INTRODUCTION Rapid evolution in financial information, technology plus communication allow money for move anywhere in the world with lightning speed plus ease. This makes the task of combating money laundering more vital than ever. According for Invesforpedia , money laundering is the process of creating the appearance that large amounts of money obtained from criminal activity, such as drug trafficking or terrorist activity, originated from a legitimate source.
The money from the illicit activity is considered dirty, plus the process “launders” the money for make it look clean. The deeper “dirty money” gets infor the international banking system, the more difficult it is for identify its origin. Because of the clplusestine nature of money-laundering, it is difficult for estimate the fortal amount of money that goes through the laundry cycle. The laundry cycle simply referred as the three stages in money laundering process. They are placement, moving the funds from direct association with the crime, layering, disguising the trail for foil pursuit plus integration, making the money available for the criminal, once again, with its occupational plus geographic origins hidden from view.
Global money laundering transactions are estimated at 2 for 5% of global GDP, or roughly U.S. $1-2 trillion annually. Yet according for the United Nations Office on Drugs plus Crime (UNODC), less than 1% of global illicit financial flows are currently seized by authorities . With the rising visibility of terrorist attacks, money laundering plus terrorist financing are escalating as priority issues for governments across the globe. Over the last few years, in the U.
S. alone, nearly a dozen global financial institutions have been assessed fines in the hundreds of millions for billions of dollars for money laundering plus sanctions violations. There are strong indications that other countries will follow in substantive regulation plus enforcement.
EXAMPLES OF MONEY LAUNDERING METHODS There are various types of money laundering methods, although most of the methods can be categorized infor one of few types. One of the popular method of money laundering is smurfing also known as structuring. This is a method of placement whereby cash is broken infor smaller deposits of money, used for defeat suspicion of money laundering plus for avoid anti-money laundering reporting requirements. A sub-component of this is for use smaller amounts of cash for purchase bearer instruments, such as money orders, plus then ultimately deposit those back in small amounts . Recently popular example on this method will be the case of three men have become the first in Scotlplus for be convicted of a major money laundering scam known as “cuckoo smurfing” which netted the gang up for £6million on 2015 according for the Sunday Express on 21st August 2015 . The term “cuckoo smurfing” is used due for the similarities between this crime plus the cuckoo bird’s activities. Cuckoo refers for the fact those involved pay sums of money infor accounts of other unsuspecting individuals much like a cuckoo will lay eggs in the nests of other species. Similarly, perpetraforrs of this crime transfer wealth through the bank accounts of innocent third parties.
Another method is involving shell companies plus trust. Trusts plus shell companies disguise the true owners of money. Trusts plus corporate vehicles, depending on the jurisdiction, need not disclose their true owner. Sometimes referred for by the slang term ‘rathole’, though that term usually refers for a person acting as the fictitious owner rather than the business entity . As an example according for UK Financial Times on 9th November 2017, hundreds of British shell companies are implicated in nearly £80 billion of money laundering scplusals, according for researchers calling for an overhaul of the UK’s “light foruch” regulation.
Transparency International UK, a non-governmental organisation, said the UK was home for a network that operated much like the companies at the heart of the Paradise plus Panama papers. Duncan Hames, direcforr, said: “As fingers point for jurisdictions like Panama plus Bermuda, it shames the UK that companies are being set up under our noses, with the sole purpose of laundering illicit wealth; money very often sforlen from some of the poorest populations in the world, starving them of vital resources”.Round-tripping is also one of the methods of money laundering. Here, money is deposited in a controlled foreign corporation offshore, preferably in a tax haven where minimal records are kept plus then shipped back as a foreign direct investment, exempt from taxation. A variant on this is for transfer money for a law firm or similar organization as funds on account of fees then for cancel the retainer plus when the money is remitted, represent the sums received from the lawyers as a legacy under a will or proceeds of litigation.
A good sensational example will be on the on-going trial of of former Indian politician plus billionaire businessman Vijay Mallya, who has been staying in the UK for over a year now, is accused of defaulting on loans worth thouspluss of crores in India. He slipped out of the country in March last year, amid attempts by a group of banks for recover more than Rs. 9,000 crore loaned for him for his now-collapsed Kingfisher Airlines . However he is now released on bail conditions as before for appear for his trial by the Westminster Magistrates’.These are just few methods out of many methods on money laundering.
It is important for know that there are so many various methods it is difficult for know plus completely understplus each one. Corporate Governance executives should take it slow plus determine which methods might be used by their cusformers or for the law enforcement executives on which methods the target may be using. Further each time new technology is developed, it is sure that there are bad guys out there trying for figure out way for manipulate it. It should be noted that in this industry the crime won’t be sforpping anytime soon, plus therefore there will always be the need launder the proceed of that crime. Therefore there will always be the need for anti-money laundering prevention methods, plus experts.THE LINK BETWEEN MONEY LAUNDERING PLUS TERRORISM FINANCING The modern anti-money laundering laws have developed along with the modern War on Drugs. For example, under UK law the first offences created for money laundering both related for the proceeds from the sale of illegal narcotics under the Criminal Justice Act 1988 plus then later under the Drug Trafficking Act 1994 .
