Veits O. Forming a System of Prevention and Counteraction of the Legalization of Bank Clients’ Proceeds

The thesis is devoted to theoretical justification, theoretic foundations’ and methodological approaches’ improvement, scientific-practical recommendations’ development in creating a system for preventing and counteracting the legalization of bank clients' proceeds. In the thesis, theoretical approaches to the concept of “legalization of proceeds” are systematized, its essential characteristics are summarized, and its content-analysis is made. The results of content-analysis in combination with a normative definition of “a bank’s client” provided an opportunity to substantiate that the legalization of bank clients' proceeds should be understood as any criminal activities with money and other financial illegally obtained funds being committed by a legal or neutral person aiming at hiding their origins and turning them into legal assets through using bank services or attempting to do so. The formulated definition indicates that the person attempting to legalize criminal money is a bank’s client according to the current legislation. It emphasizes that any actions with illegally obtained proceeds are considered to be money laundering, taking into account the morphological base and keywords accepted in a majority of official documents. In this work, it was established that the main difference between prevention and counteraction of money laundering is that counteraction arises only when there is an action aiming at money laundering. It was also substantiated that prevention of money laundering through banks should be understood as a set of made beforehand bank’s actions aiming at precluding any criminal activities with money and other financial illegally obtained funds being committed by a legal or neutral person aiming at hiding their origins and turning them into legal assets through using bank services or attempting to do so. Counteraction of the legalization of bank clients' money is a set of bank’s actions directly impeding any criminal activities with money and other financial illegally obtained funds being committed by a legal or neutral person aiming at hiding their origins and turning them into legal assets through using bank services or attempting to do so. The sequence of steps in creating a system for preventing and counteracting the legalization of bank clients' money is established, which includes not only the well-known stages of a system’s building and a current system’s evaluation but also unannounced audits, a planned staff training, and planned audits. The developed methodical approach to estimating a system for preventing and counteracting the legalization of bank clients' money consists of six stages. Their implementation helps to estimate the system’s elements integrally, compare them, and find its vulnerable and weak elements; to assess the whole system integrally with the help of incorporating all the integral elements’ estimates into the one indicator taking into account their coefficients of significance; to interpret the results using the developed scale. Through the use of the formulated approach, the seven operating Ukrainian banks’ systems for preventing and counteracting the legalization of bank clients' money were assessed. In response to results, and taking into consideration the in-depth analysis of the most challenging elements’, the relevant improvement recommendations were developed.