- December 1, 2017
- Posted by: marlenedubois
- Category: CPR Training
Money laundering is usually the process of moving money via the illegitimate to the legitimate economy. The crime of money laundering consists of knowingly disguising the source, origin or ownership of illegal funds.
Any criminal transactions are carried out in cash and also also also the function of the money launderer is usually often to translate these tiny sums into a larger, more liquid sum which will be difficult to trace and also also also more easy to invest. Money laundering has emerged on a massive international scale with the globalization of the entire world economy and also also also the internationalization of organized crime.
Money earned in one region can, with increasing facility, be transferred to another part of the entire world, preventing its eventual recovery by law enforcement. With the globalization of organized crime activity, money is usually earned in all regions of the entire world and also also also must be collected, consolidated and also also also moved.
This specific growth has been facilitated by completely new technologies, the increasing movement of goods and also also also people globally and also also also the declining significance of borders. A large number of professionals, including lawyers, accountants and also also also bankers, have emerged to provide services to This specific criminal and also also also corrupt clientele with large amounts of money at their disposal. Not involved inside original act, these professionals help perpetuate criminal and also also also corrupt activities through their services. Organized crime groups have particularly benefited via the expansion of global financial markets. They have exploited the differential regulatory regimes and also also also the possibility of moving money across jurisdictions rapidly in order to hinder detection by taking advantage of the discrepancies between country based regulatory systems.
They seek out locales of which are less regulated with respect to international anti-money laundering laws. These havens, frequently offshore banking centers, provide both banking and also also also corporate secrecy. They also provide secrecy for the trusts, which are used to hide large-scale assets of which are often illegally diverted via the companies controlled by organized crime groups. In 1996 economists of the International Monetary Fund (IMF) suggested of which 2 percent of global GDP (gross domestic product) was related to drug crime and also also also the laundered sums associated with corruption and also also also tax evasion might be an even larger percentage. The share of the entire world’s economy might be even higher today for several reasons as many forms of organized crime have grown in This specific period and also also also the countermeasures have failed to dent the profits of This specific activity except at the margins.
Much laundered money has been invested in dollarized accounts and also also also different strong currencies where of which has escaped significant losses through currency devaluations in origin countries. In offshore regimes where financial capital is usually untaxed, its growth is usually faster than of which of money of which is usually part of taxed and also also also regulated regimes. The range of businesses and also also also financial institutions used to launder money has proliferated with the profits and also also also the growing sums which need to be laundered. Among the institutions employed are large banks, offshore banks and also also also financial institutions, currency exchange and also also also wire transfer businesses, stock brokerage houses, gold dealers, casinos, insurance and also also also trading companies.
The ability to safeguard the proceeds of transnational criminal activity, tax evasion and also also also corruption have served as significant incentives for the growth of This specific activity. There is usually limited risk and also also also few deterrents for the money launderers and also also also the professionals who aid their activities. The limited seizures of which do take place are merely “one more cost of doing business.” The international efforts sponsored by the Organized for Economic Cooperation and also also also Development (OECD) to limit offshore havens and also also also to sanction countries of which facilitate money laundering have yet failed to sharply curtail money laundering.
Sources of Laundered Millions
Laundered money derives via the full range of illicit activities linked to organized crime such as narcotics and also also also arms trafficking, trafficking in human beings, extortion, gambling, counterfeiting of money and also also also goods, trafficking in endangered species and also also also stolen art and also also also automobiles. Often, corrupt government officials move the bribes they have received or the money they have embezzled to offshore locations for security. Much of This specific cannot be treated as laundered money in many countries because these corrupt activities are not predicate offenses to money laundering.
The need to have a pre-existing criminal offense under many criminal codes, is usually a major deterrent to effective money laundering investigations. The laundering techniques of organized crime groups have become increasingly sophisticated. Experts are retained who possess the capacity to disguise the source of funds and also also also make them look legitimate. due to This specific reason organized crime groups have increasingly penetrated into legitimate economies and also also also financial markets.
Such operators have laundered the assets via these diversified investments as well as via the original illicit activities. The money laundering associated with high level governmental corruption has received more attention inside post-Cold War era. Corrupt leaders launder money derived via multiple sources: siphoned out of the national treasury; diverted via foreign assistance; pay offs via foreign investors or contractors working on development loans via multilateral organizations and also also also proceeds via privatization.
