the level of awareness that the financial and non-financial institutions have reached in relation to the issue under discussion, and the potential for further development.Key words: money laundering, terrorism, suspicion, transaction, risk, prevention, indicatorIntroductionIt is impossible to imagine an effective money laundering prevention system without an elaborate definition of suspicious transactions. Regardless of whether they appear in correlation with other suspicious transactions or cash transactions, they will always form the basis of action for any financial intelligence unit.However, the question is how to define a suspicious transaction when its contents are indeterminate and the purview limitation is unacceptable. Is it possible to create a quality money laundering prevention system that will highlight just the nature of suspicious transactions?Suspicious transactions have not always had the role and significance in the money laundering prevention system they have today. From the very beginnings of trying to define them, all the way to the risk based approach system which assigns them crucial meaning, suspicious transactions have been growing in importance in a specific way in each country. On the way to alignment with international standards, paving the way towards a sophisticated money laundering and terrorist financing prevention system, Croatia achieved significant results. The comparison, of Croatian legislation and international standards on the one hand and the statistical analysis of concrete achievements on the other, points to a permanent development of the level of awareness, especially in the non-financial sector. A growing quality of suspicious transactions, which are an inevitable result of comprehensive legislation and everyday efforts of supervisory institutions in the implementation of frequent monitoring and systematic education, supports this fact.The Legislative Basis in the Defining of Suspicious TransactionsThe European Union’s directives on preventing the use of the financial system for the purposes of money laundering clearly show the development of perfecting and regulating the term of suspicious transactions. Besides introducing concrete money laundering (and later terrorist financing) prevention measures, by monitoring the transactions through the financial and non-financial sector, these directives enforce the need for the harmonisation and adjustment of national legislations. In doing so, particular emphasis is given to the need for building a money laundering prevention system based on the "risk based" approach and the development of typologies and indicators for the monitoring of suspicious transactions for all sectors and professions.The first attempt at setting a preventative framework in the field of money laundering can be found within the Directive 91/308/EEC (hereinafter: the First Directive). Although quite flexibly, it was the first to define the range of the term of suspicious transactions that remained essentially unchanged until today. Seeing as the definition obliges the credit and financial institutions to do mandatory checks with special attention to any transaction which is considered potentially related to money laundering, the vagueness of its content is clear. Taking into account the fact that the First Directive is a mere guideline for activities on the national level, regardless of the fact that the definition of suspicious transactions is quite flexible (for various reasons), this approach has established the basis of preventative action in a way. Unlike the first two directives, Directive 2005/60/EZ on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (hereinafter: the Third Directive) is based on risk assessment, thus broadening the definition of the concept of suspicious transactions. Nevertheless, the Third Directive does not directly figure suspicious transactions as the backbone of money laundering prevention, and its definition partly repeats the definition from the First Directive. However, it is entirely certain that the significance of suspicious transactions in building the money laundering prevention system can be found in the obligation to any institutions and persons defined by the Third Directive to conduct in-depth analyses of their clients, which proves that the attitude towards suspicious transactions is aimed in a new direction based on risk assessment.The implementation of client in-depth analysis measures and their contents clearly show that money laundering has gone further than handling cash, and the suspicion of money laundering is active from the moment of identifying the client at the time of (or before) establishing a business relationship to the moment of data verification. With the kind of identification and data verification that is subject to computerisation, the irreplaceability and importance of the human factor finally comes to the fore. Confirmation of this fact comes from the content of the in-depth analysis measures, which (among other things) requires continuous data collection on the purpose and intended nature of the business relationship and its constant monitoring so as to generate the client, business and risk profile, and create awareness of the source of funds available to the client.A similar developmental logic of suspicious transactions can also be observed within the framework of FATF Recommendations. Recommendations