THE

FINANCIAL

EXPRESS

MONEY LAUNDERING-AN OVERVIEW

The goal of a large number of criminal acts is to generate a profit for the individual or group that carries out the act

Money laundering is the process of disguising the proceeds of a crime in an effort to conceal their illicit origin and legitimize their future use. Objective is to conceal true ownership and origin of the proceeds, a desire to maintain control, a need to change the form of the proceeds WHY DO WE CARE?

It is a global threat Is a fuel to expand criminal enterprise Helps hide corrupt payments Uneven playing field for honest business Erodes the integrity of financial systems and institutions\ Economic factors-deters private investment Financial factors- Perpetuates corruption, obstructs good governance, erodes confidence, destabilizes financial institutions

THE

FINANCIAL

EXPRESS

PROCESS OF MONEY LAUNDERING

Illegal money arises from crimes like bribery, other forms of corruption , fraud, drug and human trafficking , environmental crime, terrorism etc. Initial stage of the money laundering cycle includes placement where initial introduction of the criminal proceeds into the stream of commerce is done. This being the most vulnerable stage of money laundering process. Next being the process of layering involving distancing the money from its criminal sources like movement of dollars into different accounts, movement of money into different countries, thus increasing the difficulty to detect. The last stage in the process is integration occurs when the laundered proceeds are distributed back to the criminals and create appearance of legitimate wealth.

THE

FINANCIAL

EXPRESS

HOW MUCH MONEY IS LAUNDERED?

Globalization opens many opportunities for crime, and crime is rapidly becoming global, outpacing international co operation to fight it(it is) estimated to gross $1.5 trillion a year-a major economic power rivalling multinational corporations. -United Nations Human Development Report,1999

At an indivijual country level-In 2000 the overall spending of illegal narcotic sale in the United States reached $160.7 billion. 90% of the bank notes in circulation in the States are contaminated by narcotics. The black market peso exchange system in Colombia is estimated to launder $6 billion per annum in drug profits. 25%of the Russias gross national income was derived from organized criminal activities. Customs authorities had estimated that the annual proceeds from crime in the UK were anywhere between 19 billion and 48 billion with 25 billion being a realistic figure for the amount that is laundered each year. At the global level- years back money laundering amounted to 25% of world GDP-between $1 to $3 trillion.

THE

FINANCIAL

EXPRESS

PREVENTION OF MONEY LAUNDERING

Enact and implement AML regime including creating Financial Intelligence Units, Suspicious Transaction Reporting, Know Your Customer,enhanced due diligence on financial transactions regarding politically exposed persons and civil/criminal forfeiture. Build clear and efficient internal mechanisms to share information by and between regulators and law enforcement agencies. Join regional anti-money laundering group to help enhance regional and international cooperation opportunities. International organisations, such as the United Nations or the Bank for International Settlements, took some initial steps at the end of the 1980s to address the problem. Following the creation of the FATF in 1989, regional groupings the European Union, Council of Europe, Organisation of American States, to name just a few established anti-money laundering standards for their member countries. The Caribbean, Asia, Europe and southern Africa have created regional anti-money laundering task force-like organisations, and similar groupings are planned for western Africa and Latin America in the coming years.

THE

FINANCIAL

EXPRESS

Global financial stability hinges on collective action at the international level, but also on effective national systems. Robust anti-money laundering and combating the financing of terrorism regimes are an important pillar of the international regulatory and supervisory system and part and parcel of the current efforts to strengthen the global financial framework.

Murilo Portugal, former Deputy Managing Director

of the IMF