The aim of this work is to provide sufficient information on the most significant key facts of money laundering and the negative impact of terrorism and organised crime on economy, companies, and society. To provide essential basics, the project will begin with the origin and definitions of the terms "money laundering" (ML) and "terrorist financing" (TF), and the differences between the two terms.
Additionally, the most relevant legislations and law enforcement units addressing the issue will be demonstrated. Because of the complexity of local rules, regulations, and legislations, it will be focussed on global and European standards. The money laundering circle including its different phases will be stated as well as alternative modernised models as potential future ML or TF mechanisms such as the use of cryptocurrencies. These are covered in the second chapter.
The third chapter will demonstrate the initiators and facilitators in the money laundering mechanism. The part of the initiators will be represented in this context by major transnational organised crime syndicates and terrorist groups to illustrate how initiators may look like, what objectives they have, how they operate, why money laundering is so essential to their future actions as well as how dangerous their existence is to our society.
On the other hand, facilitators will involve different parties such as the role of banks, specific organisations, states, or offshore locations. It will additionally highlight how these parties benefit from money laundering and why it is such an attractive model to provide initiators with assistance services.
By using real case scenarios and data of the most relevant reports, it will be emphasised in the fourth chapter what negative impact money laundering can have on the economy, society, and companies.
The fifth chapter involves a comprehensive guidance on the prevention of ML including TF for corporate entities with respect to chapter 2.2, which introduced Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) legislations and several other recommendations by law enforcement units, policy makers, and AML/CFT professionals. It will cover significant mechanisms such as risk assessments, Compliance tools, Corporate Governance, Customer Due Diligence, Know Your Customer Principles, and several other preventive measures. The research project finishes with a conclusion.
Table of Contents
LIST OF FIGURES
LISTS OF ABBREVIATIONS
1. Introduction
2. What is money laundering and where does it come from?
2.1. The origin and history of money laundering
2.2. International legislations and policy-makers
2.3. Law enforcement agencies and competent authorities
2.4. The money laundering circle
2.4.1. Placement
2.4.2. Layering
2.4.3. Integration
2.4.4. The role of cryptocurrencies
2.5 The Differences between Money Laundering & Terrorist Financing
3. Who is involved?
3.1. Initiators
3.1.1. Definitions of transnational organised crime
3.1.2. Major transnational organised crime groups
3.1.3. Definitions of terrorism and terrorist groups
3.1.4. Major terrorist groups
3.2. Facilitators
3.2.1. States and offshore locations
3.2.2. Banks
3.2.3. Underground, shell, and shadow banks
3.2.4. Shell corporations and front organisations
4. Why does Money Laundering have such a relevance?
4.1. Facts and figures
4.2. The Impact of money laundering and terrorist financing
4.2.1. Impact on companies
4.2.2. Economic impact
4.2.3. Impact on state and society
4.3. Conclusion on Responsibilities
5. How can money laundering be prevented?
5.1. Guidance and international standards
5.2. Risk Assessment
5.3. Corporate Governance & Compliance
5.4. The Role of the Money Laundering Reporting Officer
5.5. Preventive measures for money laundering
5.5.1. Awareness and training of staff
5.5.2. Customer Due Diligence
5.5.3. Record keeping and reporting
5.5.4. Research and Monitoring
5.5.5. AML Software tools and data-analytics
5.5.6. Whistleblowing-systems
5.6. Conclusion on measurement
6. Conclusion
7. References
SUMMARY
The research project deals with the term 'money laundering' and its impact on organised crime and terrorism. In today’s multinational business climate, money laundering should not only be a major concern for the nation’s state but also for the management of corporate entities. Financial crime has disastrous effects on economy and society, so it should be in the mutual interest to combat it effectively and collaboratively. The purpose of this project is, therefore, on the one hand emphasizing the significant negative impact on economy and society and on the other hand addressing the prevention of money laundering. The outcome will represent a comprehensive guide of anti-money laundering tools preventing money laundering and terrorist financing within corporate entities and disrupting actions of organised crime and terrorist groups. The guide is adjusted with respect to the most relevant issues and trends of money laundering.
