MONEY LAUNDERING
Money is the prime reason for engaging in almost any type of criminal activity.
Money-laundering is the method by which criminals disguise the illegal origins of their wealth and protect their asset bases, so as to avoid the suspicion of law enforcement agencies and prevent leaving a trail of incriminating evidence.
Terrorists and terrorist organizations also rely on money to
1) sustain themselves and
2) to carry out terrorist acts.
Money for terrorists is derived from a wide variety of sources. While terrorists are not greatly concerned with disguising the origin of money, they are concerned with concealing its destination and the purpose for which it has been collected. Terrorists and terrorist organizations therefore employ techniques similar to those used by money launderers to hide their money.
The ability to prevent and detect money-laundering is a highly effective means of identifying criminals and terrorists and the underlying activity from which money is derived. The application of intelligence and investigative techniques can be one way of detecting and disrupting the activities of terrorists and terrorist organizations.
As they deal with other people's money, financial institutions rely on a reputation for probity and integrity. A financial institution found to have assisted in laundering money will be shunned by legitimate enterprises. An international financial centre that is used for money-laundering can become an ideal financial haven.
Developing countries
1) Attracting "dirty money" as a short-term engine of growth can find it difficult, as a consequence, to attract the kind of solid long-term foreign direct investment that is based
2) Only stable conditions and good governance can help them sustain development and promote long-term growth.
3) Money-laundering can erode a nation's economy by changing the demand for cash, making interest and exchange rates more volatile,
4) By causing high inflation in countries where criminals are doing business.
5) fuels corruption and organized crime
6) Corrupts public officials
7) Terrorist groups use money-laundering channels to get cash to buy arms. The social consequences of allowing these groups to launder money can be disastrous.
In recent years, the international community has become more aware of the dangers that money-laundering poses in all these areas and many Governments and jurisdictions have committed themselves to taking action. The United Nations and other international organizations are committed to helping them in any way they can.
Criminals are now taking advantage of the globalization of the world economy by transferring funds quickly across international borders.
The Money-Laundering Cycle
Money-laundering is the process that disguises illegal profits without compromising the criminals who wish to benefit from the proceeds. There are two reasons why criminals - whether drug traffickers, corporate embezzlers or corrupt public officials - have to launder money: the money trail is evidence of their crime and the money itself is vulnerable to seizure and has to be protected. Regardless of who uses the apparatus of money-laundering, the operational principles are essentially the same. Money-laundering is a dynamic three-stage process that requires:
• placement, moving the funds from direct association with the crime;
• layering, disguising the trail to foil pursuit; and,
• integration, making the money available to the criminal, once again, with its occupational and geographic origins hidden from view.
These three stages are usually referred to as placement, layering and integration.
MONEY LUNDERING & GLOBALISATION
Rapid developments in financial information, technology and communication allow money to move anywhere in the world with speed and ease. This makes the task of combating money-laundering more urgent than ever.
The deeper "dirty money" gets into the international banking system, the more difficult it is to identify its origin. Because of the clandestine nature of money-laundering, it is difficult to estimate the total amount of money that goes through the laundry cycle.
The estimated amount of money laundered globally in one year is 2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars. Though the margin between those figures is huge, even the lower estimate underlines the seriousness of the problem governments have pledged to address.
There have been a number of developments in the international financial system during recent decades that have made the three F's-finding, freezing and forfeiting of criminally derived income and assets-all the more difficult. These are the "dollarization" (i.e. the use of the United States dollar in transactions) of black markets, the general trend towards financial deregulation, the progress of the Euromarket and the proliferation of financial secrecy havens.
Fuelled by advances in technology and communications, the financial infrastructure has developed into a perpetually operating global system in which "megabyte money" (i.e. money in the form of symbols on computer screens) can move anywhere in the world with speed and ease.
The Financial Action Task Force (FATF) on Money Laundering has identified certain ‘choke’ points in the money laundering process that the launderer finds difficult to avoid and where he is vulnerable to detection. The initial focus has to be on these areas if the war against the launderer is to proceed successfully.
The choke points identified are:
a. entry of cash into the financial system;
b. transfers to and from the financial system; and
c. cross-border flows of cash
Ravi Kunal Nayyar
Money is the prime reason for engaging in almost any type of criminal activity.