from 1990 generally referred to all complex, unusual transactions, and all unusual patterns of transactions, which have no apparent economic or visible lawful purpose. Revised Recommendations from 1996 brought no great innovations, whilst the concept of suspicious transactions was clearly emphasized in the revised Recommendations from 2003 in terms of adapting to the new trends in terrorist financing prevention. The Meaning of the Concept of "Suspicion"With the development of money laundering techniques and terrorist financing, and thus with the development of legislative attempts at controlling these, suspicious transactions stand out as being crucial. At the same time, whilst not questioning the importance of cash transactions, suspicious transactions require legislative determinateness to the fullest extent possible with respect to their complex nature.Although the FATF Recommendation 13 links suspicious transactions with suspicion or grounds for suspicion for the funds being the proceeds of unlawful activities or being linked to terrorist financing, there is a question as to what the term "suspicion" signifies. This context does not call for the evaluation of doubt based on solid evidence, as indicated by the Third Directive which considers all those transactions, whose nature could be connected to money laundering or terrorist financing, suspicious transactions. However, the term of suspicious transactions is extended to all complex and unusual transactions and all unusual patterns of transactions which have no apparent economic or visible lawful purpose. This leads to the conclusion that a suspicious transaction will be evaluated as such in case it leads to the conviction of unlawful activities (whether they be suspicious or illogical), although such facts should have a final logical stronghold. In support of this, Gold and Levi distinguish between two concepts pertaining to "doubt". According to their interpretation, the term "suspicious" signifies the objective characteristics of the transaction which may never be discovered or proven illogical (which is why the term was subject to criticism). On the other hand, the term "suspected" is more focused on "the state of mind which evaluates what it has observed" and its usage is recommended. Regardless of the content of the definition of suspicious transactions, it is important to always bear in mind that suspicious transactions have "certain broad characteristics, including, most obviously, transactions that depart from normal patterns of account activity". The extent to which the criteria elaborated on by the definition are actually met is subsequently estimated by a supervisory institution, and finally by the treatment of the reported suspicious transaction within the framework of the financial intelligence unit (hereinafter: FIU). This leads to the conclusion that the concept of suspicious transactions is multifaceted. It can be observed either from the standpoint of an institution active as an obligor in the money laundering prevention procedure or from the standpoint of the FIU, and it is the significance of either its passive or active component that can be studied. Finally, we are dealing with the element and the final result of an effective risk assessment approach, and that calls for our undivided attention to such a complex institute.Suspicious Transaction Consistency The activity closely linked to suspicious transactions can be viewed both from the standpoint of an institution and the standpoint of its very nature. By contemplating suspicious transactions as all transactions for which there is a suspicion of being linked to money laundering (or terrorist financing) in the previous chapter, and broadening a part of its definition to accommodate complex and unusual transactions, as well as those transactions that have no apparent economic or visible lawful purpose, the question of their complex nature is resolved. However, suspicious transactions can also be observed from the standpoint of the institution which initiates their being reported. In principle, any institution or person required to do so by law is obliged to report suspicious transactions if they are recognised as such using the risk assessment criteria. In this case, the active role of such institutions can be discussed, when they recognise and report suspicion of committed or attempted money laundering or terrorist financing of their own initiative.In other cases, these institutions act passively, only responding to inquiries by the authorised FIU. The contents of such inquiries are all transactions previously reported by the same or some other legally defined institutions with a request for submission of any additional information on transactions or persons and their treatment of financial assets or liabilities. Therefore, “passive” duty is similar to pre-existing national laws establishing an exception to the duty of confidentiality on grounds of public policy and crime prevention", whereas “active” duty puts forward a system of proactive reporting of suspicious transactions by credit and financial institutions is certainly a novelty".Proactive action is the key element in the mosaic of money laundering prevention. Although it is solely a system of money laundering prevention, the fact that the legislation is based on the act of reporting the (cash or suspicious) transactions already in the process