The Washing Machine - Fighting Money Laundering in the Middle East - 0 views
started by Emery Nielsen on 15 Mar 12
started by Emery Nielsen on 15 Mar 12
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Criminal organizations have three objectives for laundering the proceeds of their illegal activity. These are:
o To pay expenses in connection with their illegal activity.
o To invest their proceeds inside criminal cycle and boost illegal activity.
o Eventually, to enjoy the profits of their criminal activity.
Today, money laundering represents an estimated 2 percent to 5 percent in the world's gross domestic item. Estimates of money laundering worldwide range from $800 billion to $1. 6 trillion; 47 percent in the launderers use banks to decontaminate dirty money. While some observers have challenged the accuracy of these numbers, this problem is one of huge proportions even after a long time of strong lobbying through the inter-governmental Financial Action Job Force (FATF) to reassure that banks and non-bank loan companies adopt the FATF's Forty Tips about combating money laundering.
Three Stages of Money Washing
The money-laundering process comprises three main stages:
1. Placement is a physical disposal of bulk cash proceeds produced illegal activity.
two. Layering is separating the illicit arises from their source by producing complex layers of economical transactions. Layering confuses the audit trail and provides anonymity.
3. Integration is re-injecting in the laundered money back into the legal economy in such a way that funds re-enter the economic climate as legitimate business income.
Is Terrorist Financing Similar to Money Laundering?
Terrorism financing could be the process of reverse washing, but tends to use smaller amounts than is the case with money washing. This process uses capital raised from legitimate sources like personal donations and sales from businesses and altruistic organizations, as well as from criminal sources. Terrorists use a same money laundering ways to evade authorities' attention and protect the identity of their total sponsors and the ultimate beneficiaries in the funds.
Challenges in the center East
Fighting money laundering is not easy for any traditional bank. In the Middle Eastern, cultural customs, terrorism together with smuggling make the detection of doubtful cash transfers particularly challenging. That is why banks and other loan companies must be more alert in monitoring customer activities and knowing their customers.
In order to implement a robust anti-money-laundering (AML) program in the financial institution, senior supervision must support it and empower employees to ask uncomfortable questions; set up proper controls and strictly enforce them to be able to detect suspicious transactions and also activities; and make timely reports to financial intelligence units about suspicious pursuits.
In some Middle Eastern countries, these obligations are frequently perceived as conflicting using customer relationships and cultural customs. For example, a bank employee who ceases to discharge AML compliance responsibilities - whether wittingly or to avoid asking a customer uncomfortable questions - can negatively impact efforts with other institutions by not necessarily demonstrating a unified top and by making that institution more appealing to both money launderers and also to customers who find AML responsibilities uncomfortable.
Financial institutions generally have decades of experience implementing AML programs and ensuring compliance. But many Middle Eastern financial institutions are adopting corporate people that weaken AML together with anti-terrorist financing efforts, or continue conducting business in ways that may well undermine global AML complying efforts.
One of the biggest problems for AML initiatives in the middle East is cultural practices that accept deference to customers and anonymity. Accounts lacking full identification details or with misleading information are not unusual in your community. Verification of customer information is often difficult, if not difficult.
"Know your customer" can be an element lacking at many Middle Eastern financial institutions which follow local traditions of accommodating customers' asks for. Gathering customer information is generally a sensitive issue, as customers may see banks' requests for additional information as intrusive or bothersome. For example, it may be difficult for a bank to refuse to enter into or to help exit a relationship with a politically connected person. Doing so could mean trouble for the staffer involved.
Lack of adequate information has a significant impact on other areas of AML programs, such as transaction monitoring and the bank's ability to apply a risk-based approach to its clientele base. Bank officials frequently claim that they cannot want to offend customers and lose business for a less law-abiding competitor.
One region-specific challenge is that it can also be very difficult to perform a check against a sanctions lists influenced by a customer's name due to the multiple available spellings of names used in your community.
Financial institutions often have a formal program in place to test the potency of their AML systems together with controls. However, the quality of a number this testing can be questionable. Internal auditors commonly carry out this independent testing, but a significant concern is whether inside auditors have sufficient experience and knowledge to do this testing efficiently. Moreover, reviews often take place infrequently and some time after the event.
Challenges at the National Level
The governments in the middle East are taking measures towards enforcing AML/counter-terrorism financing laws, regulations and guidelines. However, there are several an absence of the legal and financial systems which need to be addressed:
o Although money laundering is a criminal offense, terrorist financing is not specifically prohibited in some countries.
o There is often an overreliance on suspicious transaction reporting to generate money laundering investigations
o A significant informal cash economy exists, and many financial transactions don't enter the banking process.
o Cash reporting requirements are not consistently enforced and some countries do not have currency reporting requirements for individuals leaving the country.
o Financial intelligence versions have been created in accordance with international standards, but some of them lack adequate organization, abilities and independence.
o There are deficiencies in monitoring the operations of local charities abroad.
o The presence associated with underground banking (Hawala) presents a potential opportinity for laundering funds
o It is difficult to acquire a balance between this privacy of individuals' rights versus the necessity to protect society against criminals and terrorists.
Recommendations with regard to Improvement:
o Implement a nationwide awareness campaign about the risk of money washing and terrorism financing. Such campaigns must be able to send a strong, convincing message to the public at large that financial institutions are implementing "know your customer" programs with the objective of safeguarding the country and soundness of the financial system from terrorists and criminals.
o Improve the productivity and independence of fiscal intelligence units and cause them to become provide feedback on on your guard transaction reports to reporting institutions together with sharing information with overseas financial intelligence units.
o Improve enforcement associated with cross-border currency controls, specifically allowing for seizure of suspicious cross-border currency transfers.
o Empower police officers and customs authorities to look at and investigate trade-based funds laundering, informal value send systems and customs fraud. They should take this initiative and proactively create leads and investigations and also follow the financial tracks wherever they lead.
o Update AML laws against terrorism specifically to address the threat of terrorism loans, including asset identification, seizure together with forfeiture.
o Encourage areas to ratify the UN Convention against Transnational Organized Crime; UN International Convention for any Suppression of the Financing of Terrorism; and UN Convention against Corruption.
o Strengthen charity oversight, especially in offshore operations.
o Implement and enforce a uniform cash declaration policy for inbound and outbound travelers.
More ought to be done to combat either money laundering and terrorism financing. While governments and financial institutions in your community have taken effective and advanced steps, the political and cultural environment in your community will continue to current challenges.
REFERENCE:
http://tinyarticle.com/Art/454313/25/Precisely-What-Is-Anti-Money-Laundering.html
http://www.articledisc.com/115720/374/Anti-Money-Laundering-What-Is-it-All-About.html
http://www.ezarticlesdb.com/Art/329577/25/-Anti-Money-Laundering--What-Is-it-All-About.html