Money Laundering: Critical Evaluation of FATF Report 2018 System04128

This report provides a critical evaluation of the FATF Report 2018 on professional money laundering, focusing on the role of gatekeepers in facilitating financial crimes. It examines the capacities and characteristics of professional money launderers (PMLs), including individuals, organizations, and networks that assist in money laundering for a fee or commission. The report delves into the services provided by PMLs, the need for gatekeepers by criminals, and the implications of their actions. It explores how money is laundered, the global impact of money laundering, and the measures taken by the Financial Action Task Force (FATF) and other international bodies to combat these activities. The report highlights the importance of understanding and addressing the role of gatekeepers in protecting money derived from illegal activities and preventing money laundering schemes.

Running Head: Money Laundering
MONEY LAUNDERING: Role of Gatekeepers
Critical Evaluation of FAFT Report 2018
System04128

Money Laundering
Executive Summary
This report contains the critical evaluation of the role of the gatekeepers helping and assisting
in money laundering which are given in FATF Report 2018. It focuses primarily on
professional money launderers (PMLs) who works for empowering culprits to sidestep
against money laundering. The report portrays the capacities and qualities that characterize a
professional money launderer, in particularly people, associations and systems which are
engaged with outsider washing for an expense or commission. While PMLs may act in a
professional limit (for example legal counselor, auditor) and help genuine customers, this
report recognize those persons who are criminal customers either on a fulltime or low
maintenance premise. There are both the aspects of legal professionals in money laundering
in the report: the professional duty of the lawyer towards his client and giving advice
regarding the safe transfer of money.
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Table of Contents
Executive Summary...................................................................................................................1
Introduction................................................................................................................................3
What is Money Laundering?......................................................................................................4
How much money is laundered per year?..............................................................................5
How is money laundered?......................................................................................................6
Where does money laundering occur?...................................................................................7
Who are gatekeepers?............................................................................................................8
Role of Gatekeepers in Assisting Money Laundering...........................................................8
Need of Gatekeepers by Criminals........................................................................................9
FATF Report - “Professional Money Laundering” July 2018.................................................11
Who is a Professional Money Launderer (PML)?...............................................................11
What Services Do PMLs Provide?.......................................................................................12
Complicit, if not Criminal, Professional Service Providers.................................................13
Conclusion................................................................................................................................20
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Bibliography.............................................................................................................................22
Introduction
The criminal activities, which laundered and hid in illegal tax evasion plans to threaten
popularity-based foundations, moderate financial improvement and add to legislative
unsteadiness1. The advancement of innovations, specifically inside monetary establishments,
offers more extensive open door for crooks to launder their cash got from illicit activities.
Contemporary financial institutions can move sick gotten gains by exchanging them to
different locales. In this manner, the extension of new worldwide markets, exchange and
fund, just as media communications and travel, not just have cultivated monetary
development and enabled numerous to flourish, yet have additionally exhibited culprits and
corrupt opportunist with the capacity to misuse globalization's increases to direct more
prominent wrongdoings2. This condition permits tax evasion as the “wheel greases” for these
illicit exercises, where tax evasion darkens the source of cash got from wrongdoings to wind
up untraceable, so the hoodlums can continue completing the unlawful business and getting a
charge out of the benefit.
To tackle the illegal activities which are done through gatekeepers, the International Anti-
Money Laundering Community has evolved various steps whose prime target is to eradicate
1 UNODC, Thematic Programme: Action against Corruption and Economic Crime, (Vienna: UNODC, 2011)
2 UNODC, Globalisation of Crime Vienna, (UNODC, 2010)
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activities related to illegal tax evasion and gatekeepers3. Financial Action Task Force (FATF)
is one such measure that can tackle the problem of money laundering. There are other
measures available like United Nations Conventions against Corruption (UNCAC), it is
ratified many countries around the globe and it is treated as a precious bar and regulation for
evolution and clarification of rules and regulations and instruments4. Globally present anti-
money laundering steps are continuously improving according to changes, but some of the
recent cases elaborate that offenders can still successfully conceal and make sure that their
illegal money are safe. Mostly money laundering have its effect on national level but
sometimes it have its impact outside the territory as well. Its effects spread throughout the
world, violating various jurisdictions because there is no country which can stop it from
spreading5. There is need for development of more reliable system which can erase money
laundering globally and eventually stop illegal money flows.