of money laundering is unavoidable. Hence, the active role of all institutions involved in the preventative strategy against money laundering is a vital element in its detection. Whilst advocating proactive action which is, after all, initiated by the risk based approach system as the core of the Third Directive, we should bear in mind that its implementation is not simple. Systematic data collection and verification, and data collection on the business relationship and its systematic monitoring surely require the kind of help that is best sought in the explosive advancement of technology. An IT approach to diverse data collection with a wide range of areas of work will surely influence the final result. "For any intelligence-oriented approach, a narrow focus on just the economic crime in question would not suffice; an intelligence-oriented approach would have to explore all avenues relating to commerce, industry, agriculture, banking and the financial services sector, and so on".Suspicious Transactions as the Basis for the "Risk Based Approach" System In the systematic elaboration of the concept of suspiciousness and its complex nature, the "risk based approach" system is inevitably highlighted as a system which gives risk evaluation and categorisation the concrete form of suspicious transactions.Although suspicious transactions make up its framework, it is evident that there can be no talk of any universally accepted methodologies that would describe the nature and extent of suspicious transactions. They find their place through the identification and categorisation of money laundering and terrorist financing risk, which leads to the establishment of the mechanisms of control which are based precisely on the identified risk.Without questioning the necessity of the legislative basis, the risk assessment system, and thus the detection of suspicious transactions, is after all a set of many different elements. "The risk-based approach to mitigating money laundering risk is not a specific thing; it is not a tangible, predetermined work plan that, if followed, will be the answer to all money laundering concerns. Rather, it is a state of mind".This statement does not mean the absence of basic rules pertaining to clients and their businesses. The set rules represent a mere framework of action, with a certain degree of flexibility in the implementation, according to the risk assessment for each category of clients, transactions, products or services.The FATF Guidance on the Risk-Based Approach to Combating Money Laundering and Terrorist Financing lists three steps which lead to an effective implementation of the risk assessment system: risk detection, risk assessment and risk management strategy development, in other words, risk reduction tendencies. Here, the basic concept of risk is closely linked to clients, products and services, including the means of transaction execution and the geographic position of the country assessing the risk.When considering suspicious transactions through the prism of the risk assessment system, their importance and necessary content are clear. Seeing as risk assessment is consequentially linked to the KYC principle in terms of in-depth client analysis implementation, the final result of evaluating a transaction as suspicious does not signify the choice of only one potential solution. The potential choice of "the best possible solution" is reached depending on the type of institution, the characteristics of the transaction and the business components of persons carrying out the transaction.The Development of the Concept of Suspicious Transactions in Croatian LegislationCroatian legislation developed adhering to the logic that followed the three EU Directives, from the passing of the first Money Laundering Prevention Law to the current Money Laundering and Terrorist Financing Prevention Law with its related bylaws.The Establishment of the Money Laundering Prevention System within the National FrameworkThe first Money Laundering Prevention Law was passed in 1997. In accordance with the First Directive, the concept of suspicious transactions was defined in a flexible way and placed within the provisions on client identification. The characteristics which make a transaction suspicious are not specified, and "any cash and non-cash transaction for which there is suspicion of money laundering" is considered suspicious.In line with the nature of particular suspicious transactions, Article 8 of this Law stipulates the obligation of submitting data to the competent authority (Office for the Prevention of Money Laundering) before such suspicious transactions are concluded, with an indicated time frame of their expected conclusion. Imposing the obligation of reporting the still outstanding suspicious transactions in advance shows maturity in the approach, seeing as preventative action is a rule and subsequent reports of an already concluded transaction is an exception only applied in case the Office for the Prevention of Money Laundering (hereinafter: the Office) cannot be informed of a transaction before its conclusion due to its nature.Although the second Directive brought no changes concerning the concept of suspicious transactions, two years after its adoption saw the beginnings of the first serious changes and amendments to the initial Money Laundering Prevention Law. These amendments to the Law on Prevention