The wave of privatizations inside 1990s in many parts of the entire world has contributed to the increased deposit of funds in unregulated offshore accounts. inside transitional period via governmental ownership to private ownership when there is usually limited transparency, many of the insiders have managed to appropriate significant resources of privatizing firms and also also also have through elaborate trust agreements, consistent with the laws of the locale, parked very valuable national resources in financial tax havens. The money laundering associated with the privatization process has also resulted in large and also also also visible cases of international money laundering investigated such as the Raul Salinas case via Mexico and also also also the Pavel Lazarenko case via Ukraine. Investigations into each of these cases, by Swiss and also also also American authorities, as well as different governments, has totaled inside hundreds of millions of dollars. inside Salinas case, pay offs via drug traffickers were commingled with pay offs for beneficial privatizations of key state-owned industries.
A major question is usually whether mechanisms will be made available inside future to deter such deposits and also also also whether procedures will be established to make such sums more easily recoverable by the source country. As the corruption issue is usually no longer a taboo issue for employees of multilateral financial institutions, the significant money laundering associated with project and also also also structural adjustment loans have become permissible topics of discussion.
For example, researchers at the IMF right now acknowledge of which they could observe the financial flows out of Haiti immediately after international loan funds flowed into the country. An investigator examining the diversion of a World Bank loan to Pakistan traced $30 million to a Swiss bank. Increasingly, the investigators of corruption in these international financial institutions must be trained to find money laundering because both bribe money and also also also actual project loans wind up inside banking centers of Western countries.
Banks and also also also different Financial Institutions Engaged in Money Laundering
The types of financial institutions exploited for money laundering have proliferated as the reporting requirements on major banks have increased. Offshore banks have sprung up in many locales to service the demands of affluent clients who seek secrecy and also also also an absence of reporting requirements. By the end of 1997, offshore locales housed more than half of all cross-border assets held globally. Very few countries have been active in taking measures to seize laundered assets.
The exceptions are the United States and also also also Switzerland. However, the amount they have managed to freeze and also also also confiscate has been very limited compared to the overall total of illegal monies in their financial markets. Many different major banking centers, such as those located in England and also also also Germany, have thousands of suspicious transaction reports yet have comparatively few successful criminal prosecutions or confiscations of assets. Therefore, while there are significant risks of getting caught for smuggling drugs, there is usually much less chance of getting caught and also also also losing the proceeds of drugs or different criminal proceeds. Most money laundering occurs in offshore banking centers, many of whose operations are less highly regulated than those in major banking centers.
Not all-offshore banks are laundering money. The most flagrant abusers are those offshore locales without any financial infrastructure or any regulatory mechanisms to monitor the banks or to track the transactions, which pass through their locale. In these situations individuals and also also also businesses are exploiting the possibility of bank and also also also corporate secrecy of which these locales provide. Many parts of the Caribbean have established large legitimate banking services of which are providing services to a large international clientele of legitimate businesses. This specific offers evidence to indicate of which size and also also also location are not absolute determinants of whether a financial institution is usually used as a laundering facility for the cleansing of questionable proceeds.
At present, there are different niches for different categories of money laundering. Drug dealers possess the widest range of assets to dispose of and also also also continuous financial flows, therefore they use all available financial instruments. There is usually significant differentiation inside market. For example, wire transfer businesses are used primarily by street level drug dealers, whereas the private banking services of major banks are available only to large-scale clients.
Offshore banks are used by individuals and also also also groups engaged in a wide range of illicit and also also also licit activities. There are increasing controls on large financial institutions, yet recent cases have revealed of which of which is usually still possible to launder vast sums through major banks and also also also through these banks offshore branches. Major American banks such as Citibank, the Bank of completely new York, and also also also Union Bank of Switzerland (UBS), as well as their offshore branches, have figured prominently in recent investigations of money laundering. among the minority congresswomen on the United States House of Representatives Banking and also also also Finance Committee commented, during the Bank of completely new York hearings, of which was the failure to sanction Citibank inside Salinas case of drug money laundering which has perpetuated the problem. While such actions as a Geographic Targeting Order inside completely new York area has limited wire transfers out of tiny businesses, of which remains continually possible to move large, questionable and also also also illegal sums through the private banking operations of major banks.
