Friday, 20 January, 2017

Money Laundering and Terrorist Financing

What is Money Laundering

• Any transaction or series of transactions that is designed to disguise the nature/source of proceeds derived from illegal activities, which may comprise drug trafficking, terrorism, organized crimes, murders, fraud, etc.
• Money laundering is the criminal practice of filtering ill-gotten gains from illegal proceeds of money through a series of transactions, which would appear to be legitimate.
Stage 1: Placement
Initial entry of the funds into the financial system
*Dirty money is placed into the financial system
*Common methods: Cash deposits & cheques
• Aim is to remove the funds from the location of the crime

Stage2 :Layering
• Separating the illicit funds from its origin
• Series of complex financial transaction designed to conceal the origin of the funds
• Difficult to trace Most complex stage and the most international in nature

Stage 3: Integration
• Dirty funds are integrated into the legitimate economy and financial system
• Exceedingly difficult to distinguish between legal & illegal wealth

What influence does money laundering have on economic development?
• Differences between national anti-money laundering systems will be exploited by launderers, who tend to move their networks to countries and financial systems with weak or ineffective countermeasures.
• As with the damaged integrity of an individual financial institution, there is a damping effect on foreign direct investment when a country’s commercial and financial sectors are perceived to be subject to the control and influence of organized crime. Fighting money laundering and terrorist financing is therefore a part of creating a business friendly environment which is a precondition for losing economic development.

What is Terrorist Financing

• Terrorist financing involves the solicitation, collection or provision of funds ( with the intention that they may be used ) to support terrorist acts or organizations.
- Funds may stem from both legal and illict sources
- Funds may be provided intentionally or unintentionally

How are Money laundering and Terrorist financing linked
• Money laundering : process of concealing the illicit origin of funds (the funds are always of illicit origin).
• Terrorist financing : collection or the provision of funds for terrorist purpose

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