of Money Laundering (hereinafter: LPML) started a revolution, starting with the definition of money laundering. Whilst the definition of money laundering from the initial Law was in conflict with the definition found in the Penal Statute, LPML sees it mentioned throughout the general provisions on the activities of the Office in "detecting suspicious transactions used to conceal the true source of money, property or rights for which there is a suspicion that are illegally acquired within the country or abroad".This highlighted the character of suspicious transactions (although not in the form of a definition) and gave it importance in the money laundering prevention process. Although such treatment put suspicious transactions in the foreground, it is evident that the activities of the Office were focused on cash transactions. At the same time, the Office kept receiving reports on all cash and non-cash transactions for which there was suspicion of money laundering, regardless of the amount and the type of transaction, in accordance with the then applicable international standards and with the contents of Article 3 Paragraph 8 of the Second Directive, and the 13th and 11th FATF Recommendation.Suspicious Transaction Categorisation in Relation to International StandardsPursuant to the provisions of the Third Directive in the alignment of its legislation, Croatia adopted a risk based approach and gave more attention to suspicious transactions in its new Anti Money Laundering and Terrorist Financing Law (hereinafter: AMLTFL).Bearing in mind the vast possibilities that stem from the nature of suspicious transactions, AMLTFL has tried to describe not only suspicious transactions, but also any strange and illogical transactions.In light of this, AMLTFL considers any attempted or executed cash or non-cash transaction, regardless of its value and effect, a suspicious transaction. The legislator emphasizes the active role of the obligor in the detection of (innovative) attempts at money laundering or terrorist financing in the first part of the definition of suspicious transactions. The definition of suspicious transactions listed below highlights the three qualities that a transaction may (but may not necessarily) have to be considered suspicious:a) Connection to an illegal source or terrorist financing,b) Deviation from the party’s usual business dealings, taking into account the indicator criteria,c) An attempt at finding a loophole in the law.In addition to the possible reasons for the suspicion of money laundering identified by this categorisation listed above, any transaction or party for which the obligator determines that there are grounds for suspicion of money laundering or terrorist financing is considered suspicious.Considering the fact that suspicious transactions represent an increased risk of money laundering and terrorist financing by their very nature, all obligors are obliged to recognise these transactions within the scope of their own activities, focusing on the business specifics. This alone confirms the soundness of AMLTFL in risk assessment, monitoring of the client’s business dealings and data collection on the purpose and intended nature of the business relationship.The Complexity of the Application of the List of Indicators and Its SignificanceAMLTFL took a step further in understanding suspiciousness, in accordance with risk assessment, the moment it put the making of the list of indicators for recognising suspicious transactions and persons, about whom there are grounds for the suspicion of money laundering or terrorist financing, under the jurisdiction of the obligor. These lists of indicators vary from obligor to obligor, depending on the specific characteristics of their business operations and the very concept of suspicious transactions.The basis for the preparation of each list of indicators is precisely its tendency to change. The lists are amended and adapted in accordance with the trends and typologies of money laundering and the circumstances arising from the obligor’s own business operation. Seeing as any serious attempt at money laundering has its own logic of action and a goal to be achieved, the legislator will very often use the law or delegated legislations to prescribe the framework of action regarding suspicious transactions, and leave it for the obligors of the financial and non-financial sectors to describe specific situations and actions. However, it is difficult to expect the legal treatment of certain indicators that lead to the suspicion of money laundering, but it is very realistic to accept any description of the type of situation indicative of money laundering or terrorist financing for certain types of obligors.In addition to this, the reasons for the suspicion of money laundering or terrorist financing, which indicate possible suspicious transactions, are very often found in combination with several other indicators, which ultimately results in increased suspicion of illegal activity (more than could result from a single indicator) . In other words, the reasons for doubt hold more weight if they are the result of several different indicators. However, even a single indicator may indicate a suspicious transaction if it is joined by a concrete explanation.In addition to suspicious transactions, AMLTFL recognises complex and unusual transactions. In order to distinguish between the