The profits for the institutions and also also also particularly for the officials of these divisions have made bankers often turn a blind eye. A recently released U.S. General Accounting Office (GAO) report, conducted by the investigative branch of the agency, examined the possibility of laundering money inside United States. The investigators traced US$800 million of such funds of which had been moved into U.S. banks by one Russian. He did This specific by registering companies inside “offshore location” of the State of Delaware, which protects the anonymity of corporations. The money was subsequently moved into accounts inside private banking sector of Citibank. No legal action had been taken against the banks, any of the account holders or against the individual who had managed to move these funds of unknown origin through the American banking system. This specific investigation reveals how sophisticated money launderers can exploit significant loopholes in United States to move large amounts of questionable money through a leading American institution.
Money Laundering inside Mercosur
Money laundering is usually becoming an increasingly serious problem in several of the countries of the Mercosur. Part of This specific is usually related to the need of Colombian and also also also Mexican drug lords to launder their money, and also also also the greater facility with which they can do This specific in Spanish speaking countries. of which also is usually due to the proliferation of offshore banks in Latin America and also also also the Caribbean, which right now represent 43% of the international total. The most visible manifestation of This specific phenomenon has been the construction of the resorts of Cancun of which was done with drug money. Yet the use of hotels through which to launder money is usually not confined to Mexico, as the proliferation of luxury hotels in Argentina with limited clientele is usually further visible evidence of This specific problem. More difficult to detect and also also also investigate is usually the money laundering through the Mercosur banking sector, shell companies, commodities brokerages and also also also currency exchanges.
A joint investigation conducted by the Brazilian Federal Police, Central Bank and also also also different entities reported of which between 1998-99, US$18 billion was laundered through Brazil. Brazilian money launderers, according to the U.S. Department of State, dispose of drug money and also also also the profits of white-collar crime. Much of the arms and also also also drugs trade occurs through the border town of Foz de Iguacu. The proximity to Paraguay, which is usually a major money-laundering center for Latin America, exacerbates the problem. Approximately, 20% of Paraguayan money laundering is usually related to drugs, while the vast majority emanates via smuggling and also also also contraband.
No major scandal has disrupted the Uruguayan banking system yet the dependence of the Uruguayan economy on its banking sector has failed to make of which very vigilant in reviewing the source of client funds. A major money laundering scandal erupted in early 2001 with the Argentine Central Bank President Pedro Pou accused of covering up illicit cash being moved through local and also also also foreign banks. He tried to hide via the Argentine congress information on these illegal transactions. This specific public scandal emerged after a report by an U.S. Senate Subcommittee on money laundering traced drug money via Citibank back to an Argentine bank. As much as US$10 billion may have been laundered through Buenos Aires. In response to these problems, the South American Financial Action Task Force (Grupo de Accion Finaciero de Sudamerica contra el Lavado de Avisos-GAFISUD) was established on December 8, 2000. Its member states’ include Argentina, Bolivia, Brazil, Colombia, Chile, Ecudor, Paraguay, Peru and also also also Uruguay. The vital function of This specific organization is usually to improve coordination in monitoring and also also also combating money laundering inside region.
Why has of which been so hard to move against money laundering?
Until recently of which has been difficult to undertake measures against money laundering due to the absence of a necessary political will and also also also the cumbersome international legal mechanisms which presently exist. Furthermore, the profits of This specific activity, particularly within private banking, have been very lucrative for financial institutions and also also also the registration and also also also associated services. The offshore locales have provided an incentive for many locales without alternatives. Money laundering on a large scale has existed since the 1960s. Dictators have moved money to safe havens and also also also with the rise of the international drug trade since the late 1960s, there has been an increasing need to move large amounts of money into the legitimate financial system. Covert arms sales have been facilitated for decades by money laundering. Even though many knew This specific was going on, the fight against money laundering has been treated as a secondary concern to the preservation of influence within a particular geographic region. With the end of the Cold War, the desire to protect certain dictators who were key figures in This specific strategy collapsed.
