Ken_Bradford_FCM-601-Z1_Proseminar in Economic Crime Management_Challenges in AML.docx - Challenges in AML By Ken Bradford 1 Money laundering has

Ken_Bradford_FCM-601-Z1_Proseminar in Economic Crime Management_Challenges in AML.docx

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Challenges in AML By: Ken Bradford 1
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Money laundering has terrorized the banking industry for several years. It is defined as the process of converting illegally obtained funds into the appearance of looking legitimate. This is done by cloaking the source of funds through introductory methods such as placement, layering and integration into the global financial system. Some might describe this as transforming dirty money into clean money. The laundering of money enables such criminal activities as sex trafficking, embezzlement, and terrorism, while having serious effects on the global economy (fincen.gov). Therefore, money laundering and criminal activity are deeply connected, as they cannot live without each other. The criminal activity breeds the illicit funds or perceived dirty money, while the money laundering is the process that makes those funds appear to be legitimate and thus makes it difficult to trace the true source. If there is no money laundering then criminal activity would be reduced (americanbanker.com). In another words, money laundering is what makes such criminal activity profitable for criminals, as it permits future use of funds for their illegal activities. For developing economies, money laundering weakens the integrity of the financial system, as well as the public confidence in it (Yeoh, 2014). ANTI-MONEY LAUNDERING (AML) REGULATIONS The official battle against money laundering began in 1970 with the inception of the Bank Secrecy Act (BSA), which was instilled to protect the financial banking system in the United States from the impact of such criminal activity (fincen.gov). Money laundering is like a cancer within the financial banking system that eventually grows to the point of causing a collapse, as it undermines all of the legal activity within (americanbanker.com). The BSA was the first major step towards the fighting of money laundering and it has now been followed by additional laws regulating money laundering. Some of the more prominent ones have been the Money Laundering Act (1986), Anti-Drug Abuse Act (1992), Money Laundering Financial 2
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Crimes Strategy Act (1998) and the USA Patriot Act (2001). Each of these laws has its own requirements and specifications, such as filing Suspicious Activity Reports (SAR), maintaining wire transfer records, and enhanced due diligence. All of these have been critical in the fight to prevent money laundering and criminal activity (fincen.gov). INTERNAL CHALLENGES Now that there are regulations in place to require compliance in an effort to combat money laundering, the responsibility has shifted to financial institutions to comply with them. Therefore, they are the ones that are doing the actual fighting within their day to day operations. This would be done through preventative methods and internal controls in an effort to minimize money laundering, which is not an easy task for any financial institution whether large or small.
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