This report on money laundering will be evaluating the role of gatekeepers. This report
mostly puts light on gatekeepers’ role in protecting the money arising out through illegal
activities and money laundering and to trace the flow of illegal money. This report will be
discussing the approach to prevent gatekeepers in helping the schemes related to money
laundering.
3 Robert Leventhal, Money Laundering and Terrorist Financing: A Global Threat, (U.S. Department of
State,2008)< https://www.state.gov/j/inl/rls/nrcrpt/2003/vol2/html/29843.htm> accessed on 10 April 2019
4 American Society of International Law, “Adoption of UN Convention against Corruption, The American
Journal of International Law,” (American Society of International Law), 2004<
http://www.jstor.org/stable/3139275.> accessed on 10 April 2019
5 Patrick Glynn, Stephen J. Kobrin, and Moises Naim, (Institute for International Economic, 1997) < http://
www.iie.com/publications/chapters_preview/12/ 1iie2334.pdf> accessed on 10 April 2019
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What is Money Laundering?
Money Laundering is the system where huge amount of money can be generated by criminal
activity. The money that comes from this process is dirty and laundering makes it look clean.
Illegal arms deals, pirating, and the demonstrations of crimes can create tremendous amount
of cash. Misappropriation, insider exchanging, payoff and fraudulent plans can likewise
convey broad advantages and create incentive to “legitimize” the illegal gains via illegal tax
avoidance6.
Exactly when a crime increases significantly, a person or gathering must make sense the way
to control the gains without attracting thought in regards to the essential development or the
general population included. Offenders generally do this through veiling the origin, altering
the structure, or removing the resources for a spot where it is difficult to find. As a result of
rising worries over unlawful tax avoidance, the Financial Action Task Force (FATF) was set
up in Paris in 1989 by the G-7 Summit7. Basic undertaking of the FATF was to develop
Recommendations, which are 40 to be exact, asks government of the nations to enforce these
recommendations to curb illegal tax evasion.
How much money is laundered per year?
Money laundering or illegal tax evasion is an unlawful development done by wrongdoers
who are from outside of the standard extent of financial and cash related estimations. Nearby
6 Introduction to money laundering, (UNODC, 2019)<
https://www.unodc.org/unodc/en/money-laundering/introduction.html?ref=menuside> accessed on 10 April
2019
7 History of the FATF, (FATF, 2019)< http://www.fatf-gafi.org/about/historyofthefatf/> accessed on 10 April
2019
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some extraordinary pieces of underground financial activity, unforgiving evaluations has
been progressed to provide some sentiment of measures of the issue.
The United Nations Office on Drugs and Crime (UNODC) drove an examination to choose
the significance of illegal resources. It is created through medication dealing, infringement
and to research that up to what degree these benefits are laundered8. According to the report,
criminal proceeds indicated 5% of overall GDP, with 2 trillion) were laundered in 20099.
This falls within the comprehensively referred to check by International Monetary Fund,
which communicated that in 1998 the complete size of tax avoidance will be between 2 and 5
percent of global income. Using 1998 experiences, these rates would are between 590 billion
dollars and 1.5 trillion million dollars.
Nevertheless, above evaluations must be taken seriously. These figures depicts the level of
amount in which money in laundered. As a result of the unlawful thought of the trades,
careful estimations are not open and it is along these lines hard to make a total check of the
proportion of amount that is comprehensive washed annually.
How is money laundered?
In the fundamental period of tax avoidance, the offender carries his/her unlawful advantages
in money related framework. This may be finished by isolating a ton of money in less
noticeable that are kept into a record, or by obtaining a development of financial instruments
which are assembled and put way into some other territory.