There was no longer a need to “protect our dictator,” whose corruption became an embarrassment to the states and also also also consequently multilateral lending institutions. The massive money laundering out of the states of the former Soviet Union, inside 1990s, has revealed of which the budgets and also also also economies of entire countries can be devastated by the ability to launder money to major financial centers and also also also offshore locations. The credibility of such multilateral institutions as the entire world Bank and also also also the IMF has been called into question. This specific tolerance of corruption has been a highly significant factor inside reduced legitimacy of these institutions of which have not been necessarily vigilant in monitoring the diversion of the loans they have made overseas.
Their completely new emphasis on corruption is usually an attempt to reverse This specific trend. The rise of the Internet and also also also the speed of financial transactions facilitated by computers have expanded money laundering opportunities and also also also activities inside latter half of the 1990s. There are increasing number of Webs sites of which solicit money for transfer offshore, the rise of internet gambling and also also also of virtual banking have made of which possible to launder money without any infrastructure to run or regulate international banking operations. Instead, the rise of information technology and also also also the growth of untraceable encryption have provided the possibility of laundering money with greater facility and also also also with almost perfect anonymity. All of which is usually needed is usually a computer. The rise of the completely new information technology has facilitated an incredible communications revolution, yet of which has led to the proliferation of money laundering in some of the most remote destinations inside entire world. Such locations include Vanuatu, Nauru, and also also also the Marshall Islands through whose “banks” billions have been laundered inside last couple of years.
Facilitating the rise of virtual banking in offshore locations has been the willingness of major banks to receive funds of which have been routed through these locales. While well-written software could screen these transactions and also also also prevent the absorption of these funds into mainstream banking centers, This specific has not occurred. The legal institutions to combat money laundering are much slower than those constructed on an order before the information age. Therefore, a wire transfer which is usually moved among four jurisdictions in an hour, a typical move for a money launderer, will take law enforcement inside United States a year to unravel because of the need to present documents to four different jurisdictions to obtain information on the transaction. Law enforcers in countries without such resources as the United States may never be able to trace these transactions. In some cases, of which is usually either legally impossible or physically impossible to obtain needed information on the money movement because of the bank secrecy or the presence and also also also protection of trusts. inside United States, a predicate offense is usually needed to prove money laundering. However, This specific requires cooperation of law enforcement inside source country. In cases where the money is usually associated to a high level official or his/her associates, or where domestic law enforcement has been neutralized by corruption via crime groups, of which crucial cooperation will never be forthcoming. In many countries, many categories of crime are not predicate offenses for money laundering or there is usually an absence of money laundering law, leaving many financial transactions outside the reach of American law enforcement. A novel situation right now exists.
The complexity of the cases of money laundering means of which the number and also also also expertise of the enforcement required to address these crimes is usually so vital of which even well staffed American law enforcement can address only a few major law enforcement cases annually. Furthermore, between the corruption of domestic law enforcement in many countries and also also also bank secrecy in others, most money laundering investigations are condemned to failure via the start. As the amounts of money laundered grow, the capacity to address the problem remains perpetually behind.
Why the current campaign against money laundering?
A growing consensus is usually developing in many developed countries of which the problem of money laundering must be addressed both within their economies and also also also in offshore locations. Much of This specific is usually proceeding on a diplomatic level and also also also is usually aimed at financial institutions because the previous legal strategy has inherent limitations. Focus is usually right now on prevention rather than on legal remedies. The present movement against money laundering is usually the result of a convergence of mutual interests rather than as a consequence of a unified view of the harms of money laundering. For the United States, the driving force has been the rise of the international drug trade, a trade of which has enormous financial and also also also social implications for the United States. American policy makers have become increasingly concerned of which money laundering permits the perpetuation of the drug trade and also also also terrorism.
The possibility to park funds in offshore havens gives these illicit operators the working capital to perpetrate and also also also perpetuate their activity. yet money laundering is usually not confined to offshore locales. American authorities right now estimate of which US$9 billion in narco dollars is usually laundered in completely new York City and also also also US$30 billion dollars of drug money is usually laundered in Texas. For European countries, the opening of borders and also also also the establishment of the Euro in 2002 have placed their territory and also also also financial systems at greater risk. The threat of transnational crime is usually not only higher rates of violence, unwanted immigrants yet also large scale financial crime and also also also money laundering within the European financial system. The movement of capital to offshore locations has had severe consequences for Europe’s revenue collection. The increasing amounts of capital sheltered in offshore locations is usually preventing the collection of needed taxes, generating the maintenance of offshore accounts an even greater problem for European countries of which need substantial revenues to maintain expensive social welfare systems and also also also take care of aging populations. Therefore, revenue concerns are more of an impetus for European than American action against offshore havens.
