Money Laundering - Research Paper Example

? Money Laundering Money laundering refers to a variety of financial transactions done by criminals in which sources of finance and its proceeds are disguised by the parties involved. It poses a real threat to the financial system of the nation if not checked in time. Money laundering is the result of various illegal activities. For example, across the US-Mexico border the drug trafficking business and illegal cash transfers from the US to Mexico is estimated at somewhere between $19 and $29 each year. It is difficult and cumbersome to understand how and in what way this cash is collected and delivered. It can be said that money laundering is not a cause in itself but it is a symptom that speaks about illegal activities in its root. Main Features of Money Laundering As such, money laundering is an age old activity because its underline cause lies in illegal activities such as drug trafficking, illegal production, smuggling, or tax evasion. All these underground activities have a single motive of making huge profits. Criminals attempt to legalize this money so that it can be used to acquire assets or used for their secret missions such as terrorist activities. In ‘promotional’ money laundering, money so garnered is reinvested in the illegal activities itself. The crux is that all these activities fall under a term ‘specified unlawful activities’ (SUA). Money laundering has drawn attention of the authorities in the recent years due to its role in terrorist activities as noticed during 9/11. Money laundering is rampant in most parts of the world and can cause serious economic and social implications because of its magnitude or malicious motives (Leff, 2012). Circumstantial Evidence and Money Laundering Investigators in the US need not prove that the money launderer was aware about the unlawful activity. That means that circumstantial evidence is enough for the investigator to prove that money launderer has generated the money through illicit means and juries will make note of this evidence during the trial. Thus, in the US, the money laundering charge can be proved by the investigating agency under Title 18, Section 1956, US Code through SUA proceeds; financial transaction with the sole aim to conceal or intent to conceal the proceeds; and the knowledge by culprit that the proceeds have resulted from illegal activity. It is important to note here that even clean money sent from outside the US with the purpose to promote an SUA will fall into charge of a money laundering. Thus, the intent to promote an SUA along with the movement of funds from or to the country is enough to put someone under a charge of money laundering (Leff, 2012). Money Laundering through Spending The Title 18, Section 1957, US Code deals with another kind of the money laundering charge, known as the money spending statute that prescribes that when the culprit moves over $10,000 illegally earned proceeds through a legal ‘financial institutions’ then he or she may be convicted under the law with a 10-year maximum penalty. The investigator need not prove any other thing except the simple facts of transaction unlike proving intent of the money launderer promoting an SUA under Section 1956. Further, the word 'financial institutions' is broadly defined to include not only banks or credit unions but jewelry stores, casinos, travel agencies, most merchants, brokers, and many others through which a culprit can spend their illegally earned proceeds (Leff, 2012). Money Laundering Threat Assessment (MLTA) In 2005, for the first time, the US government did Money Laundering Threat Assessment (MLTA).The purpose was to help regulators, policy makers and the law enforcement agencies to understand the depth and gravity of money laundering and develop strategy to thwart it. Under the MLTA, thirteen money laundering methods were analyzed in detail. The amount of dirty money in the US is certainly huge and globalization has given further impetus to this activity through on line payment possibility. Under MLTA several initiatives have been taken and some of them can be mentioned as per the following (US Money Laundering Threat Assessment, 2005). a) A Foreign Political Corruption Task Force has been established in Miami to scale money laundering and foreign public corruption activities. b) A Trade Transparency Unit (TTU) is aimed at identifying discrepancies related to cross-border trade involving money laundering. c) A multi-agency collaborative approach among FinCEN, the Federal Bureau of Investigation (FBI) and Internal Revenue Service – Criminal Investigation (IRS-CI) to trap unlicensed money services businesses (MSBs). Anti-Money Laundering Legislation Necessity It is necessary to launch anti money laundering measures as money earned illegally can be deployed to disrupt and damage the social and economic fabric of the society. Anti-money laundering can be defined as regulations or laws, a set of procedures to thwart the practice of generating illegal incomes. Some of the important anti-money laundering laws that are in force currently can be described as per the following. USA Patriot Act Title III of the USA Patriot Act is defined as the International Money Laundering Abatement and Financial Anti-Terrorism Act with the following provisions (Leff, 2012). 