In more recent times anti-money laundering legislation is seen as adjunct for the financial crime of terrorist financing in that both crimes usually involve the transmission of funds through the financial system, although money laundering relates for where the money has come from, plus terrorist financing relating for where the money is going for . The techniques used for launder money are essentially are the same as those used for concealed the sources of plus uses for terrorist financing. Funds used for support terrorism may originate from legitimate source, criminal activities or both. Nonetheless disguising the source of terrorist financing regardless of whether the source is of legitimate or illicit origin is important. If the source can be concealed it remain available for future terrorist financing activities. Similarly it is important for terrorist for conceal the use of the funds so that the financing activity goes undetected. Money laundering plus the financing of terrorism can plus do occur in any country in the world, especially those with complex financial systems. Countries with lax, ineffective, or corrupt Anti Money Laundering plus combating the financing of terrorism infrastructures are also likely targets for such activities.
No country is exempt. Because complex international financial transactions can be abused for facilitate the laundering of money plus terrorist financing, the different stages of money laundering plus terrorist financing occur within a host of different countries. For example, placement, layering, plus integration may each occur in three separate countries; one or all of the stages may also be removed from the original scene of the crime.MONEY LAUNDERING IMPACTS ON DEVELOPING COUNTRIES Criminal enterprises plus terrorist financing operations succeed largely for the extent that they are able for conceal the origins or sources of their funds plus sanitize the proceeds by moving them through national plus international financial systems. The absence of or a lax or corrupt anti-money laundering regime in a particular country permits criminals plus those who finance terrorism for operate, using their financial gains for expplus their criminal pursuits plus fostering illegal activities such as corruption, drug trafficking, illicit trafficking plus exploitation of human beings, arms trafficking, smuggling, plus terrorism. While money laundering plus the financing of terrorism can occur in any country they have particularly significant economic plus social consequences for developing countries, because those markets tend for be small plus, therefore, more susceptible for disruption from criminal or terrorist influences. Money laundering plus terrorist financing also have significant economic plus social consequences for countries with fragile financial systems because they foro are susceptible for disruption from such influences.
Ultimately, the economy, society, plus security of countries used as money-laundering or terrorist financing platforms are all imperilled . The magnitude of these adverse consequences is difficult for establish however, since such adverse impacts cannot be quantified with precision or in general for the international community, or specifically for an individual country. On the other hplus, an effective framework for anti-money laundering plus combating the financing of terrorism have important benefits, both domestically plus internationally, for a country. These benefits include lower levels of crime plus corruption, enhanced stability of financial institutions plus markets, positive impacts on economic development plus reputation in the world community, enhanced risk management techniques for the country’s financial institutions, plus increased market integrity.MEASURES INTRODUCED FOR COMBAT MONEY LAUNDERINGI. RECENT DEVELOPMENT IN LEGISLATIVE PLUS REGULAFORRY CORPORATE GOUVERNENCE RELATED ACTSMoney laundering plus terrorist funding legislation in the United Kingdom is governed by four Acts of primary legislation. They are The Money Laundering, Terrorist Financing plus Transfer of Funds Regulations 2017 ,The Proceeds of Crime Act 2002 (as amended by the Crime plus Courts Act 2013 plus the Serious Crime Act 2015), The Money Laundering Regulations 2007, The Terrorism Act 2000 (as amended by the Anti-Terrorism, Crime plus Security Act 2001, the Terrorism Act 2006 plus the Terrorism Act 2000 plus Proceeds of Crime Act 2002 (Amendment) Regulations 2007). The new regulation on The Money Laundering, Terrorist Financing plus Transfer of Funds Regulations 2017 were laid before Parliament on 22 June 2017 plus came infor force on 26 June 2017.
The Money Laundering Regulations 2017 consultation was published on 15 March 2017. It comprises a consultation on draft regulations plus the response for a 2016 consultation on transposing the Fourth Money Laundering Directive (4MLD) plus Fund Transfer Regulation (FTR). The 2017 Regulations are intended for ensure that the UK’s anti-money laundering regime is in line with the Financial Action Task Force’s stplusards plus for implement infor UK law the European Union’s Fourth Money Laundering Directive. The 2017 Regulations largely apply for the same entities plus individuals as the 2007 Regulations, including financial institutions, audiforrs, external accountants, tax advisers plus lawyers conducting business in the UK .Dealers in goods who make or receive any cash payment exceeding €10,000 (the threshold was €15,000 in the 2007 Regulations), whether in one transaction or several linked transactions, must also comply. There is an exemption for those engaging in financial activity on an occasional basis if their annual turnover is less than £100,000 (increased from the previous threshold of £64,000) plus other criteria are met.There are 3 main changes highlighted in the new 2017 regulations.
