Money Laundering

and Its Prevention

 References:
■ Banking Law and Practice-
Syed Ashraf Ali and RA Howlader.
■ BB Website,
■ Wikipedia, and
■ other internet sources
Presentation Topics:
■ What is Money Laundering?
■ How is money laundered?
■ Where does money laundering occur?
■ How does money laundering affect business?
■ What influence does money laundering have on
economic development?
■ What is the connection with society at large?
■ How does fighting money laundering help fight
crime?
■ What should individual governments be doing
about it?
■ Money Laundering Methods
■ Money Laundering Prevention Act,2002
 Money Laundering
■ Money laundering is the practice of disguising
the origins of illegally-obtained money.
Ultimately, it is the process by which the
proceeds of crime are made to appear legitimate.
 In Bangladesh, the Prevention of Money
Laundering Act, 2002 (Act No. VII of 2002).
In terms of section 2 (tha).
 Meaning Money Laundering

(a) Properties acquired or earned directly

or indirectly through illegal means;

(b) Illegal transfer, conversion,

concealment of location or assistance in
the above act of the properties acquired
or earned directly of indirectly through
legal or illegal means.
THE MONEY LAUNDERING
PROCESS

Placement;

Layering; and

Integration.  
THE MONEY LAUNDERING
PROCESS
 Three common factors identified in laundering
operations are;
● the need to conceal the origin and true
ownership of the proceeds.
● the need to maintain control of the
proceeds.
● the need to change the form of the
proceeds in order to shrink the huge
volumes of cash generated by the initial
criminal activity.
Money Laundering Methods
Placement Layering Integration
Stage Stage Stage

Cash paid into bank Wire transfers abroad False loan repayments or

(sometimes with (often using shell companies forged invoices used as
staff complicity or or funds disguised as proceeds  cover for laundered
mixed with proceeds of  of legitimate business). money.
legitimate business).

Cash exported. Cash deposited in overseas banking Complex web of transfers

system. (both domestic and inter
national) makes tracing
original source of
funds virtually
impossible.

Cash used to buy high value Resale of goods/ assets Income from property or

goods, property or legitimate business 
business assets. assets appears "clean".
 Other Methods

■ Establishment of anonymous companies in

countries

■ Sending of false export-import invoices

■ a simpler method is to transfer the money (via

Electronic Fund Transfer) to a legitimate bank
from a bank owned by the launderers
Where does money laundering
occur?
■ As money laundering is a consequence of
almost all profit generating crime, it can occur
practically anywhere in the world. Generally,
money launderers tend to seek out countries or
sectors in which there is a low risk of detection
due to weak or ineffective anti-money laundering
programs. Because the objective of money
laundering is to get the illegal funds back to the
individual who generated them, launderers
usually prefer to move funds through stable
financial systems.
Major money laundering
countries
Afghanistan Canada
Aruba China
Australia Colombia
Belize Denmark
Bermuda Finland
Brazil Germany
Burma (Myanmar) Greece
■ It can occur on that country, where the
regulation and the law enforcement
system is weak. For example bangladesh,
afghanistan, pakistan and so many under
developed countries.
How does money laundering
affect business?
Most of the case business man are
engaging with money laundering. It
happens in the time of export and import.
To reduce the tax amount they transfer
money by hundi. By this illegal way some
of the businessman reduce their cost and
gain high profit, whether those are doing
legal business.
What influence does money laundering
have on economic development?
■ Launderers are continuously looking for new routes for
laundering their funds. Economies with growing or
developing financial centers, but inadequate controls are
particularly vulnerable as established financial centre
countries implement comprehensive anti-money
laundering regimes.
■ Differences between national anti-money laundering
systems will be exploited by launderers, who tend to
move their networks to countries and financial systems
with weak or ineffective countermeasures.
■ As with the damaged integrity of an
individual financial institution, there is a
damping effect on foreign direct
investment when a country’s commercial
and financial sectors are perceived to be
subject to the control and influence of
organized crime.
What is the connection with
society at large?
■ The possible social and political costs of
money laundering, if left unchecked or
dealt with ineffectively, are serious.
Organized crime can infiltrate financial
institutions, acquire control of large sectors
of the economy through investment, or
offer bribes to public officials and indeed
governments. 
How does fighting money
laundering help fight crime?
■ Money laundering is a threat to the good
functioning of a financial system; however, it can
also be the Achilles heel of criminal activity.
■ Most importantly, however, targeting the money
laundering aspect of criminal activity and
depriving the criminal of his ill-gotten gains
means hitting him where he is vulnerable.
Without a usable profit, the criminal activity will
not continue
What should individual governments
be doing about it?
■ It is critically important that governments include
all relevant voices in developing a national anti-
money laundering program. They should, for
example, bring law enforcement and financial
regulatory authorities together with the private
sector to enable financial institutions to play a
role in dealing with the problem. This means,
among other things, involving the relevant
authorities in establishing financial transaction
reporting systems, customer identification,
record keeping standards and a means for
verifying compliance.
Bangladesh fights against the
money laundering
■ Money laundering is a criminal offense in
Bangladesh and can result in imprisonment for
up to seven years, in addition to financial
penalties. The Bank of Bangladesh is
responsible for investigating suspected cases
and presenting them to the courts, as well as
applying for orders freezing or seizing assets of
accused money launderers. This article offers
an overview of Bangladesh Money Laundering
law.
■ In 2002, Bangladesh enacted the Money
Laundering Prevention Act ("MLPA"), which
applies to all forms of money laundering.
Under the MLPA, money laundering is a non-
bail able crime. A conviction for money
laundering can result in imprisonment from a
minimum of six months to a maximum of seven
years, along with a fine of up to double the
amount involved in the crime.
 Money laundering prevention act

