Introduction to Money-Laundering

Money is the prime reason for engaging in almost any type of criminal activity. Money-laundering is the method by which criminals disguise the illegal origins of their wealth and protect their asset bases, so as to avoid suspicion of law enforcement and to prevent leaving a trail of incriminating evidence.

Terrorists and terrorist organizations also rely on money to sustain themselves and to carry out terrorist acts. Money for terrorists is derived from a wide variety of sources, and whilst terrorists are not necessarily so concerned with disguising the origin of money, they are concerned with concealing its destination and the purpose for which it is collected. Terrorists and terrorist organizations therefore also employ techniques not dissimilar to criminal money launderers to hide and disguise money.

The ability to prevent and detect money-laundering is a highly effective means of identifying criminals and terrorists and the underlying activity from which money is derived. The application of intelligence and investigative techniques can be one way of detecting and disrupting the activities of terrorists and terrorist organizations.

Because they deal with other people's money, financial institutions rely on a reputation for probity and integrity. A financial institution that is revealed to have assisted in the laundering of money will be shunned by legitimate enterprise. An international financial centre that is used for money-laundering can become an ideal financial haven. Developing countries that attract "dirty money" as a short-term engine of growth can find it difficult, as a consequence, to attract the kind of solid long-term foreign direct investment that seeks stable conditions, good governance and which can help them sustain development and promote long-term growth. Money-laundering can erode a nation's economy by changing the demand for cash, making interest and exchange rates more volatile, and by causing high inflation in countries where criminal elements are doing business.

Most disturbing of all, money-laundering empowers corruption and organized crime. Corrupt public officials need to be able to launder bribes, kick-backs, public funds and, on occasion, even development loans from international financial institutions. Organized criminal groups need to be able to launder the proceeds of drug trafficking and commodity smuggling. Terrorist groups use money-laundering channels to get cash to buy arms. The social consequences of allowing these groups access to the capacity to launder money can be disastrous. Taking the proceeds of their crimes from corrupt public officials, traffickers and organized crime groups is one of the best ways to stop them in their tracks.

In recent years, the international community has become more aware of the dangers that money-laundering poses in all these areas, and many governments and jurisdictions have committed themselves to taking action. The United Nations and the other international organizations are committed to helping them in any way they can.

Criminals are now taking advantage of the globalization of the world economy by transferring funds quickly across international borders.

For more information on Money-Laundering and Globalization, please click here