Laundering
Money 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.
the metaphorical "cleaning of money" with
regard to appearances in law, is the
practice of engaging in specific financial
transactions in order to conceal the
identity, source and/or destination of
money and is a main operation of
underground money.
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 regulators (such as the United State
Office of the comptrollerof the Currency) to encompass 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. As a result, the illegal activity of money laundering is
now recognized as potentially practiced by individuals, small and
large businesses, corrupt officials, members of organized crime
(such as drug dealers or the Mafia) or of cults, and even corrupt
states or intelligence agency, through a complex network of shell
companies based in offshore tax havens.
The increasing complexity of financial crime, the
increasing recognised value of so-called
financial intelligence in combating transnational
crime and terrorism, and the speculated impact
of capital extracted from the legitimate economy
has led to an increased prominence of money
laundering in political, economic and legal
debate. In many jurisdictions, money laundering
is seen as an "activity based" offense.
HISTORY
Modern development
The act of "money laundering" was not invented until the Prohibition
era in the United States, but many techniques were developed and
refined then. Many methods were devised to disguise the origins of
money generated by the sale of then-illegal evasion beverage
Following AL capones 1931 conviction for tax evasion, mobster
Meyer Lansky transferred funds from Florida "carpet joints" (small
casinos) to accounts overseas. After the 1934 Swiss Banking Act
which created the principle of bank secrery, Meyer Lansky bought a
Swiss bank where he would transfer his illegal funds through a
complex system of shell companies, holding companies and
offshore accounts.
The term of "money laundering" itself does not derive, as
is often said, from the story that Al Capone used
laundromats to hide ill-gotten gains. It was Meyer Lansky
who perfected money laundering's older brother, capital
fight", transferring his funds to Switzerland and other
offshore places. The first reference to the term "money
laundering" itself actually appears during the Watergate
scandal. US President Rchard Nixon "committee to Reelect the President" moved illegal campaign
contributions to Mexico, then brought the money back
through a company in Miami. It was Britain's guardian
[newspaper that coined the term, referring to the process
as "laundering."
International initiatives against
money laundering
The 1980s witnessed the international trend for the
criminalization of money laundering as a discrete crime.
The US and the UK have done so in 1986, and the 1988
Vienna Convention has required State Parties to
introduce this crime in their domestic legal systems. In
1989, the FATF was created. Its first report, issued in
1990, recommended the criminalization of money
laundering. In 1991, the European Union required its
Member States to 'prohibit' the laundering of funds
derived from drug offences; the original Directive was
revised in 2001 and replaced by another in 2005.
PROCESS
Money laundering is often described as
occurring in three stages: placement, layering,
and integration.
1 Placement: refers to the initial point of entry for
funds derived from criminal activities.
2 Layering: refers to the creation of complex
networks of transactions which attempt to
obscure the link between the initial entry point
and the end of the laundering cycle.
3 Integration: refers to the return of funds to the
legitimate economy for later extraction.
Anti-money laundry in China
China still facing tough situation in anti-money laundrying
China to expand anti-money laundering inspection to securitie
China still facing tough situation in anti-money
laundrying: official
China is still facing a tough situation in
anti-money laundering, said You Quan,
deputy secretary-general of China's State
Council.
He called on relevant departments to
establish an coordinated system and speed
up building of a corresponding legal system
with Anti-money laundering Law as the
core.
You Quan made the remarks while
attending a conference on anti-money
laundering in Beijing on Friday, which was
chaired by Xiang Junbo, vice governor of
the People's Bank of China (PBOC) .
There is a still room to improve for
China's anti-money laundering efforts
compared with international standard and
the requirement of building a perfect
market-oriented economic system, You
said.
Participants of the conference included representatives from 23
departments such as the State Council, the Ministries of Foreign
Affairs, Public Security and Finance as well as the State Foreign
Exchange Administration.
A report on China's anti-money laundering effort in 2004,
published by China's central bank on July 12, showed that the
country had made "outstanding achievements" in anti-money
laundering in previous year.
A total of 50 money-laundering cases were jointly investigated
by police, the central bank and the State Foreign Exchange
Administration last year. These cases involved 570 million yuan (70
million US dollars) and 447 million US dollars.
China became an observer of the Financial Action Task Force
on Anti-Money Laundering (FATF) in January this year. It aims to
become a member of the group in 2006.
China to expand anti-money laundering inspection to
securities, insurance institutions
The Oeoples Bank of China will expand its anti-money laundering special
inspection to securities and insurance institutions, a senior banking official
said Thursday.
Xiang Junbo, vice governor of the People's Bank of China, made the remark
at a high-level seminar on anti-money laundering and combating the
financing of terrorism, which was jointly hosted by the People's Bank of
China and the World Bank.
Xiang said this move aims to give full play to the role of finance institutions
as "the first defense line" for combating money laundering and financing of
terrorism.
From April to December 2004, the People's Bank of China conducted
special inspections on commercial banks' compliance with anti-money
laundering regulations, making commercial banks pay more attention to the
supervision over non-banking areas such as the transactions of real estate,
and jewel and cultural item auctions, Xiang said.
The provincial branches of the People's Bank of China
will continue its special inspections on anti-money
laundering this year, he said.
In April 2004, the People's Bank of China built up the
China anti-money laundering Monitoring and Analyzing
Center, which is responsible for collecting and analyzing
information of Renminbi and foreign exchange in respect
of anti-money laundering work, he said.
Since the establishment of the center, the People's Bank
of China and the State Administration of Foreign
Exchange have provided 1,500 pieces of suspicious antimoney laundering clue to the police, helping them to
crack 51 criminal cases in this area. The cases involved
3.096 billion yuan and 460 million US dollars separately.
The People's Bank of China is making research
on the coordination and connection among data
bases, payment systems and bank account
management systems, so as to make its
inspection work more efficient.
Meanwhile, the People's Bank of China is
making efforts to sign memorandums on
information exchange with other countries and
regions in this regard, in a bid to face the new
situation of more frequent international moneylaundering activities.
Source: Xinhua/International Finance News
And now
Criminals are now taking advantage of the globalization of the world
economy by transferring funds quickly across international borders.
Rapid developments in financial information, technology and
communication allow money to move anywhere in the world with
speed and ease. This makes the task of combating money
laundering more urgent than ever.
The deeper "dirty money" gets into the international banking system,
the more difficult it is to identify its origin. Because of the clandestine
nature of money laundering, it is difficult to estimate the total amount
of money that goes through the laundry cycle. Estimates of the
amount of money laundered globally in one year have ranged
between $500 billion and $1 trillion. Though the margin between
those figures is huge, even the lower estimate underlines the
seriousness of the problem governments have pledged to address.
There have been a number of developments in the international
financial system during recent decades that have made the three
F's-finding, freezing and forfeiting of criminally derived income and
assets-all the more difficult. These are the "dollarization" (i.e. the
use of the United States dollar in transactions) of black markets, the
general trend towards financial deregulation, the progress of the
Euromarket and the proliferation of financial secrecy havens.
Fuelled by advances in technology and communications, the
financial infrastructure has developed into a perpetually operating
global system in which "megabyte money" (i.e. money in the form of
symbols on computer screens) can move anywhere in the world
with speed and ease.
The end!