What is usually the current campaign against money laundering?
In 1989 the Financial Action Task Force (FATF) was established to coordinate a response to the problem of money laundering. The following year FATF issued 40 recommendations against money laundering which were subsequently revised in 1996. FATF, right now consists of 29 countries, and also also also two international organizations and also also also represents the larger developed countries as well as some of the more affluent developing countries. The first recommendation requires of which countries become signatories to the Vienna Convention against money laundering. The Vienna convention only concerns the proceeds of money laundering related to the drug trade.
However, of which does not include the different serious categories of crime with which money laundering may be associated. Consequently, the recommendations also suggest of which prohibitions against money laundering be extended to different serious offenses. This specific discretion has led to many countries differing legislative measures. Some have not made human trafficking, one of the fastest growing forms of organized crime, a predicate offense for money laundering. Likewise, corruption remains in most countries, including the United States, outside the list of many serious crimes, which are predicates to money laundering.
The recommendations also deal with measures to identify, trace and also also also confiscate laundered assets. Various measures must be taken by financial institutions to ensure of which they maintain proper record keeping, know their customers and also also also keep records for at least several years time to permit reconstruction of financial transactions. Bank officials are required to monitor large and also also also questionable transactions and also also also to report suspicious transactions to competent authorities without advising the customers in question. These principles are applied not only to the domestic banks yet also to their subsidiaries of which are located outside of the country. Signatory countries are to intensify controls at the borders with the purpose of limiting the movement of large amounts of cash. Furthermore, countries are required to develop modern methods of money management such as checks and also also also direct deposits of which reduce reliance on a cash economy. Effective regulatory bodies are to be established to ensure of which there are adequate measures and also also also sufficiently trained personnel to realize the implementation of these regulations.
Regulators must take efforts to ensure of which criminals do not acquire or achieve significant control over financial institutions. International cooperation must be extended as regards to suspicious transactions, confiscation, mutual assistance and also also also extradition. Cooperative investigations should be encouraged and also also also launched when possible. To ensure cooperation among states, there must be decisions made as to the best venues in which to prosecute offenders. Annual Reports are issued by the FATF within which the country teams have monitored the progress of member states and also also also issues typologies. The Typologies Report follow an annual meeting in which law enforcement, legal, financial and also also also regulatory experts discuss recent trends in laundering criminal proceeds, emerging trends of which arouse concern and also also also countermeasures which have proved effective. In June 2000, the FATF listed a group of 15 jurisdictions with serious deficiencies in anti-money laundering efforts. This specific “blacklist” was based on extent of compliance with 25 published criteria.
Three of the fifteen jurisdictions are located inside Caribbean and also also also include Dominca, St. Kitts-Nevis and also also also St. Vincent. According to the Annual Report issued at the same time, the member countries of the FATF group are largely in compliance with the regulations. This specific evaluation is usually based largely on the mutual evaluations of the member states. A dichotomy exists between the perception of the developed countries and also also also the offshore centers. The tax havens or international financial centers claim of which the legislation and also also also infrastructure are in place and also also also most money laundering occurs through large financial centers. On the different side, the mainland countries perceive of which money laundering is usually occurring in offshore locales. The problem remains of which money laundering persists in both kinds of locales. The FATF is usually right now turning its attention to such problems as money laundering through on-line banking, trusts and also also also different non-corporate vehicles, the professionals who facilitate money laundering, the role of cash vs. non-cash activities and also also also the money laundering of terrorists. The FATF is usually only one of several visible multilateral bodies working on money laundering. of which has regional task forces of which include the Caribbean Financial Action Task Force and also also also Asia/Pacific Group on Money Laundering. The United Nations and also also also its Office of Drug Control and also also also Crime Prevention (ODCCP) incorporates a program against money laundering.
