Anti-Money Laundering and Risk Management
Added on 2020-09-03
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Essay
CONTENTSINTRODUCTION...........................................................................................................................1Main body........................................................................................................................................1CONCLUSION................................................................................................................................8REFERENCES................................................................................................................................9
INTRODUCTIONMoney laundering is the procedure of create the appearance of large amount of moneyobtained from the illegal operations such as terrorist activity, drug trafficking and many more.Mainly the money created from the illegal activity is consider as dirty and the process oflaunders help in make it look clean (Masciandaro, 2017). One of the major disadvantage of thisprocess is that it slow down the economic development of nation and creates various unnecessaryproblems in its development. This process consists three steps known as placement, layering andintegration. Impact of this can be seen on various sectors of a country. One of the mainadvantage of this is that it help in bring the illegal money into upon. Money laundering andvarious stages involve in this is all detailed in this report. Further, its impact of financial, real andexternal market is also given in this. In addition to this, how economic development get affectedby the process of money laundering is all detailed in this. Main bodyConcept of money laundering refers to the conceal, relocate and retain the money for along time period created from a crime. Basically it is process of transfer of property knowing thatsuch property is origin from crime. Process of money laundering help criminal to enjoy profitswithout uncovered their illegal source (Moser, Bohme and Breuker, 2013). Mainly, insidertrading, bribery and various fraud schemes produce large amount of money. Process of moneylaundering help criminal to have the incentive and provide various legal profits. Main aim ofcriminal activities is to make large number of profits as soon as possible. Procedure of moneylaundering is very significant for criminals as this provide them an opportunity to enjoy hugeamount of profits. Stages of Money launderingBasically there are three stages involved in the process of money laundering that isplacement, layering and integration. All these can be better understood by the points givenbelow:Placement: This is the first step involve in the process of money laundering this ismovement of cash from its source. It is followed by placing money into circulation withhelp of financial institutes, shops, casinos and from various other businesses includingboth local and international (Madinger, 2011). Further, the process of placement can becarry through various other process include the following:1
Currency smuggling: This include the illegal movement of various monetary instrumentsand currency out of a country. Various transport methods do not leave a discernible audittrail. Bank complicity: Under this financial institutions such as bank is owned by individuals whoare suspected to convinced with crime groups and drug dealers. This make the whole easy forlaunders. Further, liberalisation of finance sector without any adequate cheque providefreedom for laundering. Currency exchanges: Liberalisation of foreign exchange markets make the currencymovements easy (Force, 2012). Further all these policies facilitate the process of laundering. Securities Brokers:Brokers are the one who facilitate the process of laundering by structuring large money deposits of cash in a unique way that disguise the original sourceof money.Blending of funds: One of the best way to hide cash is with huge amount of other cash. Dueto this, financial institutes and banks are the major vehicles for money laundering. Othermethod is to use the money created from illegal activities to set up a firm. This helps inenable the funds of illegal activities into legal process. Purchase of assets: Buy fixed assets is one of the classic and traditional method of moneylaundering. One of the main purpose of this is to convert the conspicuous bulk money intoless conspicuous but equally valuable form. Layering: This is the second step involve in the process of money laundering, majorpurpose of this is to make it more complex to identify or detect the activity of laundering(Bryans, 2014). This means make the illegal activities difficult for the agencies of lawenforcement. Major known methods of this are as follows:Cash converted into monetary instruments: After successful of placement with financialsystem with help of a bank or financial institution, proceeds then can be converted intomonetary instruments (Stokes, 2012). Further, this consists the use of money orders andbanker’s draft.Assets brought with cash and then sold: Under this assets are brought with help of illegalfunds are sold locally and in this case it become difficult to find. Integration: This is the third or last step, basically this involves the movement oflaundered money into the economy with help of banking system and all this help in2
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