Common AML Schemes: Trusts

Money laundering and financial crimes pose large risks to financial firms, both from a reputational and regulatory perspective. However, these schemes can take many forms making it difficult for firms to do their due diligence to protect themselves and their investors.

We’ve put together a series of the most common forms of money laundering and financial crimes and what firms can do to combat each one.

Trusts

Trusts are legal arrangements in which one party, called the trustor or settlor, transfers ownership of assets to a second party, called the trustee, to hold and manage for the benefit of a third party, called the beneficiary. Trusts can be used for a variety of purposes, including estate planning, asset protection, and charitable giving.

However, trusts can also be used for money laundering purposes. Money launderers may use trusts to conceal the true ownership of assets or the source of funds. This can be done by transferring assets to a trust, and then using the trust to conduct financial transactions or investments in a way that obscures the true ownership of the assets.

For example, a money launderer may transfer ownership of a piece of real estate to a trust, and then use the trust to sell the property to an unsuspecting third party. The proceeds of the sale may then be transferred to another trust or investment vehicle, further obscuring the true ownership of the funds. Trusts can be difficult to detect and investigate, as they often involve complex financial structures and may be subject to strict confidentiality provisions. Financial institutions and law enforcement agencies may have difficulty tracking the movement of funds through trusts and identifying the ultimate beneficiaries of the trusts.

To combat the use of trusts for money laundering purposes, financial institutions and law enforcement agencies may need to use specialized techniques and expertise to unravel the complex financial structures involved in trust-based money laundering schemes. It is also important for financial institutions to have robust anti-money laundering (AML) policies and procedures in place to detect and prevent the use of trusts for money laundering purposes.

Read about other common AML schemes

• Account takeover
• Business email compromise
• Environmental, social, and governance (ESG)
• Investment Companies
• Real Estate
• Cybersecurity Tactics
• Elder Financial Exploitation

How we help

ACA’s AML and Financial Crimes practice offers advisory services and solutions to assist financial services firms in addressing threats and regulatory obligations associated with financial crime. We work with investment advisers and broker-dealers, among others, to assess risk, develop policies and procedures, and perform independent tests and gap analyses.

Our support can incorporate our ComplianceAlpha^® regulatory technology and managed services to help your firm meet its data screening, ongoing monitoring, remediation and reporting needs.

Reach out to your ACA consultant, or contact us to find out how ACA can help you meet your AML requirements.