Term Paper on "Money Laundering the First Against"

Term Paper 12 pages (3464 words) Sources: 10

[EXCERPT] . . . .

Money Laundering

The First against Money Laundering: Who's Winning?

The same forces that have been driving the globalization process have also made it easier for criminals to transfer enormous sums of money from one financial institution to another until it becomes "clean" in a process known as money laundering. Furthermore, an increasing number of observers are cautioning that terrorist organizations are using money laundering techniques to avoid international sanctions on their assets, and to help finance their nefarious plots against the United States and its interests abroad. Even if the proceeds of money laundering are not used by terrorists groups, the criminal elements involved are avoiding paying taxes on their ill-gotten gains in whatever jurisdictions are involved, and the practice appears to be on the increase in spite of numerous laws designed to combat the problem. Clearly, then, the fight against money laundering has assumed a new level of importance in recent years, and this paper provides a review of the relevant peer-reviewed and scholarly literature to identify what money laundering is, what controlling legislation exists, and what types of investigatory processes are used to uncover it. An analysis of how cases are built against money launderers is followed by a summary of the research and salient findings in the conclusion.

Review and Discussion

What is Money Laundering, Anyway?

There are several definitions of money laundering. In general terms, "money laundering" can be defined as "The doing of a number of acts concerned with concealing, disguising or transferring out of the jurisdiction funds derived from drug trafficking, terrorism or criminal conduct" (Birks, 1995, p. 93). According to April and Grasso (2001), "Money laundering is the process by which one conceals the existence, illegal source, or illegal application of income, and disguises that income to make it appear legitimate" (p. 1051). In this regard, the Money Laundering Control Act of 1986 defined money laundering "as a broad range of activities used to conceal the proceeds of illegal activity and make the funds appear legitimate" (cited by April & Grasso at p. 1051). More specifically, according to Black's Law Dictionary (1990), money laundering is the term used to describe "investment or other transfer of money flowing from racketeering, drug transactions, and other illegal sources into legitimate channels so that its original source cannot be traced" (p. 884). Today, the laundering of proceeds from national and international criminal activities has become a lucrative and increasingly sophisticated enterprise in the United States and abroad and represents an essential element of organized criminal activities (April & Grasso, 2001). Indeed, the ability to move and conceal the existence of enormous amounts of money means that the practice also provides large scale criminal organizations with a flexibility and scope that would not otherwise be possible (April & Grasso, 2001). Money laundering is also a federal crime under 18 U.S.C.A. Section 1956 (Black's, 1990), but besides 18 USCA Section 1956, a wide range of international and domestic laws can be used in the fight against money laundering, and these are discussed further below.

Controlling Legislation.

Complex problems require complex solutions and the international community and United States alike have all developed a wide range of initiatives designed to combat money laundering. While the provisions and scope of these international and domestic laws differ, they share one fundamental commonality: "The fight against money laundering aims at a more effective enforcement of the criminal law in relation to profit-oriented crime" (Stessens, 2000, p. 3). The international and national guidelines, regulations and laws that have been developed in recent years for fighting money laundering are discussed further below.

International Standards. The international community has enacted a number of substantive measures in the recent years to combat money laundering, including the following initiatives:

Multilateral organizations have been created to develop anti-money laundering standards, mechanisms, and institutions;

The United Nations pioneered the 1988 Vienna Convention Against the Trafficking in Illegal Narcotic and Psychotropic Substances contains the requirements to criminalize money laundering and immobilize the assets of persons involved in illegal narcotics trafficking;

In 1989, the G-7 Economic Summit Group established the Financial Action Task Force (FATF), operates from the Office of Economic Cooperation and Development (OECD) headquarters in Paris and has issued a set of forty recommendations that concern legal requirements, financial and banking controls, and external affairs and issues an annual report that provides an overview of progress and problems in international anti-money laundering;

The G-10 Basle Group of Central Banks has provided timely guidelines for central bank supervisors and regulatory controls and on September 23, 1997, issued guidelines on supervision;

Regionally, the Council of Europe's 1991 Convention on Laundering, Search, Seizure and Confiscation of Assets has become the major international convention that requires signatory governments to cooperate against anti-money laundering;

The European Union, as a signatory to the 1988 Vienna Drug Convention and based on its own initiatives to address financial crimes against the Communities, issued a 1991 Anti-Money Laundering Directive and recently issued another initiative targeting cybercrimes (Zagaris, 1999).