concepts, it uses the established definition to set a clear line between the suspicious transactions which have reached a certain degree of suspiciousness due to circumstances, sufficient to identify the offense (e.g. suspicion that a person is engaged in money laundering and drug dealing), and the unusual transactions which represent a particular number of illogical transactions with a yet unidentified offense. According to the established definition, a large number of suspicious transactions reported to the competent FIU often fit the definition of illogical or unusual transactions precisely.The above shows that, because of the imagination of money launderers which is rarely defied by normative constraints, the legislator clearly indicates the need to pay particular attention to all complex and unusual transactions, as well as any other form of unusual transactions that have no apparent economic or visible lawful purpose. The risk based approach certainly requires monitoring such transactions, even when the grounds for the suspicion of money laundering or terrorist financing have not yet been established.Acting on Suspicious TransactionsUnlike cash transactions on the completion of which obligors inform the Office immediately, within three days, the nature of suspicious transactions requires a completely opposite approach. If the obligor knows or suspicious that a transaction is related to money laundering or terrorist financing, they are obliged to refrain from completing it and to notify the Office immediately, prior to its execution. The notice is to be delivered by telephone, fax or in some other way, and is to include any reasons for the suspicion of money laundering or terrorist financing and specify a period during which the transaction is to be executed. It is particularly important to deliver the notification on the intended or planned suspicious transactions regardless of whether or not the transactions are carried out later.Subsequent delivery of notices on already executed suspicious transactions is an exception, and is to be processed no later than the following working day, explaining the objective reasons why the obligor was unable to act under the provisions of AMLTFL. Such an exception is usually required by the nature of the transaction or the fact that the transaction has not been completed.Following the logic so far, the outset of the analytical processing carried out by the Office is closely linked to the transaction or the person for whom the obligor or a competent body "provides substantiated reasons for the suspicion of money laundering or terrorist financing". In this way, the legislator emphasizes the Office’s action on the transactions for which the risk analysis has been carried out, and thus limits any action based on strict adherence to the rules. This limits the number of "formally" opened items, previously encouraged by LPML, and further liberates the Office’s resources.In addition to the received information that raises the suspicion of money laundering or terrorist financing, the Office may require the obligor to seek and receive all other necessary information about the parties and transactions, their property, funds and property dealings, and all available data and information which the obligor has. The same information may be required about the person for whom it is possible to assume that they were in any way involved in the transactions or dealings of a person with respect to whom there are grounds for the suspicion of money laundering or terrorist financing. At the same time, the delivery of the requested data does not constitute disclosure of classified information (i.e. disclosure of business, banking, professional, notary, lawyer or other secrets) , nor are the obligors and their employees liable for the damage caused to the persons or third parties if they collect and submit the data to the Office, monitor the client’s business dealings and implement the Office’s decree on the transaction’s temporary suspension in good faith.In case urgent action is needed to check the data on a suspicious transaction or person, and if the Office judges that there are grounds for suspicion that the transaction or person is related to money laundering and terrorist financing, the Office may, by written order to the obligor, order the transaction's temporary suspension for no longer than 72 hours. If, due to the nature of the transaction or its processing and the circumstances surrounding the transaction (or in other emergencies), it is impossible to issue a written order to the obligor, the Office may, exceptionally, issue a verbal order to the obligor to temporarily suspend the suspicious transaction. The Office is to inform the Croatian State Attorney and/or the competent State attorney about any issued orders without delay.In addition to data collection and transaction suspension, the Office may order the obligor to deliver the additional data necessary for money laundering prevention and detection (as a realisation of the passive obligor role) and order constant monitoring of the financial dealings of the client with respect to whom there are grounds for the suspicion of money laundering or terrorist financing, and any other persons for whom it is possible to reasonably conclude that they were involved in or aided the transactions or business dealings of the suspicious person.The only exception to