Money is probably the main cause of criminal activities. It is a fact that the development of technology and communications have spread new ways to move money, and new forms of money laundering, which is an issue affecting the whole world.

According to the United States Treasury Department: “Money laundering is the process of making illegally-gained proceeds (i.e. “dirty money”) appear legal (i.e. “clean”). Typically, it involves three steps: placement, layering and integration. First, the illegitimate funds are furtively introduced into the legitimate financial system. Then, the money is moved around to create confusion, sometimes by wiring or transferring through numerous accounts. Finally, it is integrated into the financial system through additional transactions until the “dirty money” appears clean.”

The international community has become aware of the menace that money laundering is nowadays, being connected with terrorism and affecting both major and emerging financial markets. International policies to fight the plague of money laundering have been created: Anti-Money Laundering (AML) describes mainly the legal controls that require financial institutions and other regulated entities to prevent, detect, and report money laundering activities. Anti-money laundering guidelines started to be applied all around the world after the formation of the Financial Action Task Force (FATF, which was formed in 1989 by the G7 countries, it is an intergovernmental body whose purpose is to develop and promote an international response to fight money laundering) and the promulgation of an international plan about anti-money laundering standards.

These standards began to have more relevance in 2000 and 2001, after FATF began a process to publicly identify countries that were deficient in their anti-money laundering laws and international cooperation, a process colloquially known as “name and shame“. Today, most financial institutions globally, and many non-financial institutions, are required to identify and report transactions of a suspicious nature to the financial intelligence unit in the respective country.

Even if many progresses have been made, there is still a problem in imposing these common rules especially in developing and underdeveloped countries, where Governments are often corrupted by groups of terrorists or by the lobbies of the banks. The United Nations have already adopted many resolutions on the issue, but now their goal is to find a solution which could help to strengthen the application of AML measures and policies in those countries that actually lack of effective policies against financial crimes and money laundering.

Irene Dettori

Sources

  1. https://en.wikipedia.org/wiki/Money_laundering#Reverse_money_laundering
  2. Ecofin – Background guide NHSMUN 2015