Money laundering methods and techniques change in response to developing counter-measures. In recent years, there is an increase in sophisticated combinations of techniques, such as the increased use of legal persons to disguise the true ownership and control of illegal proceeds, and an increased use of professionals to provide advice and assistance in laundering criminal funds. It’s now the time for all countries to take the necessary steps to bring their national systems for combating money laundering and terrorism fianancing.
Some steps taken to prevent money laundering at the Global level
- United Nations Convention in 1988 against illicit Traffic in Narcotic Drugs and Psychotropic Substances is the first international legal instrument providing provisions against money laundering. Also this is the first international convention which criminalized Money Laundering.
- UN convention against Transnational Organized crime in 2003 and UN Convention against Corruption in 2005 came into force.
- Both convention states that money laundering should not only apply to the proceeds of drug trafficking, but should also cover the proceeds of all serious crimes.
- Both convention urge states to create domestic supervisory and regulatory regime for banks and non-financial institutions.
- Both conventions also call for the establishment of Financial Intelligence Units (FIUs)
- Financial Action Task Force on Money Laundering (FATF)
In response to mounting concern over money laundering, the Financial Action Task Force on Money Laundering (FATF) was established by the G-7 summit that was held in Paris in 1989. Recognizing the threat posed to the banking system and to financial institutions, the G-7 Heads of State or Government and President of the European Commission convened the Task Force from the G-7 member states, the European Commission and eight other countries.
The Task Force was given the responsibility of examining money laundering techniques and trends, reviewing the action which had already been taken at a national or international level, and setting out the measures that still needed to be taken to combat money laundering. In April 1990, less than one year after its creation, the FATF issued a report containing a set of forty recommendations, which provide a comprehensive plan of action needed to fight against money laundering.
FATF on Money Laundering has identified certain choke points in its process. These choke points are:
- Entry of cash into financial system
- Transfers to and from the financial system
- Cross border flow of cash
Some of the recommendations are:
- Implement relevant international conventions
- Criminalize money laundering and enable authorities to confiscate the proceeds of money laundering
- Implement customer due diligence (e.g., identity verification), record keeping and suspicious transaction reporting requirements for financial institutions and designated non-financial businesses and professions.
- Establish a financial intelligence unit to receive and disseminate suspicious transaction reports, and
- Cooperate internationally in investigating and prosecuting money laundering