Money laundering is the process of creating the appearance that large amounts of money obtained from serious crimes, such as drug trafficking or terrorist activity, originated from a legitimate source. It is a crime in many jurisdictions with varying definitions. It is a key operation of the underground economy. Money laundering is the practice of disguising illegally obtained funds so that they seem legal.
Money laundering can be described as the process by which a person conceals or disguises the identity or the origin of illegally obtained proceeds so that they appear to have originated from legitimate sources.
Money laundering is ipso facto (from the fact itself) illegal; the acts generating the money almost always are themselves criminal in some way (for if not, the money would not need to be laundered).
Criminals exploit economic and financial globalization and the advances made in technology and communications with a view to concealing the origin of funds that they have gained through illegal activities. They make extensive use of a broad array of techniques, such as the rapid transfer of money from one country to another or the misuse of corporate vehicles to disguise the true owner of the funds.
Money laundering undermines international efforts to establish free and competitive markets and hampers the development of national economies. It distorts the operation of markets transactions, may increase the demand for cash, rend
International efforts to curb money-laundering and the financing of terrorism are the reflection of a strategy aimed at, on the one hand, attacking the economic power of criminal or terrorist organizations and individuals in order to weaken them by preventing their benefiting from, or making use of, illicit proceeds and, on the other hand, at forestalling the nefarious effects of the criminal economy and of terrorism on the legal economy.
Laundering the proceeds of illicit activities in countries that do not have an effective anti-money laundering/combating the financing of terrorism (AML/CFT) system in place has one purpose only - to make use of structural weaknesses or to exploit the gaps in the institutional and law-enforcement machinery in order to benefit from the proceeds of crime with impunity. Money laundering is an essential aspect of any profit-generating criminal activity and is an inevitable corollary of organized crime. The operations of criminal organizations, directed as they are towards the accumulation of illegal profits, create a need for laundering in direct proportion to the extent that such activities are developed and concentrated in the hands of a small group. Colossal amounts of cash generated by certain types of criminal activity, such as drug trafficking, leave trails, which are more difficult to hide than the traces left by the crimes themselves.
This white paper provides an insight into the relationship between money laundering and organized crime. The area in which organized crime is most recognizable is money laundering. A United Nations report concluded that money laundering is the tenth largest global economic activity - and reliable estimates attribute 4% of the world's economy to organized crime. Organized crime needs to legitimize its funds, as the problem for these entrepreneurs is that they are cash heavy. This creates a variety of problems, not least of which is the increased likelihood of being robbed and killed.
The Law Enforcement, Organized Crime and Anti-Money-Laundering Unit of UNODC is responsible for carrying out the Global Programme against Money-Laundering, Proceeds of Crime and the Financing of Terrorism, which was established in 1997 in response to the mandate given to UNODC through the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988. The Unit's mandate was strengthened in 1998 by the Political Declaration and the measures for countering money-laundering adopted by the General Assembly at its twentieth special session, which broadened the scope of the mandate to cover all serious crime, not just drug-related offences.
The broad objective of the Global Programme is to strengthen the ability of Member States to implement measures against money-laundering and the financing of terrorism and to assist them in detecting, seizing and confiscating illicit proceeds, as required pursuant to United Nations instruments and other globally accepted standards, by providing relevant and appropriate technical assistance upon request.
"The legal economy has gone global and the crime economy has gone global as
well." Arnaud de Borchgrave, Director of the global organized crime project at
the Centre for Strategic and International Studies in Washington.
The area in which organized crime is most recognisable to you or I is money
laundering. A United Nations report concluded that money laundering is the tenth
largest global economic activity - and reliable estimates attribute 4% of the
worlds economy to organized crime. Organized crime needs to legitimise its funds
as the problem for these entrepreneurs is that they are cash heavy. This creates
a variety of problems, not least of which is the increased likelihood of being
robbed and killed. Another problem for Nigerians and Eastern Europeans is that
they are million or billionaires in non convertible currencies which nobody wants.
They need to convert these massive sums into Pounds, Dollars, Swiss Francs or
Euros.
The illicit drugs industry is reckoned to be worth $400 billion per annum (that is
bigger than the world’s oil and gas industry) with 400m regular customers - and
$200 billion of that total is successfully laundered each year. The UN estimates
that the share of the illicit drugs industry in the GDP of Peru at 6%, Colombia
7+% and in Bolivia at over 9%. In early 1998 the Mexican Government concluded
that gangs in that country had overtaken the Colombians as the most powerful
drug cartels in the Americas - profits from drugs have been conservatively
estimated at £9 billion - 5% of the country’s GDP. One discernible side effect of
this is the willingness of drug cartels to pay bribes to officials. Drug money
underpins property and share prices and much of the local economies. More
importantly drugs take up a much larger share of exports: in Bolivia and
Afghanistan drugs were the most important export. However the money is not
made in the country of origin, but at the retail stage where gross profit margins, are in some cases, 300%.