LIST OF FIGURES
Figure 1 - The thirteen global banks of the Wolfsberg Group
Figure 2 - The Money Laundering Cycle
Figure 3 – Terrorist financing
Figure 4 - Terrorism and Terrorist Financing
Figure 5 - Hawala banking
Figure 6 - The UNODC's definition of TOC
Figure 7 - Key Areas of TOC
Figure 8 - Engines of TOC
Figure 9 - Mexican and Colombian Cartels
Figure 10 - Key Terms defined in the Section 2656f(d) of Title 22 of the US Code
Figure 11 - Europol's classification of terrorist groups
Figure 12 - Global AML/CFT Compliance: On-going Process, 23 June 2017
Figure 13 – ML/TF as the base for TOC and International Terrorism
Figure 14 - FATF's designated categories of offences
Figure 15 - The costs of terrorism
Figure 16 - The key concept of a risk assessment
Figure 17 - Consequences of ML/TF for Companies
Figure 18 - Examples of economic/social consequences of ML/TF
Figure 19 - Obliged entities as in the EU's 4th AMLD
Figure 20 - Contributors or relevant sources of information
Figure 21 - Obligations and decisions for FI’s and DNFBP’s
Figure 22 - Types of risk factors
Figure 23 - Functions of a PEP
Figure 24 - Three Lines of Defence
Figure 25 – FATF Recommendations for enhanced CDD measures
Figure 26 - Right people, right skills, and right places - What skills to look for?
LISTS OF ABBREVIATIONS
Abbildung in dieser Leseprobe nicht enthalten
1. Introduction
‘As long there is no one combating money laundering and those corrupted narco-politicians, who benefit from the cartel’s businesses, there will never be a change.’ This was one of Javier Valdez’ last words in an interview with the German newspaper FAZ one month before he was assassinated by the notorious Mexican Sinaloa drug cartel on the street in broad daylight. It illustrates like no any other example the extent of the danger to any person combating organised crime. Valdez was one of Mexico’s most prominent reporters on drug war investigations, famed for his fearlessness and had to sacrifice his life by drawing international attention on the narcotic crimes of the Mexican drug cartels (FAZ 2017).
Mexico is an example of excessive narcotic trafficking and money laundering practices, which can cause a significant threat of political as well as economic instability and disorder to a nation. Drug traffickers rely on money laundering to finance further activities whether for the distribution of drugs and weapons or to bribe authorities.
It seems as if committing major crimes have never been easier for transnational organised crime syndicates since the existence of the offshore banking industry on Cayman Islands, the British Virgin Islands or Panama. Drug money can be laundered through these financial centres, also known as tax havens, or advice can be obtained by qualified lawyers who seem to be even specialised on money laundering and tax evasion (Thompson 2017).
Furthermore, terrorist groups, in particular the Islamic State, are raising remarkable amount of funds for their operations within the European Union. Whether through petty theft, social insurance fraud, fraudulent loan applications, VAT fraud or generating funds simply through inspired IS operatives transferring or bringing money with them to the Islamic State, or sending cash couriers using the hawala system, all these multiple microfinancing techniques display a significant threat for the European Union and other parts in the world. Therefore, financial intelligence plays increasingly a significant role with respect to EU counterterrorism efforts (Ranstorp 2016).
Criminals take advantage of the globalised world economy. Funds can be transferred immediately and easily across international borders without anyone noticing. Once the funds appear to be legitimate, organised crime lords are hard to remove from society. These circumstances can threaten the national security. In today’s globalisation and advanced technologies, it is not anymore just depending on law enforcement units but also on the private sector to fully participate in the fight against money laundering. That means, that international organisations interact with individual nations together. The more corporations comply with the legislations, the more they positively affect the prevention of money laundering.
Therefore, the question is, what does such a framework for the prevention of money laundering look like and what are the actions of entities are required to fulfil their obligations. Because of its complexity, there are several facts to take into consideration.
