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.
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 Euro market and the proliferation of financial
secrecy havens.
Fueled
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:
- entry
of cash into the financial system;
- transfers
to and from the financial system; and
- cross-border
flows of cash
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