Introduction
Money laundering has a major impact on a country’s because it affects economic growth. Both money laundering and terrorist financing can weaken individual banks, and they are also a threat to a country’s overall financial sector reputation Combination money laundering and terrorist financing is therefore a key element in promoting a strong and sound financial sector.
The adverse consequences for institutions are generally described as
- Reputation: clients that provide a stable deposit base and make reliable borrowers lose confidence in an institution connected with money laundering and take there business elsewhere.
- Transactional: Impaired internal processes or relations with other bank impede the institution, or raise its operating and funding costs.
- Legal: there is a risk of lawsuits adverse judgments unenforceable contracts, fine and penalties, which may include license withdrawal and management dismissal (and possibly a lifetime ban from participation in the banking industry)
A key imperative for government around the globe is to ensure that the banking system cannot be used for the purposes of money laundering terrorist financing and it is impossible to achieve this goal without the active involvement of bank supervisors Difficulties with implementation, supervision and enforcement of AML/CFT Policies procedures and rules have became an increasing concern for both developed and developing countries Indeed as the 2002 to 2008 Financial
Sector Assessment Programs (Flaps) reports and Financial Action Task Force2 Style Regional Bodies (FSRBs3) mutual assessments show, AML/CFT) supervision in the vast majority of cases, is one of the weakest sector of national regimes \
What is money laundering?
Money laundering refers to the process of concealing the source of illegally obtained money. The methods by which money may be laundered are varied and van range in sophistication1 many regulatory and government authorities quote estimates each year for the amount of money laundered, either Worldwide or within their national economy. the tem money laundering is typically wed refers to any financial tram action that was meant to be kept secret but was eventually found out in many ears it refers to the process of concealing2 a source of money. Which is often earned by illegal means such as drug trafficking health care fraud and smuggling just to name a few various laundering techniques can be used by individuals, groups officials and corporation the goal of money laundering operation is usually to hide either the source or the destination3 of money in money in many cases it aims to make illegal tram action appear legitimate and legal.
Methods or process of money laundering
Money laundering is not a single act but is in fact came about. process that is accomplished4 in three basic steps. These steps can be taken at the same time in the course of a single transaction but they can also appear in well separable forms one by one as well. The steps are:-
a. Placement
b.Layering and
c. Integration
There are also common factors regarding5 the wide range of methods used by money launderers when they attempt to launder their criminal proceeds. Three common factors identified laundering operations are.
the need conceal the origin and true ownership of the proceeds; The need to maintain control of the proceeds; The need to change the form of the proceeds in order to shrink the huge volumes of cash generated by the initial criminal activity.
Methods: money laundering takes several different forms although most methods can be categorized into one of a few types. These include balk methods surfing (also known as structuring) currency exchanges and double invoicing.
Structuring: Often known as surfing it is a method of placement by which cash is broken into smaller deposits of money used to defeat suspicion6 of money laundering and to avoid anti-money laundering reporting
Requirements. A sub-component of this is to use smaller amounts of cash to purchase bearer instruments, such as money and then ultimately deposit those again in small amounts.
Bulk cash smuggling: physically smuggling cash to another jurisdiction, where it will be deposited in a financial institution, such as an offshore bank, with greater bank secrecy or less rigorous money laundering enforcement.
Cash intensive businesses: A business typically involved in receiving cash, claiming all of it as legitimate earnings. Often the business will have no legitimate7 activity.
Over purchasing: This is where a launderer buys an item from a private seller, pays with an excess check and is paid back the overflow. This remainder can be claimed as legal spending and be used however the launderer likes Ex.- “I would like to buy your product at $300. However, I would like to pay with a $2000 check and for you to send me back the $1700”.
Trade- based laundering: Under-or over-valuing invoices in order to disguise the movement of money.
Shell companies and trusts: Trusts and shell companies disguise the true owner of money. Trusts and corporate vehicles depending on the jurisdiction8 need not disclose their true beneficial owner.
Bank capture: Money launderers or criminals buy a controlling interest in a bank preferably in a jurisdiction with weak money laundering controls and then move money through the bank without scrutiny.
Casinos: An individual will walk in to a casino with cash and buy chips play for a while and then cash in his chips for which he will be issued a check. The money launderer will then be able to deposit the cherub into his bank account and claim it as gambling9 winnings. In the United States federal law requires that chips that are purchased must be different in appearance from chips that are won. If the casino is controlled by organized crime and the money launderer works for them the launderer will lose the illegally obtained money on purpose in the casino and be paid with other funds by the criminal organization.
