How Is Money Laundered - Essay Example

? Final 3 12/10 Final 3 Money Laundering ‘Money laundering’ has many definitions. One definition describes it as the property which comes from grave crimes, for the aim of concealing or covering up the illegal rights of property or helping any person who is concerned in carrying out these heinous crimes or offences to avoid the lawful consequences of that person’s actions. Additionally, the disguise or concealment of the genuine source, nature, source, disposition, rights, and movement with regards to the property ownership, considering that property such as can be derived from grave crimes (Haggart, B., 2001). Another definition says that it is the procedure by which huge amounts of illicitly gained money such as terrorist activity, drug trafficking, or any other grave crimes is known as the facade of having created from a lawful source. If successfully done, money laundering permits the criminals to have control over their incomes and lead to give a lawful cover up for income source. Money laundering plays a basic role in the goals of the terrorist, drug trafficker, the planned criminal, the tax evader, the inside dealer, also as many people who eschew the type of notice from establishment that abrupt wealth comes about from unlawful activities (Haggart, B., 2001). How is money laundered? There are various techniques of money laundering. The technique of prohibited money import is best when introductory traces are disappeared in the initial stage, finally leading to envoy or by the international transport gives physically the money to another country where rule of money market is not much developed or the legislation likes banking system. One good method of money laundering is nominal or smurfing partnership. In this technique, a group of couriers such as nominal partner or smurf keeps little amounts of deposits each day in different financial institutions. All the deposits are less than the amount which is less than the amount which asks for the attention of banks, value is less than the report limit. Money laundering- an international threat Money Laundering is seen as a personal improvement by few people, to the loss of many people. It draws up many resources from the public sector and also deterrent growth and investment. Money Laundering is the process via which the indignant suffer most (Haggart, B., 2001). According to IMF, the estimated global money laundering is approximately between $600 billion to $1.8 trillion per year. Former President Mobutu of Zaire stole approximately more than ten billion US dollars when he was in power. Nigeria also received help of around $1.1 billion for international development but Abacha stole almost $6 billion in his regime for himself and his family (Haggart, B., 2001). International Response to Money Laundering United States have been of the fore front in combating money laundering. The Bank Secrecy Act (BSA) which obliges the broad record reporting and keeping requirements on the financial institutions in an attempt to give the law enforcement agencies with records of financial obligations. The money laundering control Act of 1986 prevents the circumvention of the requirements set by BSA by which criminal liability is created for the individuals who carry out the transactions for money having any reason, or conducting the requirements of money knowingly, that the people concerned were involved in illegal activity (Gilmore, 1999). United Kingdom is also dedicated towards the Financial Action Task (FATF) which is concerned in taking actions against the money laundering. The recommendations on the terrorist financing comply with minimum international ways to safeguard against the illegitimate act of money laundering (Gilmore, 1999). Factors that have allowed Russian organized crime to flourish since the dissolution of the USSR The political and economic instability which followed the termination of Soviet Union in 1991 permitted a planned crime to merge all of its groups in Russia. The government held many huge enterprises and also role in formulating the economy and generated vast opportunities for corruption and bribery of the government officials in government bureaucracies and economic ministries. Despite the profiting of privatization offerings and massive economic related activities by criminals, the organized crime in Russia was able to lead the governmental agenda. Some business enterprises connected with organized crimes in Russia were huge transactional organizations occupied in export/import commodities and sale whose assets and networks divest the Government of Russia of considerable legal revenues. Just as many legal firms, businesses do entangle with crime (MacQueen, 1993). The economic dispersions in corruption and crime had an enormous affect on Russian economy. The Russians planned crime groups on privatization of the previously established state-owned industries. Most importantly, Russian criminals made considerable inroads to the profitable sources of strategies in economy. The financial sector developed by Russia was also the basis of organized crime. The banking sector occasionally gave cash to troubled banks, using intimidation and extortion by the organized crime efforts and purchased true banks outright or set up new ones as per the media accounts. They influence or use their organization to get financial information about the possible extortion targets or about competition (MacQueen, 1993). What four aspects of modern-day banking challenge international efforts to curb money laundering, and why do they present such a challenge? The four aspects of modern-day banking challenges are tough for the governments of the world as they sought to prevent money laundering by using methods such as correspondent banking, cyber currency, offshore banking, and private banking. Offshore banking is the agreement between the potential far-reaching costs and cross-border banking which was created by the banking supervisors in June 1996 at the International Conference of the Banking Supervisors. The agreement took into consideration the report by Basle Committee on the Banking administration which was issued in October and recommended designs to tighten the efficiency of administration by both host country and home authorities via pen pal relationships established all across the globe (Gilmore, 1999). The Correspondent Banking comprises of money laundering investigators, regulators, and many international policy creating bodies such as FATF which faces deep challenges from banking world which is opened 24/7 and has no geographical boundaries. FATF is not inter-connected and huge multinational banks that go forward to reach the subsidiary networks and branch networks and also collaborates relationships all around the world. Cyber currency also makes use of micro-chip focused electronic money for financial dealings through smart cards and internet, and they have the potential to consider the significant role in future worldwide and domestic system of payment. The private banking consists of international and national banks occupied in ferocious competition to attract affluent companies and individuals as the clients of private banking. Private banking sector also care for personal transactions of individuals. The term considers that transactions will be private, and also private banking customers will also be treated in a different way. Private banking concern is not a huge bank’s officers might need and difficult to get hold of but also give the opportunity for entertainment tickets, help in high-ticket shopping, the type of services that are customary for management consultant services, and advertising agencies, etc (Gilmore, 1999). How have governments been able to co-operate using money laundering and financial crime investigation strategies to combat global terrorism? Many international bodies or regional agencies such as CRAFT (Caribbean Financial Action Task Force), APG (Asia Pacific Group on Money Laundering), OGBS (Offshore Group of Banking Supervision), and PC-R-EV Committee of European Council (a committee of experts based on the measures of anti-money laundering) perform such tasks for their people as FATF do for it members (Auditing Practices Board, 1997). FATF also considers these groups as their strategically partners in ensuring that all the countries of the world apply efficient counter-measures against the power of money laundering. CRATF, Council for Europe’s PC-R_EV and OGBS conduct mutual evaluations for their people which measures the programs they have developed in executing anti-money laundering progress. The CFATF, APG, and European Council also have reviewed the trends in regional ways of money laundering (Auditing Practices Board, 1997). Bibliography MacQueen, H. L., & David Hume Institute. (1993). Money laundering. Edinburgh: Edinburgh University Press. Haggart, B., Kieley, G., & Canada. (2001). Money laundering. Ottawa: Library of Parliament, Parliamentary Research Branch. Gilmore, W. C. (1999). Dirty money: The evolution of money laundering counter-measures. Strasbourg: Council of Europe Pub. Auditing Practices Board. (1997). Money laundering. S.l.: Auditing Practices Board. Read More