The aim of this work is to provide sufficient information on the most significant key facts of money laundering and the negative impact of terrorism and organised crime on economy, companies, and society. To provide essential basics, the project will begin with the origin and definitions of the terms ‘money laundering’ (ML) and ‘terrorist financing’ (TF), and the differences between the two terms. Additionally, the most relevant legislations and law enforcement units addressing the issue will be demonstrated. Because of the complexity of local rules, regulations, and legislations, it will be focussed on global and European standards. The money laundering circle including its different phases will be stated as well as alternative modernised models as potential future ML or TF mechanisms such as the use of cryptocurrencies. These are covered in Chapter 2.
Chapter 3 will demonstrate the initiators and facilitators in the money laundering mechanism. The part of the initiators will be represented in this context by major transnational organised crime syndicates and terrorist groups to illustrate how initiators may look like, what objectives they have, how they operate, why money laundering is so essential to their future actions as well as how dangerous their existence is to our society. On the other hand, facilitators will involve different parties such as the role of banks, specific organisations, states, or offshore locations. It will additionally highlight how these parties benefit from money laundering and why it is such an attractive model to provide initiators with assistance services.
By using real case scenarios and data of the most relevant reports, it will be emphasised in chapter 4 what negative impact money laundering can have on the economy, society, and companies.
Chapter 5 involves a comprehensive guidance on the prevention of ML including TF for corporate entities with respect to chapter 2.2, which introduced Anti Money Laundering (AML) and Counter Financing of Terrorism (CFT) legislations and several other recommendations by law enforcement units, policy makers, and AML/CFT professionals. It will cover significant mechanisms such as risk assessments, Compliance tools, Corporate Governance, Customer Due Diligence, Know Your Customer Principles, and several other preventive measures. The research project finishes with a conclusion.
2. What is money laundering and where does it come from?
The term money laundering was for a long time connected to narcotic-related criminal activities. Since 2001, the focus has been shifted to terrorist financing and lately increasingly to cyber-attacks and other illegal generated incorporate funds. Money laundering in relation to taxation-related issues represents one of the most complex areas due to individual financial crime regulations depending on the country’s legislation. This includes the differentiation of tax avoidance and tax evasion. The former is generally not illegal unless it is considered abusive, while the latter is illegal. Any hidden transactions of funds generated through tax evasion, can then be considered as money laundering (Cox 2014: 5).
The idea of money laundering is reasonably straightforward. Ill-gotten gains, whether acquired through narcotic-related or any other types of fraudulent activities, are disguised to prevent people’s understanding that they are the outcome of illegitimate activities. Overcoming this obstacle means hiding that the entire proceeds emanated from the original source to the implementation into the legitimate business cycle (Cox 2014: 7).
2.1. The origin and history of money laundering
Taking Sterling Seagrave’s book “Lords of the Rim” from 1996 into consideration, it indicates that the history of the money laundering procedure goes even back to ancient times some 2000 years before Christ. Chinese merchants, who were under threat of rulers confiscating their large amount of money or assets, started hiding their wealth by simply moving and investing it into businesses or assets in remote areas or even outside the country (Morris-Cotterill 1999).
The probably most common explanation of its origin is when Al Capone, an infamous mobster of the Italian-American La Cosa Nostra in the 1930’s, funnelled illicitly-obtained money through his legitimate businesses. A key fact of this analogy was, that he used mostly laundries operated by coins to disguise the money which he originally generated by extortion, prostitution, or gambling. His fellow mobster, Meyer Lansky developed later a more sophisticated money laundering method by simply transporting the cash from the United States to Switzerland and loaning it back to entities owned or controlled by the La Cosa Nostra syndicate (Turner 2011: 3).
In 1972 the term ‘money laundering’ as well as ‘follow the money’ became public through the ‘Watergate’ affaire that ultimately cost then US-President Richard Nixon his job. It involved a complex money laundering scheme which caused a major political scandal between 1972 and 1974 (Madinger 2016: 15).
