Define money laundering
How AML supports anti-corruption
“After foreign exchange and the
oil industry, the laundering of
dirty money is the world’s third-
largest business.”
Jeffrey Robinson, The Laundrymen
How Much Is Laundered?
IMF ESTIMATE = 2-5% Global GDP
Definition: The process of disguising the proceeds
of crime in an effort to conceal their illicit origins
and legitimize their future use.
Objective: To conceal true ownership and origin of
the proceeds, a desire to maintain control, a need to
change the form of the proceeds.
Techniques: They can be simple, diverse, complex,
subtle, but secret.
Proceeds = any economic advantage derived
directly or indirectly from criminal offenses
Money Laundering Cycle 1.
Predicate Crimes
• Corruption and Bribery
• Fraud
• Organized crime
• Drug and human trafficking
• Environmental crime
• Terrorism
• Other serious crimes…
4. 2.
INTEGRATION PLACEMENT
• The last stage in the laundering
• Initial introduction of criminal
process.
proceeds into the stream of
• Occurs when the laundered
commerce
proceeds are distributed back to
• Most vulnerable stage of money
the criminal.
laundering process
• Creates appearance of
legitimate wealth.
3.
LAYERING
• Involves distancing the money
from its criminal source:
• movements of $ into
different accounts
• movements of money to
different countries
• Increasingly difficult to detect
Banks
Financial services
Brokerage firms
Other Examples: Insurance companies,
Money remitters,
Cash intensive businesses,
Brokerage firms,
Realtors
Crooked LAWYERS and ACCOUNTANTS
Simple Bribe and Money Laundering Transaction
Country 3
Country 1
Company owned by Minister’s cousin
Company A
• Needs to generate
$1 million for bribe to
Finance Minister.
• Uses invoices from
company in Country
2
Company Bank Account $500,000 - Purchase $500,000 - Purchase
of Real Estate of Bearer Share
Country 4
Country 2
Money Laundering is a separate offense which carries
additional jail time. Allows for seizure and confiscation of
proceeds of crime.
Allows law enforcement access to bank and other financial
institution records.
Requires financial institutions to file suspicious and
sometimes cash transaction reports, and to identify the
beneficial owners of legal entities.
Requires establishment of Financial Intelligence Units which
receive reports from financial institutions and can provide
new channels for international exchange of information.
Large amount of proceeds from corruption
that need to be hidden
Low confidence in the security of assets in
country
Asset disclosure requirements
Political instability or possible regime
change
Greater risk for corruptors and corruptees
of investigation and prosecution
Developing political will at senior levels of government.
Tighter AML can be costly and reduce resources from
other needs.
Building capacity in developing countries for
investigation and prosecution.
Knowing your client is not always easy. Knowing your
client’s client is difficult to impossible.
Coordination among countries law enforcement,
financial intelligence units, regulators, and judiciaries.
Application of AML regime in a cash based economy.
Effective AML/CFT WB technical assistance:
regime:
Understanding of ML Awareness raising
& TF amongst workshops/ Global
stakeholders Dialogues
Legal framework Legislative drafting
Functioning FIU FIU capacity building
Supervision of AML Capacity building for
Law enforcement regulators/ supervisors
capacity Capacity building for law
enforcement
Is a global threat; Economic:
Is fuel to expand criminal Deters private
enterprise; investment
Helps hide corrupt Destroys competition
payments; Revenue impact
Uneven playing field for Financial:
honest business; Perpetuates corruption,
Risks for financial systems obstructs good
& institutions-erodes governance
integrity Regulatory Erodes confidence
Reputational, credit and Destabilizes financial
operational risk. institutions
Market risk.
Results unkown—don’t know whether
there has been a reduction in corruption
because of AML (no database of Money
Laundering Cases)
It is easier to prosecute AML even when
local jurisdictions are not able (i.e. ML is
usually multi-jurisdictional)
AML is a compliment to anti-corruption
programs but it is not a silver bullet
