Good Research Paper On Money Laundering: “Washing” Illicit Profits

Introduction

There are those that aver that money laundering is a new type of crime; in actuality, the act has been practiced for quite some time. Safeguarding legal or illicit wealth from the prying eyes of the government has been a longstanding practice in society. For example, annalist Sterling Seagrave narrates instances 3,000 years ago when Chinese traders concealed there earnings in fear that authorities will confiscate their riches accumulated over years of hard work. The methods Sterling documented in converting currencies into transferrable assets, transmitting cash to other locales to set up a business, and trading at inordinately high prices to ship money are still being used today.
Illicit profits have been moved in a number of ways. Persons have been convicted of money laundering by moving diamonds purchased with the monies derived from criminal activity. Monies that have entrusted in bank accounts can be withdrawn from any place on the globe by way of debit cards. Even the most fundamental of approaches inclusive of wire transfers can help in expediting acts of money laundering. Fiscal and commercial globalization has made money laundering less tedious for the criminals.
The enormous amount of “legal money” moving in global markets effectively conceals the parallel movement of illegal profits from criminal groups. In addition, globalization of the financial services sector has resulted in the storage of the profits of criminal syndicates in jurisdictions with less stringent regulations that can be easily moved to a branch with a higher level of regulatory conduct (Cotterill, 2001, p. 1).
The commission of criminal acts is geared towards generating a profit. Money laundering is facilitating the “washing” of the “dirty money” in order to conceal their actual character. This procedure is crucial for criminal elements, as the process allows the money to be used by the syndicates and not place at risk the source of these funds. Illicit weapons transactions, bootlegging, narcotics trafficking, and prostitution can generate enormous amounts of revenues for operators. Misappropriation, “insider trading,” computer extortion, and corruption schemes also provide significant revenue streams for criminal syndicates. Hence, with growing profits but having a lack of storage space, organized crime needed a venue where to “cleanse” the money to be able to invest the money in a legitimate business activity.
When illegal businesses generate substantial revenues, the parties must be able to devise a way to rein in the funds without generating too much attention to the supporting activity or to the persons engaged in the practice. Criminal elements accomplish this challenge by concealing the sources of the funds, or transferring the funds to a jurisdiction where it will not attract much attention. In a study of the United Nations Office on Drugs and Crime (UNODC), the group reported as of 2009, total criminal revenues amounted to 3.6 percent of global Gross Domestic Product (GDP) with 2.7 percent, amounting to $1.6 trillion, laundered in various ways (Financial Action Task Force, 2014, p. 1).
However, not all money laundering involves the profits from criminal activities. Revenues from legal business activities can be transformed into “illegal” money if transferring the money infringes on nation’s foreign currency regulations or other financial laws. To cite an example, foreign exchange transactions from Malaysia must first be disclosed to Malaysia’s central bank, the Bank Negara Malaysia. If the parties fail to do so, the money is considered illegal. In another instance, legal money and revenues can turn illegal if it is concealed by way of tax evasion. Simply put, even though the revenues were realized through legal means, the taxes on the monies, if not paid out, will be considered as monies that have been laundered.
Withal, there is another digression in regarding laundered money. It is that what is considered as illegal in one jurisdiction can be considered as icons in another. In one example, “white” farmers in Zimbabwe sent their assets overseas as President Robert Mugabe tagged them as “enemies of the state.” Though these farmers committed an act against the country, in other countries these can be considered as acting reasonably. In a similar vein, dictatorial governments will push businesses to the fringes of their law systems (Cotterill, 2001, p. 1).
The United States has been experiencing a severe money laundering problem for the past 30 years. Regrettably, the crime shows no sign of decreasing; rather, it has been rising swiftly. Though the actual amount of “profits” is difficult to estimate, the most common estimation of law enforcement for money laundered is at $250 billion yearly.
Much of the overseas money laundering in the United States has traditionally been fueled by the massive production and trade of cocoa leaf and cocaine to the US by large cartels located in Bolivia, Colombia, and Peru. Three contemporary instances have caught the unqualified attention of agents of US law enforcement, Congress, and the Department of the Treasury on the vulnerability of US financial entities to money laundering. The initial operation, “Operation Casa Blanca,” was an intricate “drug sting” launched in 1994.
United States Drug Enforcement Administration and Customs elements penetrated and eventually uncovered “big time” money laundering activities of the Juarez and the Cali narcotics syndicates and further bared the links of these criminal cartels to a number of Argentinean, Venezuelan, and Mexican banking institutions. The banks and more than 150 distinct entities were ultimately charged. With the help of covert operatives, the United States Customs Service took into custody 22 senior and middle management executives connected with 12 of Mexico’s 19 biggest banks. Furthermore, Customs agents confiscated $35 million, approximately 2 tons of cocaine, and 4 tons worth of heroin (Manney, 2002, p. 2).