1. Information sharing between the US government and financial institutions and among all financial institutions is strengthened. 2. Criminal and civil penalties for money laundering are increased. 3. The anti-money laundering program requirements expanded for all financial institutions. 4. The Secretary of the Treasury is authorized to enforce "special measures" on institutions, jurisdictions, or transactions that relate to money laundering. 5. Banks need to respond to regulatory institutions within 120 hours. Bank Secrecy Act Reporting It is mandatory for certain financial institutions that include merchants and some casinos to file currency transaction reports, suspicious activity reports (SARs), foreign bank account reports and similar kinds of other reports with the crimes enforcement network. Investigators use these reports to find concealed assets. SARS is used as a source of initiating investigations. SARS helps in identifying accounts and other identity information. SARS review teams are available across the country and help multiple agencies to find correct targets. Financial institutions make available the supporting documents to facilitate law enforcement departments (Leff, 2012). Immigration and Customs Enforcement (ICE) ICE leads in investigation of financial crime and money laundering activities. Drug trafficking is a large source of financial crimes and money laundering and huge sum of money is diverted through legal routes of investment vehicles and financial institutions. ‘Corner’ is one such initiative of ICE to detect weaknesses in the US trade and transportation sector usually exploited by criminal organizations. Law enforcement agencies share information with the financial and trade community so that they could safeguard themselves from getting trapped by the criminal organizations that often take advantage of the same system used by traders. Other initiatives by ICE can be described as per the following (ICE, 2013). El Dorado Task Force Over 55 law enforcement agencies in New Jersey and New York have collaborated to form the El Dorado that include state and local police investigators, federal agents, federal prosecutors and intelligence analysts. The El Dorado is focused at all kinds of financial crime. It educates private parties in identifying money laundering cases. Targets are identified and prosecuted taking advantage of civil and criminal laws. Commodity-based money laundering is also identified by the El Dorado task force (ICE, 2013). Foreign Investigations ICE investigates foreign money-laundering cases where money is embezzled by corrupt officials in developing countries and placed in the US financial system. Trade-Based Money Laundering False invoicing such as over- and under-invoicing in commodity transactions, known as trade-based money laundering, are also investigated by the ICE through the Trade Transparency Unit initiative launched by them. U.S. Immigration and Customs Enforcement (ICE) has come forward with some new ways in analyzing money services businesses (MSBs), bulk cash smuggling, courier hubs, and alternative remittance systems (ICE, 2013). Bulk Cash Smuggling On bulk cash smuggling aspect, ICE has taken several initiatives and the same can be described as per the following (US Money Laundering Threat Assessment 2005). 1. Partnering with State Department and CBP, ICE imparted training to 28 developing countries in Asia, Africa, South America, and Middle East. 2. Financed by the Executive Office for Organized Crime Drug Enforcement Task Forces (OCDETF), seven major cities of the United States were covered providing training in bulk cash smuggling for the benefit of state, federal and local law enforcement agencies. 3. Partnering with Customs and Border Protection (CBP), ICE provided Mexican authorities the training and expertise on bulk cash smuggling. ICE on Mass-Marketing Fraud Low-cost communication technology and the Internet have supported mass-marketing frauds across the world. Telemarketing and theft scams usually operate from far off locations. ICE participates with the International Mass-Marketing Fraud Working Group. The working group collaborates with regulatory and consumer protection agencies from seven countries drive public awareness on mass-marketing fraud schemes, exchange information with the concerned agencies, and detect fraudulent operations to disrupt their activities (Mass-Marketing Fraud, 2010). UNDOC on Money Laundering – International Conventions and Legislation Anti-money laundering Unit of the United Nations Office on Drugs and Crime (UNDOC) conducts Global programs against money laundering