8 UNODC on money-laundering and countering the financing of terrorism, (UNODC, 2019)<
https://www.unodc.org/unodc/en/money-laundering/index.html?ref=menuside> accessed on 10 April 2019
9 Money-Laundering and Globalization, (UNODC, 2019)< https://www.unodc.org/unodc/en/money-
laundering/globalization.html> accessed on 10 April 2019
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When the money is deposited into cash related framework, the second – or covering –
compose happens. In this step, the offender participates in a development of changes or
enhancements of the assets for oust them from their source. The points of interest may be
involved through the buy and offers of theory instruments or the launderer may just wire the
advantages through a development of records at different banks around the world. This use of
extensively dissipated records for washing is particularly predominant in those spaces that
don't team up in against duty shirking examinations. In specific cases, the launderer may veil
the trades as portions for product or organizations, in this way giving them a genuine
appearance. Having sufficiently managed his criminal points of interest through the hidden
two stages the offender moves to the next stage – mix– in which the advantages re-develop
the veritable economy10. The offender might invest the money into land, extravagance
resources, or organisational adventures.
Where does money laundering occur?
Tax evasion is an aftereffect of for all intents and purposes all advantage creating bad
behaviour, it can happen anywhere on the planet. Generally, tax criminal will largely hunt out
countries or portions in which there is an alright of recognizable proof due to weak or
insufficient foe of tax avoidance programs. Since the target of tax evasion is to recuperate the
unlawful resources for the person who made them, offenders generally need to relocate
resources via reliable fiscal structures. Tax evasion action focus geographically as shown by
the stage the laundered resources have come to. At the primary stage, for example, the profits
are regularly aligned close to the under-lying activity as often as possible, yet not for every
circumstance, in the country where the advantages start. In the next stage, the launderer may
10 What is money-laundering?, (ICA, 2019)< https://www.int-comp.org/careers/a-career-in-aml/what-is-money-
laundering/> accessed on 10 April 2019
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pick an offshore cash related center, an immense nearby business center, or a world money
related center – any territory that gives a tasteful financial system. In this step, the washed
sources may in like manner simply travel records at different territories where this should be
conceivable without revealing hints of their extraordinary objective. Lastly, in joining stage,
offenders may put washed resources in specific territories if they were formed in
temperamental economies offering restricted venture openings11.
Who are gatekeepers?
There is specific definition of gatekeepers, however the FATF characterizes gatekeepers
'assigned without-money related organizations and occupation', including legal advisors,
public accountants, land specialists, trust, gambling club, bookkeepers, and other free lawful
experts who play out the job of a confided in outsider12.
Role of Gatekeepers in Assisting Money Laundering
To control these illegal exercises helped by gatekeepers, all things considered, the worldwide
enemy of tax evasion network has created numerous measures focusing on tax evasion and
watchmen specifically. Some of the measures that were set up by the recommendations of the
Financial Action Task Force are Know Your Customer method and Customer Due Diligence.
It is intended for the execution on a worldwide scale. Furthermore, there are numerous other
specialized estimates accessible, for example, the United Nations Conventions against
Corruption (UNCAC)13 that have been confirmed by most of the countries and fill in as
profitable norms and structure for improvement and filtering of standard practices and
11 Money Laundering, (Global Financial Integrity, 2019)< https://www.gfintegrity.org/issue/money-laundering/>
accessed on 10 April 2019
12 Kevin L. Shepherd, “Guardians at the Gate: The Gatekeeper Initiative and the Risk-Based Approach for
Transactional Lawyers,” (Real Property, Trust, and Estate Journal, (2009)
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mechanisms. Worldwide enemy of tax evasion steps are tenaciously getting better to meet the
evolving requirements, yet late incidents exhibit that offenders can in any case successfully
stow away and ensure their unlawful resources utilizing seaward banks. These can be
applicable partially, or noncompliance because of de facto, with these steps, which have been
sanctioned by most of countries, and fill in as significant models and system for the
improvement. Worldwide enemy of tax evasion steps are industriously getting better to meet
the evolving requirements, yet ongoing incidents exhibit that the culprits can even now viably
cover up and secure their illicit resources utilizing seaward banks, which are just in fractional
consistence, or a true condition of noncompliance, with such measures.
Money laundering is a kind of organized crime and these kind of large scale crimes are
working smoothly because they are very well supported by legal professionals who helps
them to escape the law. Legal professionals have knowledge regarding handling the business
trade without the interference of the laws14. Moreover, they have expertise in Anti-Money
Laundering law that helps the criminals to escape the prison. Criminals operate the operation
of money laundering freely without any fear of law. Rather fighting against the organized
crimes of money laundering, gatekeepers are assisting money launderers in expanding the
business.