reporting suspicious transactions is presented by the group of professions and occupations such as lawyers, notary publics, auditors, legal and natural persons providing accounting services and tax consultation, regarding the data received from their clients or collected on the client during the course of representing the client in relation to court proceedings (including the counselling on proposing or avoiding court proceedings), regardless of whether the data was collected or obtained before, during or after court proceedings. Analysis of the Number of Reported Suspicious Transactions in Croatia and Western European CountriesSuspicious transactions are undoubtedly the basis of any money laundering and terrorist financing prevention system. With an elaborate risk assessment system, utilisation of a list of indicators and an ongoing educational process for all participants of this complex money laundering prevention system, we still have to ask ourselves what the crucial thing is, influencing the quality of the assessment of a certain transaction as suspicious. As mentioned previously, the risk assessment system, and therefore the concept of suspiciousness, is still a certain state of mind, while its concrete implementation is in the hands of individuals on the one hand, and the hands of the institutions of law enforcement on the other. Analysis of the implementation of the money laundering prevention system in Switzerland, Germany, France and Croatia will show whether or not such a system is viable and effective in practice, and how the inevitable alignment of national legislations with international standards contributed to it.Table 1. The analysis of suspicious transaction reports by financial institutions (banks) and the non-financial sector in 2009/2010 COUNTRYNUMBER OF REPORTED SUSPICIOUS TRANSACTIONS2010/2009SHARE OF BANKS IN THE TOTAL NUMBER OF SUSPICIOUS TRANSACTIONS2010REPORTING TREND IN THE NON-FINANCIAL SECTOR (lawyers and notary publics)2010/2009SHARE OF SUSPICIOUS TRANSACTION REPORTS TO COMPETENT BODIES2010CROATIA602/62930150% (-)Lawyers 5Notary publics 2315726% (+)Lawyers 0Notary publics 2FRANCE19.208/17.31013.81472% (-)Lawyers 0Notary publics 6748865% (+)Lawyers 2Notary publics 370GERMANY11.042/9.0466.75161% (-)Lawyers 10Notary publics 44.19638% (0)Lawyers 16Notary publics 5SWITZERLAND1.159/89682271% (+)Lawyers 13100286% (-)Lawyers 11Source: Croatian, French, German and Swiss Annual Reports and the Croatian Moneyval Report for 2011.CroatiaAn examination of the statistical data in the Moneyval Report for 2011 and the Croatian Annual Report for 2010 shows a downward trend of suspicious transaction reports in comparison to the suspicious transaction reports from earlier periods. After AMLTFL, which bases the suspicious transaction detection and reporting system on risk assessment, came into effect in 2009, the number of suspicious transactions reported in 2009 and 2010 was reduced by up to 5 times in comparison to previous years (2,323 suspicious transactions reported in 2007, and 2857 such transactions reported in 2008). The demonstrated decrease in the number of reported suspicious transactions is the result of the application of AMLTFL, which describes the nature of suspicious transactions in great detail. Although the total number of suspicious transaction reports is clearly on the decline, the share of banks in these reports has also dropped and was only 50% in 2010. For the same reasons, the number of suspicious transaction reports in the non-financial sector (especially by lawyers and notary publics) is rising fast, and in 2009/2010 the number of their reports has increased fourteen fold. The non-financial sector outdid the financial non-banking sector in the number of reported suspicious transactions, noting that the Croatian Post, with a total of 63 reported transactions in 2010, exceeded the total number of reports in the non-banking and non-financial sectors.On the other hand, there is an observable trend of an increase in the share of reported suspicious transactions within the total number of reports to the competent authorities, recorded in Croatia as 26%. A distinct improvement in this category can be identified by comparing this piece of data with the number of forwarded (and processed) suspicious transaction reports in 2009, when the share of such reports was 20%, and only 4% in 2008.FranceThe statistical review of suspicious transactions reported in France between 2009 and 2010 indicates an increase in the number of reports. The significant dominance of the banking sector notwithstanding, the decline in the share of banks in the total number of reported suspicious transactions is evident, and in 2010 the banks accounted for 72% (in 2009, they accounted for 75%).The data pertaining to non-financial institutions, especially notary publics, followed by auctioneers, casinos, auditors and chartered accountants, whose number of reported suspicious transactions increased by 37% in 2009 and 2010, testify to the realisation of the implementation of risk assessment in France. The leading institution in this category consists of notary publics with an increase in suspicious transaction reports by 82% (compared to 2009). Such explosive growth can be explained by a number of educational campaigns to raise awareness, carried out by the body responsible for the direct supervision of notary publics, while the quality