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Money Laundering and Terrorism Financing - Essay Example

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Money laundering has its origin when the British landed up in India and other Oriental countries. It was a common scene to find a person who has returned from the Orient rich and pompous. Money in various forms, taken from these Oriental countries was sent back to England without the knowledge of the administration was common…
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Money Laundering and Terrorism Financing
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Download file to see previous pages However, it is common sight for the law keepers to have a red light burn the moment they find unaccounted money getting passed down somewhere.
Money laundering in today's world happens mostly through the banks. Banks were expected to tighten their money movement specifications. But with the wide open internet all around it becomes tougher for the banks to manage and monitor what is the nature of movement and who is sending what to whom. The following section identifies the various methods adopted by the banks to ensure fair movement of money.
Three points were the money laundering and terrorism related monetary transactions can be identified and monitored are: 1) entry of cash into the financial system 2) transfers to and from financial system and 3) cross border flows of cash. The following processes are adopted by the banks in order to monitor these three and control them:
1. 'Know your customer' rule. This was brought in during the heights of terrorist bombings on the aircrafts that every customer should be known and identified by the financial institutions. This would ensure that the customers are monitored and they are known if there is an uncanny behavior in any it is identified and monitored for further action1. This is for the existing customers.
2. 2. Movement of any transaction over PDS 10000/- in UK and an equivalent in other countries are monitored and suspicious cases are reported to the legal authorities for further action. This is a statutory requirement in most countries and stipulated in UN charter for fighting drug and crime2.
3. For the new customers, a proper identification should be established before any transaction with the intended person is made by a financial institution3. This should be an official identification document like a passport, birth certificate or such other means of identification. If the person is acting on behalf of a company or another person, then the identity of this person on whose behalf the transaction is being done is to be clearly established and identified to the maximum extent possible by the financial institution.
4. All financial institutions and cash dealers should establish a clear internal and hierarchical reporting structure of such occurrences in their office or during the course of their business. This should be implemented and followed up on a daily basis.
5. Under no circumstances should a financial company or a cash dealer shall allow opening and operating of an account in a false name. Even if no offence was committed by the account operator, the financial institution has committed an offence according to the law.
6. Countries are coming in heavily on cash movement either for import or for export or for any other purpose. Countries have made it clear that cash handling beyond a specific value is not accepted and can be seized at any port or place.
It is essential that all the financial institutions abide by these laws. Now UNODC (United Nations Office on Drugs and Crime) has issued a comprehensive legal framework for the member countries to follow to counter crimes including terrorism.
3. Lacuna in Controls
Whatever be the methods that are adopted by the banks to identify such variations in the transactions, it is always found that people committing the ...Download file to see next pagesRead More
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