In the 1980’s during the ‘war on drugs’ involving the South-American drug cartels, anti-money laundering initiatives became the core fight against organised crime syndicates. The main actor back then was the Colombian drug lord, narco-terrorist and the wealthiest criminal in history Pablo Escobar, whose cartel supplied an estimated 80% of the cocaine smuggled into the United States. A time where it was not unusual for drug trafficker to just deposit large amounts of cash into a bank account (Ferragut 2012: 2).
Ever since the 9/11 terrorist attacks on the United States that killed almost 3,000 people, terrorist financing has been brought sharply into focus. Several international agreements and treaties have labelled terrorist financing as a serious crime, which imposed general and permanent obligations on all states. The event shifted significantly the attention from anti-money laundering policies against organised drug crime syndicates to terrorist financing, which has become a major concern for many governments and citizens globally (Roach 2011: 1).
Most recently, money laundering has been amplified with the leaks of the Panama Papers. It showed the hidden depth of the offshore world and the unscrupulous exploitation on tax havens. However, it was not only a matter of tax evasion of wealthy individuals or international companies but the services of the law firm Mossack Fonseca were also linked to terrorist groups, international arm dealers and several organised crime syndicates (European Parliament 2016).
2.2. International legislations and policy-makers
As already mentioned the fight against money laundering originally started as a response to the increasing narcotic industry. Therefore, most of the original legislations were concentrated on narcotic-groups. Nowadays, it has a much broader focus including terrorist financing and other funds related to any other major crime act (Cox 2014: 6).
One of the most leading policy-making and standard setting body is the Financial Action Task Force (FATF) established in 1989 by the Ministers of its Member jurisdictions of the G7 Group. The inter-governmental agency has developed about 40 recommendations for the implementation of legal, regulatory, and operational measures combating money laundering, terrorist financing and other related major crimes, which threaten to undermine the integrity of the international financial system. FATF collaborates with other international stakeholders, monitors the progress of the implementation processes, reviews effective AML techniques and promotes further research on new appropriate measures to be adopted globally (FATF 2017a).
Another very recent model is the “Model Provisions for Common Law Legal Systems on Money-Laundering, Terrorist Financing, Preventive Measures and the Proceeds of Crime” introduced in 2009 by the United Nations Office on Drugs and Crime (UNODC) in collaboration with the International Monetary Fund (IMF), Commonwealth Secretariat and several other individual experts from common law countries (UNODC 2011).
The included working tools for member states set new effective international standards and is accompanied by the UNODC’s “Global Programme against Money-Laundering, Proceeds of Crime and the Financing of Terrorism”. It offers, with respect of the FATF recommendations, guidance and assistance for nations in setting up their national legislations complied with the most effective polices and measures for the prevention and detection of money laundering (UNODC 2009: 6).
The European Union 4th Anti-Money Laundering Directive (4th AMLD) was to be implemented by 26 June 2017 by all EU-Member States. The Directive aims for the prevention of money laundering and terrorist financing. Like the UNODC guidelines, the 4th AMLD takes most of the FATF’s recommendations into account to be adopted by companies operating within the European Union (European Parliament 2015).
The Wolfsberg Group is an association of thirteen global banks, inspired by Transparency International to meet in 2000 in Switzerland where it was founded. The association, focusing in financial crime risks, develops regularly policies on Know Your Customer, AML, and Counter Terrorist Financing, designed for the management of financial institutions (The Wolfsberg Group 2017b).
Abbildung in dieser Leseprobe nicht enthalten
Figure 1 - The thirteen global banks of the Wolfsberg Group (The Wolfsberg Group 2017b)
Some content of the regulations, recommendations and guidelines will be further and more detailed analysed in chapter 5 dealing with the prevention of money laundering.