Money-laundering is the method by which criminals disguise the illegal origins of their wealth and protect their asset bases, so as to avoid the suspicion of law enforcement agencies and prevent leaving a trail of incriminating evidence.
Terrorists and terrorist organizations also rely on money to
1) sustain themselves and
2) to carry out terrorist acts.
Money for terrorists is derived from a wide variety of sources. While terrorists are not greatly concerned with disguising the origin of money, they are concerned with concealing its destination and the purpose for which it has been collected. Terrorists and terrorist organizations therefore employ techniques similar to those used by money launderers to hide their money.
The ability to prevent and detect money-laundering is a highly effective means of identifying criminals and terrorists and the underlying activity from which money is derived. The application of intelligence and investigative techniques can be one way of detecting and disrupting the activities of terrorists and terrorist organizations.
As they deal with other people's money, financial institutions rely on a reputation for probity and integrity. A financial institution found to have assisted in laundering money will be shunned by legitimate enterprises. An international financial centre that is used for money-laundering can become an ideal financial haven.
Developing countries
1) Attracting "dirty money" as a short-term engine of growth can find it difficult, as a consequence, to attract the kind of solid long-term foreign direct investment that is based
2) Only stable conditions and good governance can help them sustain development and promote long-term growth.
3) Money-laundering can erode a nation's economy by changing the demand for cash, making interest and exchange rates more volatile,
4) By causing high inflation in countries where criminals are doing business.
5) fuels corruption and organized crime
6) Corrupts public officials
7) Terrorist groups use money-laundering channels to get cash to buy arms. The social consequences of allowing these groups to launder money can be disastrous.
In recent years, the international community has become more aware of the dangers that money-laundering poses in all these areas and many Governments and jurisdictions have committed themselves to taking action. The United Nations and other international organizations are committed to helping them in any way they can.
Criminals are now taking advantage of the globalization of the world economy by transferring funds quickly across international borders.
The Money-Laundering Cycle
Money-laundering is the process that disguises illegal profits without compromising the criminals who wish to benefit from the proceeds. There are two reasons why criminals - whether drug traffickers, corporate embezzlers or corrupt public officials - have to launder money: the money trail is evidence of their crime and the money itself is vulnerable to seizure and has to be protected. Regardless of who uses the apparatus of money-laundering, the operational principles are essentially the same. Money-laundering is a dynamic three-stage process that requires:
• placement, moving the funds from direct association with the crime;
• layering, disguising the trail to foil pursuit; and,
• integration, making the money available to the criminal, once again, with its occupational and geographic origins hidden from view.
These three stages are usually referred to as placement, layering and integration.
MONEY LUNDERING & GLOBALISATION
Rapid developments in financial information, technology and communication allow money to move anywhere in the world with speed and ease. This makes the task of combating money-laundering more urgent than ever.
The deeper "dirty money" gets into the international banking system, the more difficult it is to identify its origin. Because of the clandestine nature of money-laundering, it is difficult to estimate the total amount of money that goes through the laundry cycle.
The estimated amount of money laundered globally in one year is 2 - 5% of global GDP, or $800 billion - $2 trillion in current US dollars. Though the margin between those figures is huge, even the lower estimate underlines the seriousness of the problem governments have pledged to address.
There have been a number of developments in the international financial system during recent decades that have made the three F's-finding, freezing and forfeiting of criminally derived income and assets-all the more difficult. These are the "dollarization" (i.e. the use of the United States dollar in transactions) of black markets, the general trend towards financial deregulation, the progress of the Euromarket and the proliferation of financial secrecy havens.
Fuelled by advances in technology and communications, the financial infrastructure has developed into a perpetually operating global system in which "megabyte money" (i.e. money in the form of symbols on computer screens) can move anywhere in the world with speed and ease.
The Financial Action Task Force (FATF) on Money Laundering has identified certain ‘choke’ points in the money laundering process that the launderer finds difficult to avoid and where he is vulnerable to detection. The initial focus has to be on these areas if the war against the launderer is to proceed successfully.
The choke points identified are:
a. entry of cash into the financial system;
b. transfers to and from the financial system; and
c. cross-border flows of cash
Ravi Kunal Nayyar
No comments:
Post a Comment