or proceeds of crime. The unit was established in 1997 to check illicit drug traffic; however, its scope was later broadened to encompass all serious crimes. The Global Program aims at strengthening Member States so as to implement anti-money laundering measures, and assist them find, seize, and confiscate illegal money as per the accepted conventions (UNODC, 2009). Model provisions on anti-money laundering are the result of close collaboration between UNODC, IMF, and the Commonwealth Secretariat. This essentially forms a basis for States to form domestic law to detect, and prevent money laundering practices. Model Provisions consist of eight parts: Preliminary, Money Laundering and Terrorist Financing Offences, Cross Border Transportation of Currency and Bearer Negotiable Instruments, preventive measures, Financial intelligence unit, Conviction-Based Confiscation, Benefit Recovery and Extended Benefit Recovery Orders, Civil Forfeiture, Recovered Assets Fund, Model Decree on the Financial Intelligence Unit. The model provisions cover a wide range of areas. The provisions aim at detecting money laundering activities, preventing such activities with appropriate measures and finally recovering proceeds of crime (UNODC, 2009). UN's legislative guide, in reference to money laundering, establishes four general types of conduct as criminal activities as per the following. 1. Transfer or Conversion of Money When finances are converted from one kind to another or they are transferred from one bank or account to another bank or account. The act is done intentionally and with the knowledge to conceal or disguise the criminal activity with the sole purpose to evade criminal liability associated with the activity. 2. Disguising or Concealment of Money of Crime When concealment of such proceeds is intentional or it is done with the sole aim of deception to law enforcement authorities. 3. Possession or Use of Proceeds As per this section, liability is rested with the recipients of the illegal proceeds. There is intent to possess or acquire or use proceeds with the knowledge thereof. 4. Participating, Facilitating, or Counseling Roles Apart from actual commitment of offence, there could be participation or counseling to criminal offence and the parties doing this are also liable under this law. Anti- Money Laundering Measures and their Effectiveness As already stated, money laundering is an age-old activity but its forms vary time to time. With the advent of communication and Internet technology, money laundering has developed several new ways and means. Evidences are available that tougher money laundering regulatory measures do create its impact on lowering money laundering activities. Laws and regulations do make a difference but its enforcement has to be cost effective and that is there that the international cooperation is of immense importance. Many of the activities to money laundering are not considered illegal in several of the countries, especially so called tax havens where least questions are asked about the proceeds and about the financial transactions thereof and that poses a big threat to anti-money laundering measures internationally. Moreover, the specific legislation as regards to confiscation is strongly needed because most nations widely differ on the laws to confiscate money generated from criminal activities. It goes without saying that close international cooperation is a must for the fight against money laundering. It is commendable that increasing numbers of countries have now realized about the potential dangers of numerous kinds of money laundering activities that prevail internationally and most agree to eradicate them from their soil for their own socio-economic stability within the country. References Financial Crimes Enforcement Networks (2013). History of Anti-Money Laundering Laws. Retrieved May 6, 2013 from http://www.fincen.gov/news_room/aml_history.html ICE (2013). Money Laundering. ice.gov. Retrieved May 6, 2013 from http://www.ice.gov/money-laundering/# Leff, D. (2012). Money Laundering and Asset Forfeiture. Retrieved May 6, 2013 from http://www.fbi.gov/stats-services/publications/law-enforcement-bulletin/april-2012/money-laundering-and-asset-forfeiture Mass-Marketing Fraud (2010). International Mass-Marketing Fraud Working Group. Retrieved May 6, 2013 from http://www.ice.gov/massmarketing-fraud/ UNODC (2009). Model Provisions on Money Laundering, Terrorist Financing, Preventive Measures and Proceeds of Crime. Retrieved May 6, 2013 from http://www.unodc.org/documents/money-laundering/Model_Provisions_2009_Final.pdf US Department of the Treasury (2012). Money Laundering. Retrieved May 6, 2013 from http://www.treasury.gov/resource-center/terrorist-illicit-finance/Pages/Money-Laundering.aspx US Money Laundering Threat Assessment (2005). Department of the Treasury. Retrieved May 6, 2013 from http://www.treasury.gov/resource-center/terrorist-illicit-finance/Documents/mlta.pdf Read More