of their reports remained at the same high level.Authorised exchange offices also marked a significant increase (33%) in suspicious transaction reports because of an increased trade in gold and precious metals, rationalised as the safest investments in the times of economic and financial crisis. In addition to this explanation, there is a possibility that an increase in these types of transactions resulted from the money launderers’ innovative ways of doing business in order to avoid the banking sector armed with sophisticated methods.On the other hand, suspicious transaction reports by lawyers and solicitors are evidently on the wane (3 transactions were reported in 2008, and 2 were reported in 2009), and have reached zero in 2010, despite the efforts from the Conseil National des Barreaux to confirm the particular and indisputable place that lawyers have in the AML/CFT.The relatively high number of suspicious transaction reports from the financial and non-financial sectors notwithstanding, the total number of processed suspicious transactions referred to courts and other competent institutions (and other state regulatory and supervisory agencies, and foreign FIUs) reached the very low 5% in 2010. From the total number of 886 suspicious transactions forwarded onto authorities, FIU sent 404 transactions to the competent courts, and 482 so-called "spontaneous reports" were referred to other state regulatory and supervisory agencies and foreign FIUs. Although the percentage of suspicious transactions processed after forwarding is relatively low, we can notice its trend of positive growth of 29% (compared with the data from 2009), with substantial implications for the financial flows potentially associated with illegal activities amounting to €524 million in total.GermanyThe statistical analysis of data on reported suspicious transactions in Germany follows the same growth trend. Even though, statistically speaking, the number of suspicious transaction reports is on the rise, nearly 20% of reported transactions in 2009 and 2010 included an intense activity in transferring illegal funds through bank accounts to third parties and the theft of personal information via e-mail. Despite the exclusion of these types of transactions, the number of suspicious transaction reports was still slightly increased in 2010, which was also the year it reached its peak.The banks' share in the total number of reported suspicious transactions in Germany participates in a relatively high percentage of 61%, although with a downward trend (although the share of the financial sector in the total number of suspicious transactions is 92%). The same downward trend in the number of reported suspicious transactions is detected with attorneys, notary publics, auditors and accountants. On the other hand, the number of reports by tax advisers and casinos has increased slightly, and the increase is more significant in the category of reports by persons trading in goods.The number of suspicious transaction reports from the Tax Administration intensified in 2010 (compared to 2009, there is an increase of 9%), although the total number of 271 suspicious transactions is far smaller than the number of suspicious transaction reports in the period between 2004 and 2007. Using the same objective and with more frequent supervision organised within the framework of the Customs Administration, the number of suspicious transaction reports (3,085) marked a significant increase (77%) compared to 2009.Despite the fact that, out of the total number of reported suspicious transactions, the FIU forwarded a high 30% percent of cases classified as "especially relevant to analysis" onto competent institutions, it is important to note that 36% of the cases are still under analysis within the FIU. After the analysis is completed, the number of cases and therefore the number of suspicious transactions sent onto the competent authorities for further action will ultimately increase, noting that the vast majority of cases are based on fraud as their predicate.Switzerland Although the number of suspicious transaction reports in the period between 2009 and 2010 was slightly increased, the Swiss FIU Annual Report for 2010 justified the increase in the number of suspicious transactions with the activities pertaining to two complex cases in the banking sector, which resulted in a large number of suspicious transactions (144) . In spite of that, the banking sector still accounted for a very high 71% of the total number of reported suspicious transactions, although there was a perceived rise of suspicious transaction reports in the field of payment services, by fiduciaries (trustees), persons managing the assets, and lawyers (although they were not primarily obliged with the obligors’ role of reporting suspicious transactions).However, what really indicates a developed risk assessment system is the number of reported transactions based on personal assessment, and not in accordance with the strict provisions of the law. Such applications are indicative of the financial sector (banks and payment services sector), and account for one-sixth of the total reported suspicious transactions in the last eight years. The total number of reported transactions on the basis of personal assessment is steadily increasing due to the change in legislation allowing their submission to MROS (the Swiss FIU) directly, and