In the past, the term "money laundering" was applied only to financial transactions related to organized crime. Today its definition is often expanded by government and international regulators such as the US Office of the Comptroller of the Currency to mean any financial transaction which generates an asset or a value as the result of an illegal act, which may involve actions such as tax evasion or false accounting. In the UK, it does not even need to involve money, but any economic good. Courts involve money laundering committed by private individuals, drug dealers, businesses, corrupt officials, members of criminal organizations such as the Mafia, and even states.
As financial crime has become more complex, and "Financial Intelligence" (FININT) has become more recognized in combating international crime and terrorism, money laundering has become more prominent in political, economic, and legal debate. Money laundering is ipso facto illegal; the acts generating the money almost always are themselves criminal in some way (for if not, the money would not need to be laundered).
In US law it is the practice of engaging in financial transactions to conceal the identity, source, or destination of illegally gained money. In UK law the common law definition is wider. The act is defined as taking any action with property of any form which is either wholly or in part the proceeds of a crime that will disguise the fact that that property is the proceeds of a crime or obscure the beneficial ownership of said property.
In other words we can say that ‘Money laundering’ is any action taken to conceal, arrange, use or possess the proceeds of any criminal conduct. Criminals try to launder 'dirty money' in an attempt to make it look 'clean' in order to be able to use the proceeds without detection and to put them beyond the reach of law enforcement and taxation agencies.
Transnational organized crime is considered as one of the major threats to human security, impeding the social, economic, political and cultural development of societies worldwide. It is a multi-faceted phenomenon and has manifested itself in different activities, among others, drug trafficking, trafficking in human beings; trafficking in firearms; smuggling of migrants; money laundering; etc. In particular drug trafficking is one of the main activities of organized crime groups, generating enormous profits. UNODC works closely with Governments, international organizations and civil society to strengthen cooperation to counter the pervasive influence of organized crime and drug trafficking.
The United Nations Convention against Transnational Organized Crime is the main international instrument to counter organized crime.
UNODC helps countries use the provisions of the Convention to create domestic criminal offences to counter the problem; to adopt new frameworks for mutual legal assistance; to facilitate extradition; law enforcement cooperation; technical assistance and training.
As globalization has expanded international trade, so the range of organized crime activities has broadened and diversified. The traditional hierarchical forms of organized crime groups have diminished; replaced with loose networks who work together in order to exploit new market opportunities. For example organized crime groups involved in drug trafficking are commonly engaged in smuggling of other illegal goods. The links between drug trafficking and other forms of transnational organized crime calls for a more integrated approach to address this nexus. The signing of the United Nations Convention against Transnational Organized Crime in 2000 was a historic step forward in countering this threat.
The United Nations Convention against Transnational Organized Crime, which entered into force in September 2003, is the main international instrument to counter organized crime. The Convention commits states to introduce a range of measures, including the creation of domestic criminal offences to counter the problem; the adoption of new frameworks for mutual legal assistance; extradition; law enforcement cooperation; technical assistance and training.
UNODC works closely with national governments, organizations and civil society to enhance international cooperation to counter the pervading influence of organized crime and drug trafficking. The Unit has initiated and oversees numerous counter-narcotics and anti-organized crime projects. Moreover, the ‘anti-money laundering Act’ has been passed out where all the crimes has been defined and the punishment has also been given.
BRIEF ANALYSIS OF THE CURRENT SITUATION
As mentioned in the introductory part, the offence of Money laundering has not
yet registered itself very firmly in our system. Perhaps we lack the necessary
skills to detect and investigate this offence or it is non existent. However, we would like to believe the former to be true because with the trade liberalization at its peak, there has been a lot of people from all over the world coming into the country under the guise of investors. Due to lack of adequate skills it has always been difficult on us to identify non-genuine investors from the genuine ones. Being a poor country which welcomes investments from all over the world, sometimes it is felt that if you start equiries against the so called investors you risk the possibility of chasing them away with their much wanted investments. As a result we are always in dilemma not knowing the right course of action to take.
It is partly because of these reasons that our record of detection is not very impressive at all. These are however instances when Money Laundering
activities have been inferred. One such incident involved the MERIDIAN BIAO
bank which had offices in Tanzania, Apart from that case we do not have
any statistics to amplify this situation. This does not however mean that Money
Laundering is not present in our country. Most of the emphasis had therefore been
placed in fighting other organized crimes. The legal framework that is in place caters generally for organized crimes without specifically addressing the offence of Money Laundering. Recently, however, emphasis has been placed on Money Laundering as well.