2.3. Law enforcement agencies and competent authorities
Interpol’s role in the global combat of money laundering is to exchange data, support ongoing operations and bring various experts in the field together. Moreover, the organisation collaborates with other international organisations to increase the awareness of the relevance of promoting financial investigative techniques against organised crime groups and terrorism. Recent resolutions encouraged many countries to adopt their legislation in that manner, so that the police force was able to access the financial records of organised crime groups as well as to identify, trace and seize their assets eventually (Interpol 2017a).
A similar perspective follows Europol, headquartered in The Hague, by assisting the EU Member States in combating serious international crime and terrorism. The agenda includes large-scale criminal and terrorist networks undermining the internal security of the EU by terror attacks, human trafficking, drug trafficking, money laundering, organised crime, fraud, or cybercrime. Europol’s core objectives serve as a support for law enforcement operations, hub for information and analysis on criminal activities as well as centre for law enforcement expertise (Europol 2017b).
Both agencies collaborate worldwide with domestic federal police units such as the American Federal Bureau of Investigation (FBI), the British National Crime Agency (NCA) or the German Bundeskriminalamt (BKA). The Egmont Group, a united body of 156 Financial Intelligence Units (FIUs), represents a vital link between law enforcement and competent authorities for the combat against money laundering and terrorist financing. The organisation provides a platform for secure exchange of expertise and financial intelligence to promote national and international efforts for implementing global Anti-Money-Laundering and Counter Financing of Terrorism (AML/CFT) standards. FIUs of each nation are obliged to exchange information and engage international cooperation, which The Egmont Group oversees and facilitates as a governing body (The Egmont Group 2017).
Financial Intelligence Units serve as a national hub for the receipt of suspicious transactions reports on the one hand and the analysis of all information relevant to money laundering or terrorist financing on the other. The FIU collaborates with the reporting institution as well as law enforcement agencies and investigative authorities. With accordance to the FATF’s 40 recommendations law enforcement agencies should constantly take actions like undercover operations, intercepting communication as well as accessing computer systems and controlled delivery.
These investigative techniques, including the access on all relevant information held by the FIU and the process of identifying assets without prior notification to the owner, will ensure effective mechanisms for successful investigation on money laundering and terrorist financing. In addition, maintaining comprehensive statistics on AML/CFT matters, providing guidance and feedback for assisting financial institutions and non-financial businesses as well as accomplishing proportionate and dissuasive sanctions through prosecutions and convictions are further effective tools (FATF 2012-2017: 23).
All authorities publish regularly Police Crime Statistics, Annual Reports or Situation Assessments and play, therefore, a significant role in receiving valuable information on facts, figures, and trends on major crimes.
2.4. The money laundering circle
In general, money launderers are always prioritising safety and secrecy. They prefer the method which involves a process with low risks of loss or disclosure. Another significant fact is, that some part of the laundered funds may be hidden for a certain period, but the main purpose of the method is to make the funds publicly usable. Therefore, the mechanism need to involve legitimate types of transactions, which will be demonstrated in this chapter dividing the money laundering circle into the ‘placement’, ‘layering’ and ‘integration’ phase, as figure 2 illustrates (Turner 2011: 7).
Abbildung in dieser Leseprobe nicht enthalten
Figure 2 - The Money Laundering Cycle (Schott 2006: 8)
2.4.1. Placement
The placement phase is the first stage, where the illegal funds are introduced into the system. During this phase, it is the most likely chance for authorities to detect the money laundering process. At this stage, the launderer must incur certain fees and costs to disguise the original source of the funds. This illustrates how lucrative this business is for any other participant involved, which will be discussed more detailed in chapter 3. In this situation, it is essential that financial institutions act diligently, when suspicious transactions appear. On that part, the principles of Know Your Customer and Customer Due Diligence become crucial.
However, this is a critical point, because it depends on the staff of the financial institutions, which have certain sales goals to achieve. Yet, a money launderer will not always move the cash into a bank. This can also be done by buying physical assets, which can be then, by selling them subsequently, transferred into cash which would seem to be legitimate.
To give further illustrations, a launderer will always seek for opportunities with the least obvious controls such as purchasing new or second-hand cars, paintings, chips at a casino or for instance investment products (Cox 2014: 8-17).
