A new era of globalization has emerged, and it is shrinking the world and shaping domestic

politics and international relationships1. Globalization involves the international integration of

capital, technology, and information in a manner resulting in a single global market and, to
some degree, a global village.2 Globalization has turned the international financial system
into a money launderers dream, siphoning off billions of dollars a year from economies
around the world and extending the reach of organized crime. This unintended
consequence of globalization presents a serious challenge to law enforcement agencies and
financial regulators. In 21st century, economy is largely governed by advances
made in information and communication technologies (ICT). Such technological
advances make it easier to invest into developing countries. Developing
countries economies are growing at faster pace. Developed economies as well
as developing economies continue to face challenges that come with economical
advancements such as regulation of money flow, financial crimes, and abuse of
financial systems. Among these challenges include crimes related to the
information economy which is seen as an increasing source of concern within the
international financial community. The proceeds from these crimes are bundled
to give it a legal appearance and this process is known as "Money Laundering". A
concise working definition was adopted by Interpol General Secretariat
Assembly in 1995, which defines money laundering as: Any act or attempted
act to conceal or disguise the identity of illegally obtained proceeds so that they
appear to have originated from legitimate sources.3
It is a strong belief that economic crimes, including money laundering constitute
a serious threat to national economies, and respective governments. Economic
crimes can have a devastating effect on a national economy since potential
victims of such crimes are far more numerous than those in other forms of crime.
Economic crimes also have the potential of adversely affecting people, who do
not, prima-facie, seem to be the victims of the crime. For example, tax evasion
results in loss of government revenue, thus affecting the potential of the
government to spend on development schemes thereby affecting a large section
of the population who could have benefited from such government expenditure.
A company fraud not only results in cheating of the people who have invested in
that company but may also adversely impact investors confidence thereby
affecting the growth of the economy. There have also been instances of
manipulation of stock markets resulting in the loss of a substantial amount of
assets of the small investors. Corruption not only results in loss of citizens rights
but also has the potential of ruining the moral fabric of the society. Therefore,
1 Thomas L. Friedman, The Lexus and the Olive Tree: Understanding
Globalization(New York, NY: Farrar, Straus, Giroux,1999).
2 Ibid
3 Arya, Ashok, Money Laundering: Combating the Menace in Global and Indian
Context, Taxmanns, November 2003.

economic crimes constitute a serious threat to the national economy and system
of governance.

The concept of money laundering originated in the U.S.A. It started with the attempt to
disguise the ill-gotten wealth, obtained from trading in alcoholic beverages. American
mobster Meyer Lansky transferred funds from small casinos to overseas accounts,
especially Swiss banks, the term used for such activity is, capital flight. The first reference
to the term, Money Laundering itself appeared during the Watergate scandal. Here illegal
funds obtained for the president re-election were moved to Mexico and then brought back
through a company to Miami. In this context the British newspaper coined the term
Laundering

The negative economic effects of money laundering on economic development are

difficult to quantify, yet it is clear that such activity damages the financial-sector institutions that
are critical to economic growth, reduces productivity in the economy's real sector by diverting
resources and encouraging crime and corruption, which slow economic growth, and can distort
the economy's external sectorinternational trade and capital flowsto the detriment of
longterm
economic development. Developing countries' strategies to establish offshore financial
centers (OFCs) as vehicles for economic development are also impaired by significant
moneylaundering
activity through OFC channels. Effective anti-money-laundering policies, on the other
hand, reinforce a variety of other good-governance policies that help sustain economic
development, particularly through the strengthening of the financial sector. Money laundering
also facilitates crime and corruption within developing economies,
which is antithetical to sustainable economic growth. Just as an efficient financial sector is a key
"input" to other productive processes in a developing economysuch as manufacturingan
efficient money-laundering channel is a key "input" to crime because the financial proceeds from
crime are less valuable to the criminal (in a sense, an "unfinished product") than are laundered
funds.
Link: https://www.unodc.org/tldb/pdf/Asian-bank-guide.pdf