not to the bodies of criminal prosecution.The high level of banks’ shares in the total number of suspicious transaction reports notwithstanding, it is pointless to question the effectiveness of the developed money laundering and terrorist financing prevention system in Switzerland, indicated by the fact that the FIU refers 86% of processed suspicious transactions to the competent authority for further action, with the total amount of €593 million Euros. Summary of the Statistical Analysis Although Croatia found itself in a very elite group of Western European countries in the analysis of the importance of suspicious transactions for the implementation of money laundering preventive strategies, the statistics indicate that the importance and consequently the quality of suspicious transactions has been taken to a higher level. Therefore, the level of awareness keeps growing in the non-financial sector from one year to the next, as a positive trend within the limitless possibilities of the money launderers’ imagination.The increased share of suspicious transactions within the total number of suspicious transactions sent to the competent authorities for further processing surely contributed to the increase in quality of the evidently smaller number of reported suspicious transactions.By passing AMLTFL, Croatia adjusted to international standards. Considerable progress has been made through the concrete efforts to define the content of suspicious transactions, by imposing an active role onto obligors in their drafting of the indicators for recognising suspicious transactions, and by frequent obligor trainings in 2009 and 2010. One should not ignore the crucial role of supervisory institutions, especially the Croatian National Bank and the Tax Administration, when conducting off-site supervision, as well as the role of the FIU which conducted frequent on-site supervision.Furthermore, the statistics of suspicious transaction reports certainly confirm that France maintains money laundering prevention at a high level. Despite the high level of participation of the banking sector in the total number of reported suspicious transactions, there is a noticeable growth trend for these reports in the non-financial sector. However, a relatively small percentage of suspicious transactions is processed and referred to the competent authorities for further processing.On the other hand, the German non-financial system is not yet sufficiently involved in the money laundering and terrorist financing prevention system, although there is slight improvement in this area. However, the activities focused on the quality of suspicious transaction reports have intensified, and there is noticeable change in quantity in the government bodies. The results are clearly visible in the increasing number of suspicious transaction reports referred to the competent authorities.Finally, Switzerland reached the quality and quantity of suspicious transaction reports in all areas thanks to its money laundering prevention system "based on well-founded suspicion of money laundering", unlike most systems which base their preventive strategy on "suspicious transaction reports STR (i.e. an unqualified suspicion)", or even merely on "currency transaction reports CTR (i.e. a transaction exceeding a certain monetary threshold)" .ConclusionRegardless of the legislative treatment of risk assessments, and subsequently the actual application of suspect transactions, the criteria for assessing the performance of their implementation indicate that, in practice, the efforts are talked about more than the facts. In this sense, we can talk more of the Croatian efforts towards the implementation of an efficient money laundering and terrorist financing prevention system, and less of the established facts based on which it is possible to reach concrete conclusions.Whilst quoting an interesting example of the perceptive standpoint regarding suspect transactions in which "Justice Potter Stewart tried to explain hard-core pornography, or what is obscenity, by saying: "I know it when I see it", the definitions of "suspicious activities" are equally vague, and they vary from country-to-country", the conclusion offers itself.With respect to the specificity and necessary differences between certain countries, and therefore different money laundering and terrorist financing prevention systems, it is evident that, in Croatia, the awareness of all involved institutions toward the issue has reached a higher level after all. The increasing involvement of the financial sector and the actions taken by the supervisory institutions all speak in favour of the above fact, with obvious room for development and improvement.Further steps of the Croatian positive efforts towards improvement are expected within the framework of effective risk assessment approach – regardless of sector. In other words, it aspires to reinforcement of suspicious transactions through the identification and categorisation of money laundering and terrorist financing risk, which leads to the establishment of the mechanisms of control which are based precisely on the identified risk. Concretely, a relatively small number of reported suspect transactions with a high percentage of suspect transactions referred to the competent authorities poses a challenge for Croatia. ................
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