Countering money laundering on a global scale

The global community has come together in voicing out their support for measures to eradicate money laundering and money laundering to fund extremist groups. The world has come together and established several goals. One, defending the stability and cohesion of the global financial mechanism; two, destroying the financial lifelines of extremist groups, and making it harder, if not impossible, for those engaged in criminal activities to gain from their “businesses.” The International Monetary Fund, in 2000, recognized calls from various nations to extend its mandate in the field of “anti-money laundering” and the exploitation of “offshore financial centers” by establishing an OFC evaluation program and studying how anti-money laundering policies can be integrated into its operations, particularly Article IV monitoring as well as the newly founded “Financial Sector Assessment Program (FSAP).
The IMF is particularly concerned on the potential effects of money laundering and funding extremism on the individual economies of its members. Among the possible adverse effects of money laundering here includes risks to the stability and integrity of financial entities and systems; heightened exposure to global money flow fluctuations; and a depressing effect on global investments. Extremists and criminals aggressively search for loopholes and variegations among laws on money laundering and extremist funding, and when these weaknesses are found, these are exploited and the groups course the money through on to jurisdictions with deficient regulatory regimes and institutional mechanisms.
In addition, the Fund is aiding in the global fight against money laundering and extremist funding in a number of significant ways. As a coordinating agency with almost universal membership, the Fund is a natural stage for distributing information, establishing general methodologies and advocating for common standards and programs-all of these programs are crucial for the success of the global community over money laundering and extremist funding (International Monetary Fund, n.d., p. 1).
Nevertheless, even governments with the most stringent regulations must be on their guard against money launderers. Many of these criminal elements have evinced themselves to be extremely creative in developing new plans to go around government instituted countermeasures. Here, national mechanisms and policies must be pliable enough to identify and respond to changing money laundering mechanisms. Countermeasures will compel launderers to locate themselves in the weakest parts of the market laden with deficient or inutile laws to address the problem. Governments, whether local or national, must strive to work and collaborate with others to assure that launderers will not be able to persist in their business by relocating to another jurisdiction where the practice is legal (Financial Action Task Force, 2014, p. 1).
International accords that deal with money laundering are the sole factor to eradicate the threat of money laundering. Without any potent global collaborative effort, no rational chance of eliminating money laundering will ever succeed. Regulatory laws that are in place in different countries offer a confusing patchwork of legal regimes and are largely ignored. What is ironic is that the efforts of countries to aggressively deal with money laundering has actually contributed to the growth of the “industry.” Only when these efforts are harmonized can the global community hope to overthrow the threat of money laundering (Cotterill, 2001, p. 1).

References

Cotterill, N. (2001) “Money laundering” Retrieved 11 April 2015 from <https://www.globalpolicy.org/pmscs/30048.html
Financial Action Task Force (2014) “What is money laundering?” Retrieved 11 April 2015 from <http://www.fatf-gafi.org/pages/faq/moneylaundering/
International Monetary Fund (n.d.) “Anti money laundering/combating the financing of terrorism” Retrieved 11 April 2015 from <https://www.imf.org/external/np/leg/amlcft/eng/aml1.htm
Manney, R (2002) “Money laundering: the global threat to the integrity of financial systems.” Retrieved 11 April 2015 from <http://www.wilmott.com/pdfs/020120_moneylaundering.pdf