The Organization of American States (OAS) Inter-American Commission on Drug Control, as well as the Council of Europe, have launched special initiatives on money laundering. Much has also been done at the national level. The Bureau of International Narcotics and also also also Law Enforcement of the U.S. Department of State releases annually its International Narcotics Control Strategy, approximately a quarter of of which is usually devoted to actions against money laundering and also also also compliance with money laundering regulations. The report assesses not only drug-related money laundering yet of which related to different offenses. A significant group of countries are identified as of primary concern based on their failure to meet a wide range of criteria concerning asset and also also also information sharing, as well as the deficiencies of their legal framework. Individual countries have established domestic Financial Intelligence Units to address problems of financial crime in order to formulate more effective countermeasures.
These countries share some information within the framework of the Egmont Group. This specific informal alliance includes over 45 countries facilitating the exchange of records and also also also evidentiary materials among member states. The United Nations Convention Against Transnational Organized Crime, was signed in Palermo, Italy by 123 countries (December 12-14, 2000). of which contains provisions to combat money laundering as of which is usually related to organized crime. These include adequate system of internal regulation within the signatory countries, cooperation on the regional, international and also also also multilateral levels, and also also also the mechanisms needed to detect the cross border movements of capital. Furthermore, of which requires customer identification, record keeping, reporting of suspicious transactions. Money laundering in This specific convention is usually tied not only to traditional forms of organized crime yet also to the corrupt practices facilitating of which.
The enormous growth of money laundering results via several factors simultaneously: the rise of transnational organized crime, the globalization of corruption and also also also the competition for capital in an increasingly globalized international economy. The major actors in This specific essentially criminal business practice are major banking centers and also also also offshore locales, although many different institutions and also also also businesses participate. The possibility of laundering money in so many regions of the entire world has resulted inside massive transfer of resources via developing and also also also transitional countries to safe havens inside more developed countries and also also also more protected offshore locations.
Placement of money overseas, allows criminals and also also also corrupt individuals to evade the control of local authorities, avoid the instability of domestic banking institutions while securing access to their funds internationally. Combating money laundering requires a multi-faceted approach. of which is usually necessary not only to target the recipients of the laundered money yet also to recognize the instability of the financial system inside source country. The capacity of different states to combat organized crime and also also also money laundering must also be enhanced. This specific is usually a difficult problem in states of which often do not possess the sufficient resources to provide for the basic educational, medical and also also also social needs of their citizenry. The international actions against money laundering are right now focused more on prevention and also also also sanctions rather than the multi-faceted strategies needed to address the actual causes of the problem.
Prevention works more effectively inside international financial community than in just one country where corruption and also also also coercion by crime groups or high level corrupt officials may prevent the implementation of needed controls. Sanctioning may work in embarrassing major banking centers into greater compliance yet the enormous profits of private banking services make many institutions adhere to the letter yet not the spirit of money laundering controls. Their internal audit rules screen out some of the most blatant violators yet the proliferation of trust agreements and also also also front companies make of which very difficult to screen clients effectively. Many larger financial systems, such as Switzerland, which have served as major repositories for drug kingpins, corrupt officials, and also also also oligarchs are evaluated as in compliance of money laundering provisions.
Yet they do not provide enough law enforcement resources to investigate the vast amounts of money and also also also the diversity of actors who are laundering money through their financial system. Therefore, the probability of successfully laundering large sums may be greater and also also also there are many jurisdictions of which are considered medium or high risk for money laundering by the FATF. In developing countries, which house many offshore locations, there is usually desperate competition for capital. Some Caribbean nations suggest of which the drive against offshore locations is usually not motivated so much by the desire to combat money laundering yet to counter the competition for financial services. inside absence of development alternatives, there is usually often little incentive to get out of the money laundering business. The sanctioning regime of which has been instituted is usually being executed without equity. Countries placed on the high-risk list, otherwise known as the “black-list,” by the FATF are not necessarily the worst offenders. Some countries with very significant problems of money laundering have escaped sanctioning because of their political connections. Some tiny countries inside Caribbean or territories of larger countries do not possess the public relations or the regulatory capacity to prevent their sanctioning have been exposed to the full force of the FATF. Whereas a country like Liechtenstein has the abundant resources to put towards the hire of lobbyists to clear its name and also also also also address some aspects of the problem.