Efficacy of the Saudi Arabian Financial Intelligence Unit - Assignment Example

• The literature review touches on the various sections of Saudi Arabian law that deal with money laundering and terrorist financing. It also addresses how Saudi Arabia relates with international agencies such as the UN Security Council (UNSC), FATF recommendations, and the SAFIU relations with other countries through bilateral and multilateral agreements aimed at combating money laundering and terrorist financing.

• 3.1. Money Laundering and Terrorist Financing
  • 3.1.1. Defining money laundering

The process wherein financial transactions are concealed is referred to as money laundering. Such laundering methods are being used by corporate, organizations as well as individuals. The main aim of money laundering is to conceal either the destination or the source of the money (Arnone & Borlini, 2010).

The process of money laundering usually takes place in three major phases:

In the first phase, the funds that are received through criminal activities are introduced into the financial and banking system. However, due to the stringent law enforcement policies, it is becoming difficult to introduce such funds into the banks. Further, the banks also need to comply with requirements to report suspicious transactions.

In the second phase, the funds are put into various financial operations by misleading the investigators and making the funds appear as if they are from a legal origin. This phase is known as the money-laundering phase, wherein numerous transactions between the money launderers and banks are being showcased, money laundering also loans, invoices, etc. to mislead the investigators and prove that the money is from a legal origin (Merlonghi, 2010).

In the final phase, the funds after appearing as from a legal origin are reintroduced into the economy. This is being done through the following routes:

• Through the buying of luxury goods and items
• By investing in assets such as company shares, real estate, etc.
• By investing in economic entities such as hotels, casinos, cinemas, restaurants, etc., and in companies wherein such funds could be easily invested into existing businesses.
  • 3.1.2. Defining terrorist financing

The financing of terrorist activities may include the funds being raised from legitimate sources like donations made by individuals, profits of various charitable and business organizations, and from unauthorized sources like smuggling, drug trade, kidnapping, fraud, extortion, etc. The terrorists use a similar manner through which money launderers evade the investigators, and protect the role and identity of their sponsors as well as the end users of such funds. However, with regard to terrorist financing, it has been often seen that such transactions are usually of smaller amounts as compared to that amount transferred through money laundering (Ho, 2005).