Domestic Legislation. Like the international community, the United States has enacted a number of laws that can be used to address illegal offshore banking activities that affect U.S. interests, depending on the circumstances. The primary provisions of anti-money laundering in the United States can be found in Titles 12, 18 and 31 of the U.S. Code (Zagaris, 1999). A list and description of other controlling legislation in the United States are provided in Table 1 below.

Table 1.

Controlling Anti-Money Laundering Legislation in the United States.

Legislation

Description/Goal

The Bank Secrecy Act of 1970 (BSA).

This law was a precursor to anti-money laundering and was intended to deter laundering and the use of secret foreign bank accounts; the law established an investigative "paper trail" for large currency transactions by establishing regulatory reporting standards and requirements, such as the Currency Transaction Report requirement (CTR Form 4789). This requirement distinguished the U.S. from other nation's approaches to anti-money laundering early on; for instance, the BSA imposed civil and criminal penalties for noncompliance with its reporting requirements; the legislation was also designed to improved the detection and investigation of criminal, tax, and regulatory violations. A unique aspect of U.S. anti-money laundering laws that other countries are starting to emulate is the simultaneous use of anti-money laundering, tax, regulatory, and even criminal, --especially organized crime -- goals.

The Money Laundering Control Act of 1986.

This law was part of the Anti-Drug Abuse Act of 1986 and created three new criminal offenses for money laundering activities by, through, or to a financial institution: (a) knowingly helping launder money; (b) knowingly engaging -- including by being willfully blind -- in a transaction of more than $10,000 that involves property from criminal activity; and - structuring transactions to avoid the reporting requirements of BSA.

The Anti-Drug Abuse Act of 1988.

This Act strengthened anti-money laundering laws by: (a) significantly increasing civil, criminal and forfeiture sanctions for laundering crimes and BSA violations, including forfeiture of "any property, real or personal, involved in a transaction or attempted transaction in violation of laws" relating to the filing of Currency Transaction Reports, money laundering, or structuring transactions; (b) requiring stronger and more precise identification and recording of cash purchases of certain monetary instruments; - allowing the Treasury Department to require financial institutions to file additional, geographically targeted reports; requiring the Treasury Department to negotiate bilateral international agreements covering the recording of large U.S. currency transactions and the sharing of such information; and (d) increasing the criminal sanction for tax evasion when money from criminal activity is involved.

The Housing and Community Development Act of 1992.

This Act made changes in anti-money laundering laws; the law strengthened penalties for financial institutions violating anti-money laundering laws, and allows regulators to now close or seize institutions by appointing a conservator or receiver or terminating the institution's charges. Federal regulators can also suspend or remove institution-affiliated parties who have violated the BSA or been indicted for money laundering or criminal activity under the BSA. It forbids any individual convicted of money laundering from unauthorized participation in any federally insured institutions.

Annuzio-Wylie Act Anti-Money Launder Act, Pub. L. No. 102-550, 106 Stat. 4044 (codified as amended in various sections of the U.S.C.).

Under the Annunzio-Wylie Act, the Treasury must issue regulations requiring national banks and other depository institutions to identify which of their account holders -- other than other depository institutions or regulated broker dealers -- are non-bank financial institutions, such as money transmitters or check cashing services. Treasury, together with the Federal Reserve, are responsible for issuing regulations that require financial institutions and other entities that cash checks, transmit money, or perform similar services to maintain records of domestic and international wire transfers that are useful in law enforcement investigations. Under the Act, the U.S. Government has established a BSA Advisory Group that includes representatives from the Departments of Treasury as well as Justice, and the Office of National Drug Control Policy and other interested persons and financial institutions. The group was created for the purpose… READ MORE

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