2.4.2. Layering
Following from that, the layering phase will disguise the proceeds of the crime with the objective to make the original source or current position of the funds look indistinct. A sophisticated launderer will move the funds through a high complex scheme which include several accounts of various jurisdictions and companies to blur the trail as best as possible. Recent cases have shown that funds “spin up” ten times before entering the banking system. During these phase, there are different levels of risks for the money launderer to consider.
The acquisition of antiques or paintings can be undertaken privately with low risk and mostly without any formal records. Besides this the buyer could claim the acquisition as inherited from a third party. With the support of layers and solicitors, there are no further obstacles to buy even property despite their actual due diligence obligations regarding the report of money laundering. Similarly, it depends on the legislation and scruples of the lawyer (Cox 2014: 18).
2.4.3. Integration
The final stage is the integration where illegal proceeds are re-integrated into the legitimate financial system and assimilated with other assets. On this occasion, the disguised criminal proceeds will now appear as legitimate funds and can be integrated into the normal economy. Once this was achieved, the launderer can use it for any other purpose.
There are several different ways to integrate the money into the normal economy. Main objective is not to cause any suspicion. Most money launderers fail by too conspicuous lifestyles or by abusing schemes of money laundering processes due to greedy behaviour for example. To illustrate some of the integration methods, there is the method of opening a shell bank owned by the money launderers. Despite increasing jurisdictional rules regarding the ownership of shell banks, it is still one of the simplest ways to transfer money to a legitimate bank.
Also, money launderers may sell assets privately or in an open market. The transaction will appear ideally electronically on a legitimate bank statement (Cox 2014: 18).
An example shows, that money launderers contacted law firms asking for advice. The criminal will first pay a large fee upfront but will claim a week later or so that the ongoing case was settled. The funds of the cancelled contract will be then asked to be returned to a legitimate bank account (Telegraph 2017a).
Another effective technique is the use of trading accounts of financial institutions. The return of the trade funds can be claimed as legitimate earnings. A more complex method on a more international level is to open anonymous companies in foreign countries with a guarantee of secrecy. Within these frameworks of companies, loans can be granted to each other as a legal transaction (Cox 2014: 18-19).
2.4.4. The role of cryptocurrencies
It is believed that cryptocurrencies such as Bitcoins, Ethereum and other digital forms of money appear to be the new future threat to the global economy in terms of money laundering methods (EconoTimes 2017). The negative aspect of the dark web is criminals paying in virtual currencies and making it difficult for law enforcement bodies to investigate.
The fact, that using Bitcoin as an encrypted virtual currency and ‘The Onion Router’ (TOR) as a web browser hiding a user’s IP address provide a great opportunity to launder funds in total anonymity. This method has outsmarted all efforts of law enforcement authorities, regulators, and AML professionals.
The only limitation on that method is, that virtual currencies can just be used on a small number of places. However, this will change soon with companies such as BitPay, Coinbase or Braintree processing virtual currencies for merchant payments.
It will reduce the traditional three stage money laundering circle into one step method by simply loading multiple prepaid credit cards with illicit cash, using for the purchase of bitcoins, and buying then goods and services online. It will challenge the ability of investigators following the trail of the criminal proceeds (Fraud Magazine 2016).
However, the European Union’s report indicates that ‘traditional’ organised crime syndicates find it difficult to use virtual currencies for evil intentions due to the high technology requirements for now. Nevertheless, this will not always be the case. Therefore, it is crucial to act as soon as possible to keep up with modernised methods (EUROPEAN COMMISSION 2017: 87).
2.5 The Differences between Money Laundering & Terrorist Financing
The idea of terrorist financing is the same, however the main difference between both is, that terrorist financing intends to fund mechanisms for terror acts by people who share the same political ideologies. Main goals of terrorist organisations are causing shock, trauma, political communication, financial disruption, and destabilisation of the system. As the following figure shows, practices are nearly the same, yet the intent of the end user is the significant part. However, not always is the source of the funds gained through illegal activities (Turner 2011: 132).