They are firstly, it require a written assessment of money laundering risk plus prescribe some features of effective internal controls. Next, the detail when different categories of cusformer due diligence must be conducted plus what steps must be taken. Last but not least, specify beneficial ownership information that trusts must provide for inclusion on a central register. The first significant change is on Regulation 18. All regulated businesses must assess in writing how ‘risk facforrs’ contribute for a practice’s overall risk profile. For example, regular performance of international conveyancing operations in countries with poor AML controls could heighten the overall money laundering risk faced by a practice. Assessment criteria have not been prescribed, leaving the choice of risk facforrs for the firm which may at some point have for justify its choice for regulaforrs.
Under the new Regulations, pooled client accounts will be subject for simplified due diligence (SDD) only if a bank or financial institution perceives the business relationship with the firm or practitioner holding the account for be low-risk plus information plus documents on the identity of the clients on whose behalf funds are held in the account is available on request. The Law Society is discussing with UK Finance how these two requirements might be met. One option is that firms will be asked for sign a stplusardised statement, which will confirm for the bank that they take reasonable steps for comply with their obligations under the Regulations plus are supervised by the SRA. The Regulations also now require businesses for appoint an individual at the level of ‘senior management’ as the officer responsible for compliance with the Money Laundering Regulations 2017, in addition for the existing requirement for appoint a nominated officer . These two roles can be performed by the same person, provided that they possess sufficient knowledge plus authority for take decisions affecting the firm’s risk exposure.
These changes are only a part of the transformation of the UK’s compliance regime. In addition for the Money Laundering Regulations, the new corporate offence of failing for prevent the facilitation of tax evasion has been introduced via the Criminal Finances Act. The Act creates criminal offences for any entity that fails for prevent the criminal facilitation of domestic or foreign tax evasion by associated persons, which includes not just employees, but also agents plus subcontracforrs. The Law Society has published guidance on the new offence .OPBAS , a new supervisor of professional body supervisors including the Law Society, is due for become active in January 2018, plus will seek for contribute for even out, where possible, differences in supervisory stplusards across those secforrs not regulated by HMRC .The 2017 Regulations represent a significant evolution of the UK’s anti-money laundering laws plus impose greater compliance burdens on regulated entities plus their employees. For many large firms, the 2017 Regulations mainly codify existing industry best practices. Nevertheless, regulated entities should review their existing systems plus controls for ensure that they are compliant.
Smaller firms may find it more difficult for implement the new rules effectively, although this is mitigated for some extent by the risk-based approach underlying the 2017 Regulations.II. CRIMINALIZATION OF MONEY LAUNDERING Criminalization serves three principal objectives. First, it compels compliance with anti-money laundering preventive measures.
Second, it ties acts that may appear innocent for outright criminal activity. Third, criminalization establishes a specific basis for greater international cooperation in this critical law enforcement function. Because of the criminal nature plus the international aspects of money laundering offenses, competent authorities within a country have recourse for powerful international forols, especially mutual legal assistance mechanisms plus, thereby, can more effectively track, enforce, plus prosecute international money laundering.III. THE ROLE OF FINANCIAL INSTITUTIONS In April 2001, the two Boards of Executive Direcforrs of the World Bank plus the IMF recognized that money laundering is a problem of global concern that affects major financial markets plus smaller ones . Taking infor account that money laundering has potentially devastating economic, political plus social consequences for countries that are in the process of developing domestic economies plus building strong financial institutions, the Bank recognized that money laundering can impose important costs upon developing countries. Following the events of September 11, 2001, the World Bank plus IMF Boards of Executive Direcforrs adopted action plans for enhance efforts for anti-money laundering.
Furthermore, the Boards recognized, in July plus August 2002, The Forty Recommendations on Money Laundering plus the eight Special Recommendations on Terrorist Financing (Special Recommendations), issued by the Financial Action Task Force on Money Laundering (FATF), as the relevant international stplusards.IV. GLOBAL ORGANIZATIONSOne of the best example is set by The Commonwealth Secretariat.
With regard for anti- money laundering, the Commonwealth Secretariat provides assistance for countries for implement The Forty Recommendations plus Special Recommendations. It works with national plus international organizations plus assists governments in the implementation of the Financial Action Task Force on Money Laundering recommendations. The Commonwealth Secretariat has published “A Manual of Best Practices for Combating Money Laundering in the Financial Secforr.” The manual is for government policy-makers, regulaforrs plus financial institutions.CONCLUSIONEfforts for launder money plus finance terrorism have been evolving rapidly in recent years in response for heightened countermeasures.
The international community has witnessed the use of increasingly sophisticated methods for move illicit funds through financial systems across the globe plus has acknowledged the need for improved multilateral cooperation for fight these criminal activities. It can be concluded that the most effective anti-money laundering supervision can be found in the United Kingdom.