Introduction to money-laundering

Introduction to MLMoney 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 the suspicion of law enforcement agencies and 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. While terrorists are not greatly concerned with disguising the origin of money, they are concerned with concealing its destination and the purpose for which it has been collected. Terrorists and terrorist organizations therefore employ techniques similar to those used by money launderers to hide their 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 found to have assisted in laundering money will be shunned by legitimate enterprises. 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 is based on stable conditions and good governance, and that 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 criminals are doing business.

Most disturbing of all, money-laundering fuels 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 to launder money can be disastrous. Taking the proceeds of crimes from corrupt public officials, traffickers and organized crime groups is one of the best ways to stop criminals 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 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.