Chetan Shah's Blog

Move securities to Roth Account

Chetan Shah — Mon, 07 Dec 2009 20:10:09 +0000

If you have securities for which you are losing money and do not want to part with it then one way of avoiding future tax payment is to transfer the securities over to a Roth IRA account that way when in future it is making money, you will not be taxed on profit the security returns. In addition you will be able to claim the loss now as part of your current year tax filing.

For example : If you bought a stock of ABC company at $15 and now it is trading at $10 but you do not want to part with it, then a strategy could be to sell the ABC stock at $10 and claim tax deduction (if you have held it for more than a year) for loss ($500 loss if you have 100 shares) and after 30 days buy the same stock in your Roth IRA account.

The advantage of doing so will be :

1. You get a tax deduction now because of the loss you had by selling it.

2. You will not be required to pay on the profits you make in future.

With the income caps going away in 2010, opening a Roth IRA account should be even more easier.

Leverage Checksum to determine identical files

Chetan Shah — Sun, 29 Nov 2009 01:27:17 +0000

An easy way to identify if two files are exactly the same or not is by determining the check sum of each file and comparing the check sum. If the check sum for both the files is exactly same then it can said that the two files are identical.

I have written a little java program which determines the check sum of file.

import java.io.FileInputStream;
import java.security.DigestInputStream;
import java.security.MessageDigest;

public class Checksum {

public static String computeCheckSum(String fileName) {

try {
FileInputStream stream = new FileInputStream(fileName);
MessageDigest md = MessageDigest.getInstance(”SHA-1″);

DigestInputStream dIS = new DigestInputStream(stream, md);
dIS.on(true);

byte [] b = new byte[1000];

while (dIS.read(b,0,1000) > -1);

byte []signature = md.digest();
//System.out.println(”The signature is :”);
for (int i = 0; i < signature.length; i++) {
System.out.print(signature[i]);
}
} catch (Exception e) {
e.printStackTrace();
}

return "";
}

public static void main(String [] a) {
Checksum.computeCheckSum(a[0]);
}

}

CAMS Certification Preparation

Chetan Shah — Sun, 04 Oct 2009 23:50:58 +0000

I took the CAMS certification examination (and passed with good points) after 2 months of prep work (approx. 1 hour per day max). The exam is not tough but a good prep work is required. The study guide provided by ACAMS is an excellent resource. In addition to that I reviewed the supplemental guide also. I think all the topics covered in the study guide are equally important and strongly suggest to not skip any chapters. I did not make any notes (I think I am not good at making notes)

I am assuming that someone will take this examination not to just get one more certification but has sincere interest in AML domain and is currently working on projects which are AML related. The test tries to identify how much practical knowledge a candidate has. I certainly would not recommend taking this examination just to get one more certification as in that case it is not worth the time and money spent to get it.

I strongly recommend this test to candidates who have just started in AML field and want to explore it further as their career. It certainly helps the candidate to get a good understanding on various AML aspects, regulations, bodies etc.

Hope this helps and Best of Luck for CAMS Examination!

Section 311 etc. (ACAMS Notes)

Chetan Shah — Sun, 30 Aug 2009 21:19:54 +0000

Section 311:
Special measure for Primary Money Laundering concerns, this include foreign country, financial institution, type of an account or type of a transaction.
By designating an entity a primary money laundering concern, the government can force US banks to halt financial dealings with the designated entity. It can ask the domestic financial institution to
1. Keep records of each transaction including all the transaction participants and beneficiaries

2. Obtain information of beneficial ownership of any accounts maintained in US by a non US person or his/her representative.

3. Obtain information of all customers who are permitted to use or whose transactions are routed thru the designated financial institution’s
correspondent account.

4. Obtain information of all customers who are permitted to use or whose transactions are the designated financial institution’s payable thru account.

5. Order closure of payable thru and/or correspondent account.

Section 312:
Requires EDD for Correspondent and Private Banking.
The correspondent banking rule applies to bank, broker deals, future commission merchants, mutual funds and introducing broker dealers
The due diligence requirements are based on risk based approach.
EDD for private banking should include senior political figures, their families and close associates.
To fall under this rule Private Banking account must maintain a USD 1 Million or more of minimum aggregate deposit
Private bankers should identify the benefial owners of the account and their source of funds and how they plan to use it.

Section 313:
Do not transaction with Shell Banks.
In addition it prohibits the respondent bank to permit shell bank to access its correspondent bank account through nested correspondent relationship.

Section 319(b):
Allows the Treasury Secretary or attorney general to issue summons or to subpoena records of, a foreign bank that maintains a correspondent account in the US.

Foreign banks must designate a registered agent in US to accept service of such subpoenas.

Section 319(a):
If the funds the US pursues are deposited in a foreign bank which keeps an interbank account at a US bank, the US may attempt to forfeit the crime-tainted funds in the US account.

FATF Membership Points (ACAMS Notes)

Chetan Shah — Tue, 25 Aug 2009 00:43:41 +0000

To qualify for FATF membership, a country must :

- Strategically Important.

- Be a member of FATF style body(for example : Asia Pacific Group(APG), Eurasian Group (EAG) etc.

