Money Laundering in A Changed World!

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Money Laundering in A Changed World!

If you shop with a significant bank, possibilities are that all the transactions in your account are scrutinized by AML (Anti Money Laundering) software application. Bank directors, exposed, under the Patriot Act, to individual liability for money laundering in their facilities, swear by it as a legal guard and the holy grail of the on-going war against monetary criminal offense and the finances of terrorism.

Priced estimate in Wired.com, Neil Katkov of Celent Communications, pegs future financial investments in compliance-related activities and items by American banks alone at close to $15 billion in the next 3 years (2005-2008). The United States Treasury Department’s Financial Crimes Enforcement Network (FinCEN) received c. 15 million reports in each of the years 2003 and 2004.

This is a drop in the seething ocean of illegal financial transactions, in some cases egged on and abetted even by the very Western federal governments ostensibly dead set versus them.

Israel has constantly disregarded to the origin of funds deposited by Jews from South Africa to Russia. In Britain it is completely legal to conceal the true ownership of a business. Underpaid Asian bank clerks on immigrant work permits in the Gulf states hardly ever require identity files from the mystical and well-connected owners of multi-million-dollar deposits.

Swiss and American banks team up with suspicious correspondent banks in offshore centers. Multinationals move money through tax free territories in what is euphemistically understood as “tax planning”.

The 500 Euro note makes it much easier to smuggle cash out of Europe. A French parliamentary committee implicated the City of London of being a cash laundering haven in a 400-page report. Intelligence services cover the tracks of hidden operations by opening accounts in odd tax sanctuaries, from Cyprus to Nauru. Cash laundering, its places, and methods, are an integral part of the financial fabric of the world. Company as normal?

Not truly. In retrospect, as far as cash laundering goes, September 11 might be viewed as a watershed as essential as the sheer collapse of communism in 1989. Both occasions have permanently changed the patterns of the global circulations of illegal capital.

Summary:

Money laundering, its methods, and venues, are an essential part of the economic material of the world. Strictly speaking, money laundering is the age-old process of disguising the illegal origin and criminal nature of funds (acquired in sanctions-busting arms sales, smuggling, trafficking in people, organized crime, drug trafficking, prostitution rings, embezzlement, insider bribery, computer system, and trading scams) by moving them untraceably and investing them in legitimate companies, securities, or bank deposits. The confluence of criminal and tax averse funds in money laundering networks serves to obscure the sources of both.

 

What is Money Laundering?

Strictly speaking, money laundering is the age-old procedure of disguising the prohibited origin and criminal nature of funds (obtained in sanctions-busting arms sales, smuggling, trafficking in human beings, organized criminal offense, drug trafficking, prostitution rings, embezzlement, expert trading, computer, and bribery fraud) by moving them untraceably and investing them in genuine businesses, securities, or bank deposits. However, this narrow meaning masks the reality that the bulk of money washed is the outcome of tax evasion, tax avoidance, and straight-out tax scams, such as the “VAT carousel plan” in the EU (moving items amongst companies in various jurisdictions to capitalize on distinctions in VAT rates). Tax-related laundering nets between 10-20 billion US dollars every year from France and Russia alone. The confluence of criminal and tax averse funds in money laundering networks serves to obscure the sources of both.

The Scale of the Problem

According to a 1996 IMF estimate, money washed every year amounts to 2-5% of world GDP (between 800 billion and 2 trillion United States dollars in today’s terms). The lower figure is significantly bigger than a typical European economy, such as Spain’s.

The System

It is important to realize that cash laundering takes place within the banking system. Huge amounts of cash are spread among numerous accounts (in some cases in complimentary economic zones, financial off coast centers, and tax havens), transformed to bearer monetary instruments (cash orders, bonds), or placed with trusts and charities. The cash is then transferred to other areas, sometimes as phony payments for “services and items” against inflated or phony billings issued by holding business owned by legal representatives or accountants on behalf of unnamed beneficiaries. The transferred funds are re-assembled in their location and often “shipped” back to the point of origin under a new identity. The washed funds are then invested in the genuine economy. It is a basic procedure – yet an effective one. It results in either no proof – or too much of it. The accounts are inevitably liquidated, and all traces erased.

Why is It a Problem?

Wrongdoer and tax evading funds are non-productive and idle. Their injection, nevertheless, surreptitiously, into the economy changes them into an efficient (and inexpensive) source of capital. Why is this unfavorable?

Since it damages federal government officials, banks and their officers, pollutes legal sectors of the economy, crowds out foreign and genuine capital, makes money supply unforeseeable and unmanageable, and increases cross-border capital movements, therefore boosting the volatility of currency exchange rate.

A multilateral, coordinated, effort (exchange of details, consistent laws,
extra-territorial legal powers) is required to counter the worldwide dimensions of cash laundering. Many nations choose in because money laundering has also become a domestic political and financial issue.

Cash Laundering in the Wake of the September 11 Attacks

Guideline

The least essential trend is the tightening of financial policies and the establishment or enhancement of compulsory (instead of market or voluntary) regulative and enforcement agencies.

New legislation in the United States which amounts to extending the powers of the CIA domestically and of the DOJ extra-territorially, was rather xenophobically described by a DOJ official, Michael Chertoff, as planned to “make certain the American banking system does not end up being a haven for foreign corrupt leaders or other kinds of foreign organized bad guys.”

Personal privacy and bank secrecy laws have been thinned down.

If you shop with a significant bank, opportunities are that all the transactions in your account are inspected by AML (Anti Money Laundering) software. Bank directors, exposed, under the Patriot Act, to personal liability for cash laundering in their establishments, swear by it as a legal shield and the holy grail of the on-going war against monetary criminal activity and the financial resources of terrorism.

Money laundering, its methods, and venues, are an essential part of the economic material of the world. Strictly speaking, money laundering is the age-old process of disguising the illegal origin and criminal nature of funds (acquired in sanctions-busting arms sales, smuggling, trafficking in people, organized crime, drug trafficking, prostitution rings, embezzlement, insider bribery, computer system, and trading scams) by moving them untraceably and investing them in legitimate companies, securities, or bank deposits. The confluence of criminal and tax averse funds in money laundering networks serves to obscure the sources of both.

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