Message from the President & CEO
On October 26, 2001, President Bush enacted the USA Patriot Act. Its main goal is to prevent terrorism. Title III of this act, known as the “International Money Laundering Abatement and Antiterrorist Financing Act of 2001,” focuses on money laundering. It expands upon previous laws like the Bank Secrecy Act, which mandated financial institutions to report certain transactions and criminalized money laundering.
Title III broadens the anti-money laundering regulations to include all financial institutions, including escrow agents. The United States Treasury Department now oversees regulatory compliance and is responsible for developing and implementing regulations.
Section 352 of the Act requires all financial institutions, including escrow agents, to develop anti-money laundering policies and programs. These include:
- Developing internal policies, procedures, and controls
- Designating a compliance officer
- Maintaining an ongoing training program
- Establishing an independent audit function to test programs
To comply with the USA Patriot Act, Lake Inc. has developed an Anti-Money Laundering Policy. This policy must be strictly enforced. The United States Treasury Department is expected to enact regulations specific to escrow agents, which may require additional policies and programs.
President and CEO
Lake Inc.’s Anti-Money Laundering Policy
Federal anti-money laundering legislation has prompted Lake Inc. to revise our policy for handling funds. These changes ensure our compliance with money laundering regulations and protect Lake Voices Inc. and its producers from potential criminal fines and penalties.
Definition of Money Laundering
Money Laundering involves transactions designed to conceal or disguise the nature and source of funds obtained from illegal activities. The goal of the money launderer is to convert ‘dirty’ money into ‘clean’ money or other assets while leaving minimal traces of the transformation. Illegal activities often associated with money laundering include drug trafficking, terrorism, smuggling, fraud, bribery, robbery, embezzlement, and illegal gambling.
Money laundering is typically carried out in three stages:
- Placement – This involves depositing “cash” into banks and non-bank financial institutions like currency exchanges, converting “cash” into other financial instruments (e.g., purchasing monetary instruments like travelers’ checks, payment orders), or using “cash” to buy expensive items for resale. Launderers often deposit cash into banks in less regulated countries, then transfer these funds to banks in regulated environments as “clean” money. A technique known as “Smurfing” involves making numerous small cash deposits instead of a single large one to evade regulatory reporting requirements for cash transactions.
- Layering – This stage separates the proceeds of criminal activity from their origin through multiple layers of financial transactions (e.g., multiple transfers of funds among financial institutions, early surrender of an annuity without regard to penalties, cash collateralized loans, L/Cs with false invoices/bills of lading, etc.). The aim is to disguise the origin of the funds, disrupt any audit trail, and provide anonymity. Launderers aim to move funds around, changing both the form and location of the funds to make it harder for law enforcement authorities to identify “dirty” money.
- Integration – This involves reintroducing the laundered proceeds back into the economy so that they appear as legitimate funds. It’s also illegal to transport, transmit, or transfer (or attempt to do so) a monetary instrument or funds exceeding $10,000 either into or out of the United States for illegal activities or to avoid reporting requirements. Violations can result in up to 20 years in prison and fines up to $500,000. U.S. Customs Service Regulations mandate filing a “CMIR” Report when physically transporting, mailing, or shipping funds or monetary instruments totalling $10,000 or more either into or out of the United States.
Lake Inc. has implemented the following measures with immediate effect:
Knowing the Source of Client Funds
Agents and employees must always be aware of the source of client funds used to pay premiums. Funds obtained from illegal activities should never be accepted.
Cash and Other Monetary Instruments
Cash should never be accepted. Other monetary instruments (cashier’s checks, money orders, bank drafts, and traveler’s checks) should not be accepted or transported into the United States by an agent unless the agent is certain that the source of funds is legal and all required disclosure forms (CMIR) are completed.
Acceptable Forms of Payment for Lake Inc.
- Personal or business checks drawn on a U.S. bank, or a branch of a foreign bank located in the United States, subject to the Bank Secrecy Act.
- Third-party checks with a clear connection to the underlying transaction.
- Cashier’s checks, money orders, bank drafts, and traveler’s checks for over $10,000 in a single denomination.
- Wires processed through banks located in the United States, subject to the Bank Secrecy Act.
Unacceptable Forms of Payment for Lake Inc.
- Personal or business checks drawn on a foreign bank.
- Third-party checks without a clear connection to the underlying transaction.
- Checks made payable to individual producers, agencies, or to “cash”.
- Routine payments by cashier’s checks, money orders, bank drafts, and traveler’s checks for $10,000 or less.
- Agents’ personal checks or checks drawn on agency bank accounts for clients’ transactions.
All managers are required to develop written procedures for their areas of responsibility to ensure compliance with this policy.
The Chief Executive Officer (currently David Ciccarelli) serves as the Compliance Officer for this policy. The Compliance Officer’s responsibility is to ensure that the company policy complies with current laws and regulations and that the policy is communicated to relevant agents and employees.
All employees, agents, and producers will receive a copy of this policy. New employees, agents, and producers will receive a copy of this policy upon hiring. Managers are responsible for providing ongoing training regarding this policy and compliance procedures.
An audit of compliance with this policy will be completed by Internal Audit no later than six months after the effective date and at appropriate intervals thereafter.
We appreciate your understanding and full cooperation in implementing this policy. This policy was approved by Senior Management on September 22, 2023.