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In the financial world, the term Money Laundering is used to describe the misuse of the financial system by criminals who are attempting to hide the source of funds gained by illegal means such as fraud, theft, drug dealing, and other illegal activities by attempting to make their ill gotten gains appear genuine. The phrase describes the actual process criminals undertake to turn the proceeds of a crime into legitimately earned cash, assets or income.
There are three recognised stages to Money laundering called Placement, Layering and Integration. The first called Placement is the actual deposit of physical banknotes. Layering describes the process multiple transactions between individuals and companies of transactions, some very simple, some more complicated, the sole purpose of which is to cover up the actual reason for and source of the original cash deposits. Often this will include transactions with overseas entities and banks because criminals know that police systems are for the most part designed to investigate within country borders. The final stage called Integration is where the now confused money trail returns to the criminal in the form of an apparently legitimate transaction (typically the acquisition of assets for the criminal).
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The term Anti Money Laundering is not the opposite of Money Laundering, rather it describes the efforts of law enforcement and systems and controls within the financial community to combat this illegal activity. Banks and financial institutions are legally obliged by regulators to have systems and controls in place to prevent their systems being used by criminals from using these institutions as conduits of turning dirty money into clean funds. |
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In all major financial centers, criminal legislation exists which make it mandatory for financial institutions to attempt to prevent Money Laundering, with harsh criminal and civil penalties for failing to operate such systems of control.
Banks and financial institutions have a duty to protect themselves against being misused by a launderer. Controls and systems within banks have developed over the years to help these institutions protect their reputations, and thereby their customer base against the activities of the criminal element. The main elements of a good Anti Money Laundering programme for a bank would include:
- Standard setting and approval by management setting out the institutions Minimum Standards and Policies, approved by Senior Management, which clearly set out your philosophy on crime prevention and business requirements.
- A Know Your Customer regime where all customers are vetted both sales staff a compliance department so that the institution is aware of who their customers are, what their legitimate business activities are. Such checks at customer acquisition will help identify and exclude known criminals.
- Training is undertaken so that all employees no matter how junior are aware of the risks and bank systems deployed to counter those risks.
- Processes (often automated) to seek out patterns of unusual activity and report such to the financial police.
Moneylaundering.info provides you with the latest in defences against financial crime. www.world-check.com is the world leader in the supply of AML data enabling you to be aware at all times of the customers who may pose most risk to your institution. They provide screening and database solutions to the Money Laundering issue and are used by over 3000 institutions and regulators globally.
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