The effects Of Global Money Laundering

Abstract

On daily basis banking systems records more than thousand of different transactions for their customers. Majority of the transactions are recorded for common operations which are associated with are the results of legal actions. In short, Money laundering (money, goods and values) means the conversion of money or illicit goods “capital” apparently lawful.

Table of Content

ABSTRACTII

I. BACKGROUND / HISTORY1

II. THE MONEY LAUNDERING PROCESS2

a)Placement - Introduction of the dirty money into the financial system2

b)Layering - Dissociation of the dirty money3

c)Integration: The money is invested in the legal financial system3

III. MONEY LAUNDERING METHODS4

a)Black Market Colombian Peso Exchange4

b)Structuring Deposit4

c)Foreign Banks5

d)Investing in Business Legitimate5

e)Drug-money Laundering5

IV. EFFECTS OF MONEY LAUNDERING5

a)Economic Distortions6

b)The Erosion of the Financial Sector- Security6

c)Socio-Economic Costs6

V. FIGHTING MONEY LAUNDERING7

VI. CONCLUSION9

REFERENCES10

The Effects of Global Money Laundering

I. Background / History

Law enforcement officials have long struggled to combat money laundering, the disguising of illegally obtained funds to make them appear legitimate. Today, those efforts are viewed as part of the battle against international terrorism. Some observers argue that stricter laws against money laundering would weaken the ability of terrorist groups to conduct operations around the world. Others disagree, however, and contend that the costs of tougher money-laundering laws would outweigh the benefits.

Although the exact origin of the term "money laundering" is unknown, most experts trace it back to Mafia ownership of public laundry facilities during the 1920s. At the time, organized crime leader Al Capone sought a way to hide the origins of his criminal profits. By mixing that money with the legal profits earned by his laundry businesses, Capone could make it appear that all of his income had been derived through legitimate means.

Over time, criminals have discovered increasingly sophisticated ways to launder their money. Computers and the Internet now enable lawbreakers to transfer funds through multiple banks and financial institutions around the world in a matter of minutes. As a result, law enforcement efforts to track those funds--and thus the criminals behind them--have become increasingly difficult.

The difficulties in tracking laundered money have come to light since Sept. 11, when terrorists attacked the U.S. Analysts say that the unimpeded movement of terrorist funds through the global financial network enabled Al Qaeda, a terrorist group led by Saudi mastermind Osama bin Laden, to launch that attack and others.

As a result, many policy makers have recently called for a widespread crackdown on money laundering. They argue that improved mechanisms for tracking laundered money would facilitate the capture of the terrorists responsible for the Sept. 11 attack and make it much harder to coordinate future attacks.

II. The Money Laundering Process

It has been shown that money laundering takes place generally in three stages: placement, layering and integration.

Placement - Introduction of the dirty money into the financial system

This first phase, which usually takes place near the place where criminal actions are committed, is entered into the financial system the money from the illegal activity. This is done in many ways, but the common denominator is that the illicit capital is split into smaller amounts that are ...