Need of Gatekeepers by Criminals
Counseling is primary thing offered by the gatekeepers to money launderers in regards
money laundering schemes. The counseling can fluctuate from basic strategy to a muddled
13 United Nations Convention Against Corruption, (UNCAC, 2019)<
https://www.unodc.org/unodc/en/treaties/CAC/index.html> accessed on 10 April 2019
14 Richard Malish, Are lawyers facilitating money laundering?, (NICE, 2017) <
https://www.niceactimize.com/blog/ARE-LAWYERS-FACILITATING-MONEY-LAUNDERING-534>
accessed on 10 April 2019
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technique, for example, buying of estate, influencing nonprofit organizations and industrial
instruments, and controlling overtaking of organizations’ plans15. There are plenty of cases
which involves a lawyer who served as a gatekeeper and who successfully have expertise in
money laundry schemes16. In United States v. Arditti17, a lawyer was sentenced to
imprisonment because he advised an agent on purchasing of land without getting caught
regarding from the source of the assets. In United States v. Foster18, Mr. Foster laundered his
client’s cash via client trust account and transferred funds into non-existing company.
Moreover, he gave advise to his customer that US is not having any tax treaty with Cayman
Island, where the fund were transferred, and Internal Revenue Service will fail to trace the
account in Cayman Island19.
There are possibly two main reasons for a person who takes help from gatekeepers for money
laundering: Firstly, steps against money laundering has expanded hazard of tax evasion being
found out by money related organizations. Secondly, the upgraded steps connected and
endeavors of administration in battling illegal tax evasion have made offenders face critical
deterrents in avoiding money. Illegal tax avoidance needs at any rate increasingly refined and
complex plans to be revealed by law implementers. These circumstances constrain the
offenders to use legal experts, including legal officials, tax experts, bookkeepers, and other
15 Criminals Need Gatekeepers to Launder Their Money, (Gatekeepers’ Role as a Fundamental Key in Money
laundering, 2016)< https://media.neliti.com/media/publications/63337-EN-gatekeepers-roles-as-a-
fundamentakey-i.pdf> accessed on 10 April 2019
16 R.E. Bell, The Prosecutions of Lawyers for Money Laundering Offences, (Journal of Money Laundering
Control) 6, no. 1, (2003), p. 19.
17 The United States v Arditti, 955 F. 2d 331 (5th Cir. 1992)
18 The United States v Foster, 835 F. Supp. 360 (1993)
19 Ibid
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professional to help in clouding such proceeds. In such manner, the FATF sees legal
professionals as gatekeepers20.
FATF Report - “Professional Money Laundering” July 2018
The Financial Action Task Force (FATF) has published an exceptional report on professional
money launderers (PMLs) who give tax evasion skill and administrations to their wrongdoing
carrying out customers. The Report depicts the capacities and attributes of a PML and the
administrations they give. In spite of the fact that the FATF has published numerous articles
on probable vulnerabilities in hostile to launderers endeavors21, this Report centers on the
agreed dangers presented by money launderers.
The Report is enlightening, and contains instances of implementation activities including
PMLs over the globe. A private adaptation of the Report, accessible to the Members of the
FATF and the FATF’s Global Network, puts forward viable suggestions for the discovery,
examination, indictment, and counteractive action of professional money laundering-related
laundering, with “appropriate guideline”, legally implementation support, universal co-task
and data trade22. Apparently, the Report will give extra support to endeavors over the world to
close apparent administrative holes including the accumulation of advantageous
proprietorship data, and the potential job of experts, including legal counselors, in helping
others to wash unlawful assets.
20 Financial Action Task Force (FATF), Money Laundering and Terrorist Financing Vulnerabilities of Legal
Professionals, < http://www.fatf-gafi.org/documents/documents/mltf-vulnerabilities-legal-professionals.html>
accessed on 10 April 2019
21 Lawyers and money laundering, ( Anti-money laundering forum, 2019) < https://www.anti-
moneylaundering.org/lawyers_and_money_laundering.aspx> accessed on 10 April 2019
22 FATF Report: Professional Money Laundering, p. 11
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