Real estate: Real estate may be purchased with illegal proceeds then sold. The proceeds from the sale appear to outsiders to outsiders to be legitimate income. Alternatively the price of the property is manipulated the seller will agree to a contract that under – represents the value of the property, and will receive criminal proceeds to make up the difference.
Black salaries: Companies might have unregistered employees without a written contract who are given cash salaries. Black cash might be used to pay them.
Anti–money laundering (AML) is a term mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent detect and report money laundering activities. Anti-money laundering guidelines came into prominence globally as a result of the Financial Action Task Force (FATF) and the promulgation of an international framework of anti-money laundering standards.
These standards began to have more relevance in 2000 and 2001 after FATF began a process to publicly identify countries that were deficient in their anti-money laundering laws and international cooperation a process colloquially known as name and shame.
An effective AML program requires a jurisdiction to have criminalized money laundering given the relevant regulators and police the powers and tools to investigate be able to share information with other countries as appropriate and require financial institutions to identify their
Prevent of money laundering
The primary purpose of organized crime is to make profits. Like any business the purposes of profit are to enjoy it and re-invest it in future activity. For the organized criminal
However profit close to the source of the crime represents a particular vulnerability10 and unless the criminal can effectively distance himself or herself from the crime which is the source of the profit they remain susceptible to detection and prosecution. hence the need to launder their illicit profits to make them appear legitimate.
The biggest source of illicit profits comes from the drugs trade and it was drug trafficking that provided the initial catalyst for concerted international efforts against money laundering. The drug’s industry is a highly cash intensive11 business and “in the case of cocaine and heroin the physical volume of notes received is much larger than the volume of drugs themselves”. In order to rid them of this large burden it is necessary to use the financial services industry and in particular deposit –taking institutions.
The Financial Action Task Force (FATF) on Money laundering has identified certain choke points in the money laundering process that the launderer finds difficult to avoid and where he is vulnerable to detection. The inertial focus has to be on these areas if the war against the launderer is to proceed successfully.
The choke points identified are:
- Entry of cash into the financial system
- Transfers to and from the financial system and
- Cross-border flows of cash.
The entry of cash into the financial system known as the placement stage is where the launderer is most vulnerable to detection. Because of the large amounts of cash involved it is extremely hard to place it into a bank account legitimately12.
The Ukase system of reporting suspicious transactions to the authorities along with the procedures adopted by deposit-takers are powerful weapons against money launderers. In particular the emphasis13 being placed on the importance of deposit-taking institutions knowing their customer has severely curtailed this activity to such an extent that one of the favorite methods for money launderers to place their money is to smuggle the money out of the country. There are penalties attached to the various money laundering offences for the deposit-taking institutions and these have provided for a powerful incentive for reporting suspicions to the National Criminal Intelligence Services
However cross-border flows of cash are one of the areas mentioned above where the launderer is vulnerable to detection. In the UK legislation provides the police and customs service with the power to seize cash they believe could be the proceeds of drug trafficking.
Part III of the Criminal Justice (International Co-operation) Act 1990 introduced the powers for customs and police officers to seize cash being brought into or out of the United Kingdom where they have reason to believe that such money represents the proceeds of drug trafficking or is intended to be used in drug trafficking. The power operates in respect of consignments of cash of Taka 10000 or more. Additionally the courts are empowered to order the confiscation of such where they are satisfied on the balance of probabilities of the alleged link with drug trafficking.
These measures overcome the difficulty of custom officers coming across large amounts of cash with no reasonable explanation for their export/import but at the same time with no hard evidence of links to drug trafficking it allows the detention of the cash pending an investigation. Due to this couriers limit the amount they carry out of the country at any one time and the risk is seen as being less than passing the money into a financial institution.
The reporting of suspicious transactions is not limited to cash in the UK. Transfers to and from the financial system are also under the umbrella of reporting of suspicious transactions and this can provide useful information on the layering stage of the money laundering process.
The keeping of comprehensive transaction records (part of the procedures) by financial organizations provides a useful audit trail and gives useful information on people and organizations involved in laundering schemes once discovered.
It is important therefore to ensure that complacency dies not creep into our financial institutions at this stage now that the measures are in place to money launderers open access to this same institution.
Conclusion
Money laundering not good for any country economics. It has a huge bad effected in any economics. Some peoples are involves this types of illegal activities. Its help of the persons and organization in our country. This types of bad effectively increasing day by day, as a results our economies are getting down and we have face liquidity cruces. so, the government lades to state has early possible the present this types of illegal activities for the betterment in our country.
Bibliography
-http://www.wisegeek.com
-http://www.wikipedia.com
-http://www.laundryman.com
-http://www.adb.org
-http://www.billy steel
6 .Unconfirmed belief that something is wrong a very small quantity
7.Based on strict hereditary right