Economic Paper

2310-1385 (online)
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This series examines current economic issues from a Commonwealth perspective. The titles in the series are technical papers of topical interest to specialists concerned with trade, micro and macroeconomics, development economics and related subjects.

A Model of Best Practice for Combating Money Laundering in the Financial Sector

A Model of Best Practice for Combating Money Laundering in the Financial Sector You do not have access to this content

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Sue Thornhill
01 Jan 2000
9781848597242 (PDF)

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Internet financial services is a rapidly changing field. The new technologies available to facilitate criminal activities make it imperative that more sophisticated means of combating money laundering are developed. This manual addresses issues such as: the interface with the parallel economy; grand corruption and diverted aid funds; fiscal offences and exchange control violations. It also reviews antimoney laundering developments in the four strategic geographical areas of influence within the Commonwealth – Africa, Australia, the Caribbean and the UK. It examines the developments in international standards since 1996 in various fora, for example the OECD convention on Combating Bribery of Foreign Public Officials and the OECD re unfair tax competition.

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  • Preface

    Money laundering is a world-wide problem. It has been reckoned that about $600 billion, or 2 to 5 per cent of the world's gross domestic product, is laundered, even at the lowest estimate. It is a truly international problem and affects both large and small, and rich and poor, countries, industrial economies and international financial centres.

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  • Expand / Collapse Hide / Show all Abstracts Global Issues, Strategies and Standards

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    • Background and Introduction

      It is now over a decade since the first formal and concerted international action to combat money laundering was taken. Without effective international and regional co-ordination, it was recognised that there was little prospect of successful action to deprive criminals of the proceeds of their crimes. National economies also need to be protected from the harmful effects of crime and its financial rewards.

    • Money Laundering – the Need for Action and the Benefits to be Obtained

      Money laundering is the process by which criminals attempt to hide and disguise the true origin and ownership of the proceeds of their criminal activities, thereby avoiding prosecution, conviction and confiscation of criminal funds. Failure to prevent the laundering permits criminals to retain the funds or recycle them to fund further crimes.

    • Development of International Initiatives and Standards

      International action to combat money laundering started in the late 1980s and the resulting developments have formed the basis for international standards and national initiatives. It is important that all Commonwealth countries adhere to international standards for money laundering prevention.

    • Establishing International and Regional Co-operation

      Money laundering is an international problem, often carried out by international crime syndicates, and effective measures to tackle it require international co-operation – no one country or agency can succeed alone. This co-operation is necessary at a number of levels, and among a number of different agencies.

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  • Expand / Collapse Hide / Show all Abstracts National Issues and Strategies

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    • Developing National Strategies

      Strategies to combat money laundering need to be wide-ranging, involving governmental and private sector action in legal, regulatory, financial and law enforcement fields. To ensure that any proposed anti-money laundering strategy is capable of achieving its aim, and of functioning effectively in a given political, social and economic environment, it is essential that laws, regulations and administrative actions are developed that take account of the context in which they must operate. This means that all interested parties should participate in the development and administration of antimoney laundering programmes.

    • Criminalising Money Laundering

      Criminalising money laundering must be the starting point of any credible anti-money laundering strategy.

    • Setting Financial Sector Obligations

      While the basic statutory money laundering offences and defences, for example the requirement not to assist any other person to launder the proceeds of crime, will apply universally, additional measures are necessary to strengthen the financial sector against abuse by money launderers.

    • Processing Reports, Investigation, Prosecution and Confiscation

      FATF Recommendation 15 states.

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  • Expand / Collapse Hide / Show all Abstracts Financial Sector Procedures

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    • Internal Controls, Policies and Procedures

      No financial sector business is immune from the risk of being used to launder the proceeds of crime. The reputational risk from becoming involved with criminal money can be fatal for any financial institution, regardless of whether a criminal prosecution is brought against the business. Financial institutions should therefore be vigilant to guard against their involvement or misuse for money laundering activities.

    • Establishing Know-Your-Customer Procedures

      Having sufficient information about a customer or a prospective customer, and making effective use of that information, underpins all other anti-money laundering procedures and is the most effective weapon against being used to launder the proceeds of crime. In addition to minimising the risk of being used for illicit activities, it provides protection against fraud, enables suspicious activities to be recognised and protects individual institutions from reputational and financial risks.

    • Recognition and Reporting of Suspicions

      FATF Recommendation 14 states.

    • Retention of Records

      FATF Recommendation 12 states.

    • Awareness Raising and Training

      The communication of a financial institution's policies and procedures to prevent money laundering, and the training in how to apply these procedures, underpin all other anti-money laundering strategies. The effectiveness of any anti-money laundering strategy depends on the extent to which staff appreciate the serious nature of the background against which the legislation and financial sector regulations have been issued.

    • Appendices
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