BizAims

For most countries, money laundering and terrorist financing raise sig­nificant issues with regard to prevention, detection and prosecution. Sophisticated techniques used to launder money and finance terrorism add to the complexity of these issues. Such sophisticated techniques may involve different types of financial institutions; multiple financial transactions; the use of intermediaries, such as financial advisers, accountants, shell corpora­tions and other service providers; transfers to, through, and from different countries; and the use of different financial instruments and other kinds of value-storing assets. Money laundering is, however, a fundamentally simple concept. It is the process by which proceeds from a criminal activity are dis­guised to conceal their illicit origins. Basically, money laundering involves the proceeds of criminally derived property rather than the property itself.

The financing of terrorism is also a fundamentally simple concept. It is the financial support, in any form, of terrorism or of those who encourage, plan, or engage in terrorism. A less simple concept, however, is defining ter­ rorism itself, because the term may have significant political, religious, and national implications from country to country. Money laundering and terrorist financing often display similar transactional features, mostly having to do with concealment and disguise.

Money launderers send illicit funds through legal channels in order to conceal their criminal origins, while those who finance terrorism transfer funds that may be legal or illicit in origin in such a way as to conceal their source and ultimate use, which is the support of terrorism. But the result is the same—reward.

When money is laundered, criminals profit from their actions; they are rewarded by concealing the criminal act that generates the illicit proceeds and by disguising the origins of what appears to be legitimate proceeds. Similarly, those who finance terrorism are rewarded by concealing the origins of their funding and disguising the financial support to carry out their terrorist stratagems and attacks.

What Is Money Laundering?

Money laundering can be defined in a number of ways. Most countries subscribe to the definition adopted by the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances and the United Nations Convention Against Transnational Organized Crime:

• The conversion or transfer of property, knowing that such property is derived from any  offense or offenses or from an act of participation in such offense or offenses, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such an offense or offenses to evade the legal consequences of his actions;

• The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from an offense or offenses or from an act of participation in such an offense or offenses, and;

• The acquisition, possession or use of property, knowing at the time of receipt that such property was derived from an offense or offenses or from an act of participation in such offense or offenses.

The Financial Action Task Force on Money Laundering (FATF), which is recognized as the international standard setter for anti-money laundering (AML) efforts, defines the term “money laundering” succinctly as “the processing of…criminal proceeds to disguise their illegal origin” in order to “legitimize” the ill-gotten gains of crime.

A money laundering predicate offense is the underlying criminal activity that generated proceeds, which when laundered, results in the offense of money laundering. By its terms, the Vienna Convention limits predicate offenses to drug trafficking offenses. As a consequence, crimes unrelated to drug trafficking, such as, fraud, kidnapping and theft, for example, do not constitute money laundering offenses under the Vienna Convention. Over the years, however, the international community has developed the view that predicate offenses for money laundering should go well beyond drug trafficking. Thus, FATF and other international instruments have expanded the Vienna Convention’s definition of predicate offenses to include other serious crimes.

For example, the Palermo Convention requires all participant countries to apply that convention’s money laundering offenses to “the widest range of predicate offenses.”In its 40 recommendations for fighting money laundering (The Forty Recommendations), FATF specifically incorporates the technical and legal definitions of money laundering set out in the Vienna and Palermo Conventions and lists 20 designated categories of offences that must be included as predicate offences for money laundering.---Source: worldbank.org