- Provide a letter from appropriate government official making a political commitment to implement FATF recommendations (1, 5, 10 and 13 at the minimum) within a reasonable time frame and to undergo a mutual evaluation process.

- Criminilize money laundering and terrorist financing; require financial institutions to perform KYC, EDD and report suspicious transaction to the country’s Financial Intelligence Unit (FIU).

Internet Casinos and Prepaid Cards/E-Cash (ACAMS Notes)

Chetan Shah — Sat, 22 Aug 2009 22:23:43 +0000

Internet Casinos
• Prime mode of payment used is Credit Card.
• Casinos being on offshore location prevents prosecution
• Government receive tax dollars due to internet casino and therefore have lax controls
• Citibank has banned the usage of Visa and Mastercard for Internet Casino usage
• Banks can identify the type of transaction conducted via credit card by interpreting the transaction codes.
• Internet enables fast transmission of money<
• Online gambling does not lend to any cash movement.

PrePaid Cards and E-Cash
• New Payment technologies like internet payment, mobile payment, digital precious metals, prepaid cards)
• Prepaid cards are like cash, they are portable, exchangeable, valuable and anonymous.
• The cards can be purchased by one person and used by another and that too in a different part of the world.
• There maybe an account for each prepaid card issued or alternatively there may be a pooled account that holds funds for all issued prepaid cards.
• Potential Risk Factors

Anonymous card holders

Anonymous funding of cards

Can be virtually anywhere on the globe

No limits on how many cards an individual can buy.

High Value Limits

Offshore card issuers may not observe laws in all jurisdictions

• In Germany, adding value to a prepaid card is considered as making a deposit and therefore the card issuers are considered credit institutions which require full banking license and follow country’s AML regulations.
• Electronic Purses (or stored value cards) are cards that electronically store value on the chips embedded on the card.
• E-Purses issuance is declining
• Potential Risk Factors for E-purses

Anonymous users

Anonymous funding

No High Value

No Transaction Records

• Measure to limit Prepaid/E-Purse vulnerability to AML

Limit number of cards issued to a customer

Assign High Value Limit

Track Transactions

Linking payments technology to banking institutions

Establishment of global standards

Record keeping procedures requirements for the issuing banks

Capability to examine the records by investigating authorities

(more…)

Spousal IRA

Chetan Shah — Thu, 06 Aug 2009 00:47:59 +0000

I cannot stress enough the importance of saving money using Roth IRA. Roth IRA is a great vehicle to save money as the investment proceeds from this account are completely tax free. That means that if you make a 20%, 30% or any number of profit on your investment, IRS cannot ask you to pay income on that profit.

Which makes me think to open a Roth IRA account for my wife also. She does not work and therefore has no income to report on our joint Income tax. The question is can I open a Roth IRA for her too and contribute the maximum allowable limit in her account also (in addition to making my 100% contribution to my Roth IRA). The answer is YES, you can contribute to your spouse’s Roth IRA account (even if s/he does not work).

IRS Link : http://www.irs.gov/newsroom/article/0,,id=134667,00.html

Buying Call Options.

Chetan Shah — Fri, 15 May 2009 19:43:42 +0000

Lately I have been hearing that “buy and hold” is dead. I am not sure whether I am completely sold on that thought but I do believe in keeping small (10% or less) portion of my investing funds assigned to short term trading. Before my “options” days I used to buy a stock outright and then sell it when it fetched me a pre-determined profit margin. Thus if the stock price was $10, it would have costed me $1000 to buy 100 shares. I would sell it when it hits $15 thus making a $500 profit due to this transaction. i. e. : 50% return.

From options perspective it is all about “differences”. Please refer to my options blog to get an overview of what call and put options mean.

Therefore in this scenario, if the call option for this stock is trading at a $1 I would be able to buy 10 contracts (each contract comprises of 100 shares). If the stock hits $15, the option value will rise by $4 thus making it a $5 value option. Since I bought 10 contracts, my profit will be $4000 as compared to $500 if I had bought the stock outright. Taking the options route I was able to get a 400% as compared to a meagre 50% by taking the stock purchase route.

Caution :
1. This strategy only works when you are buying a stock to sell it in a short time period.

2. Options do expire at a predetermined date. If the stock goes down below the strike price then the option is worthless and you will end up losing the entire ($1000 in the above example). If you had taken the stock route, atleast you will be holding the stock and have a chance to recuperate your losses in future.

Watchlist filtering white paper

Chetan Shah — Wed, 07 Jan 2009 21:18:09 +0000

I have written a white paper on watch list filtering. Please feel free to comment on it.

Link to White Paper on Watch List Filtering

Autonumber in Microsof Excel (works after inserting rows)

Chetan Shah — Fri, 31 Oct 2008 15:39:28 +0000

If you want the autonumber to work even after you insert a row in Excel, use the following formula.

=CELL(”contents”, INDIRECT(CONCATENATE(”B”, ROW()-1)))+1

I am assuming the list of values are in B column.

A simple formula =”aboverow”+1 does not work if you insert a new row which falls in the value range.

If you have a better way of doing this please let me know