■ Money Laundering Prevention Act, 2002 (Act No. 7

of 2002) has been published in the Bangladesh
Gazette (extra issue) on 7th April, 2002 with the
purpose of combating money laundering. As per
article 1(2) of the Act, the Government of the
Peoples Republic of Bangladesh has made this Act
effective from April 30, 2002 AD (Baishakh 17, 1409
Bangla) by an Official Notification in the Gazette.
Responsibility of the banks, financial institutions and
other institutions engaged in financial activities in
preventing and identifying money laundering—
(1) In checking and identifying money laundering banks, financial
institutions and other institutions engaged in financial activities—
■ (Ka) As a client of it , it should preserve the correct and full information of
all of its clients and in the event of closing of transactions it should
preserve records of transactions for at least five years from the date of
closure;
■ (Kha) Will provide the records so preserved as per Sub-section (Ka) above
to Bangladesh Bank from time to time on demand;
■ (Ga) Information regarding abnormal transactions and doubtful
transactions which are likely to be related to money laundering should be
informed to Bangladesh Bank.

(2) Bangladesh Bank will determine the information to be preserved as

per Subsection (1) and issue Circular or Gazette Notification from
time to time.
■ (3) In the event of failure of providing and preserving the
information as mentioned in Sub-section (1) Bangladesh Bank
will inform the licensing authority of the defaulting bank,
financial institution and other institutions engaged in financial
activities so that the concerned authority can take proper
action for negligence and failure against the concerned bank,
financial institution and other institution engaged in financial
activities as per their own rule or provision.
■ (4) Whatever may contain in Sub-section (3), Bangladesh Bank
will be able to impose fine up to a maximum of Taka one lac
and a minimum of Taka ten thousand to the defaulting bank,
financial institution and other institution engaged in financial
activities for failure to preserve and supply information as
mentioned in Sun-section (3) and also for negligence.
 Responsibility of Bangladesh Bank in
preventing Money Laundering
■ (Ka) To conduct enquiry about the crime of money
laundering;
■ (Kha) Observe and supervise the activities of banks,
financial institutions and other financial institutions
engaged in financial activities;
■ (Ga) To invite statement from the banks, financial
institutions and other institutions engaged in
financial activities about any matter connected with
money laundering.
Power of enquiry

Establishment of Money Laundering Court

Legal seizure of property

Freezing of the property

Appeal.
■ Whatever different may exist in the Code of
Civil and Criminal Procedures, the aggrieved
party aggrieved by order, judgment , degree
or punishment imposed by the Court will be
able to appeal in the High Court within 30
days of the date of the above order,
judgment, degree or punishment order
Punishment for Money
Laundering
(1) If any person is engaged in Money
Laundering in any way he will be regarded as a
person who has committed a crime.
■ will be sentenced to imprisonment for at
least a period of six months and a maximum
of seven years and will be fined for an
amount not exceeding double the amount
involved in the crime.
Punishment for violation of
the Freezing Order
If any person violates the Freezing Order
under Section 11 he will be imprisoned
for at least one year maximum or fined
for at least Taka five thousand
maximum or he may be punished with
both.
Punishment for divulgation of
information
■ No person will obstruct the enquiry or
divulge information relating to enquiry
■ If any person violates the provision of Sub-
section (1) he will be imprisoned for at
least one year maximum or fined for at
least Taka ten thousand maximum or he
may be punished with both
 Punishment for obstruction
in enquiry
■ No person will express his unwillingness without
any reasonable ground to assist the enquiry
officer in his enquiry activities under this Act.
■ If any person violates the provision of Sub-
section (1) he will be imprisoned for at least one
year maximum or fined for at least Taka ten
thousand maximum or he may be punished
with both.
Example Of Money Laundering