Abbildung in dieser Leseprobe nicht enthalten
Figure 3 – Terrorist financing (Schott 2006: 8)
In relation to the combat of terrorist financing, it is important to understand that the focus is on preventing future terrorist acts from occurring whereas with combating money laundering, the predicate offence of the criminal party has already occurred. In addition, the size of the funds or transactions are substantially smaller than for example of narco-related ones. This key consideration becomes more vital when deciding the scope of money laundering and terrorist financing risk assessments or addressing the question if it needs to be considered separately or together, which will be discussed later in chapter 5 (FATF 2013: 11). The next figure explains through which channels funds are generated.
Abbildung in dieser Leseprobe nicht enthalten
Figure 4 - Terrorism and Terrorist Financing (FATF 2013: 33)
In this context “hawala banking” (from Arabic, meaning “transfer”) poses a significant challenge to investigators. This alternative unregulated banking method from the Middle East runs in parallel with the established regulated banking system and is legal in some jurisdictions and illegal in others. As the following figure illustrates, it usually involves a person who intends to send money in a foreign currency to another person by using two intermediaries to carry out the business.
Abbildung in dieser Leseprobe nicht enthalten
Figure 5 - Hawala banking (ACFE 2017)
However, like hawala, there are many other banking systems around the world and each of them have a different cultural background such as fei-ch’ien (China), hui kuan (Hong Kong), hundi (India), padala (Philippines) and phei kwan (Thailand). Main advantages of this banking system are having a better exchange rate than the “official” one offers, a fast and convenient transaction process (compared to the regulated banking system) as well as no bureaucracy including little or no paper trail (i.e. it avoids opening a new bank account). The main feature is that it is simply based on trust, the identity of the customer is mostly not revealed, and countries involved have a certain lack of regulated facilities, which makes it even more difficult to detect transactions for terrorist financing reasons (ACFE 2017).
The threat which appears with hawala banking is, that terrorist groups can easily abuse this method to raise funds for maintaining their agenda and territorial strength. As mentioned in the beginning, there are several microfinancing techniques one of which is hawala banking. Although, it has been easier to detect and disrupt underground hawala networks in the European Union, the Islamic State is recently transferring funds through multiple networks, established throughout Iraq, Syria and beyond. Having infrequent or no access to international financial institutions, the Islamic State relies increasingly on hawala banking. A prominent example of such a massive, secret hawala underground network was an investigation in 2015 on 300 hawaladars with clandestine offices in Spain through 250 telephone call centres, grocery stores and butcher shops. Having managed the savings of over 150,000 Muslims, many of whom received social welfare payments from the Spanish government without any legal oversight, the money was allegedly used to pay Spanish jihadists in Syria. The network paid $1,200 to married persons and $800 to singles. This shows, that there is a number of reasons to focus more on microfinancing schemes. On the other hand, it also provides valuable insight into the web of the Islamic State’s transnational networks and local recruitment/facilitation focal points (Ranstorp 2016).
3. Who is involved?
Following from the professional launderer’s approach, it can be differed between ‘self-employed’, also considered as initiators or originators as well as ‘service-providers’, also called facilitators. The first group seeks to launder funds for their own use whereas service-providers supply initiators with commercial services for their demanded needs. Among initiators, there can be various people or entities with various objectives. However, as already mentioned, in this case it will be focused on organised crime and terrorist groups, because they represent a major concern for the prevention of money laundering and terrorist financing. Apart from that, it is crucial to understand why people launder money and why service-providers offer assistance simply because it is a profitable business (Turner 2011: 4-5).
3.1. Initiators
Nowadays, the initial drive of AML/CFT legislations are mainly to combat organised crime and terrorism. However, there are significant differences of the understanding of such illegal activities in most countries. Therefore, it is essential to define organised crime and terrorist groups to provide a better overview first. Besides, it illustrates the relevance why the underworld threatens to undermine society so significantly (Cox 2014: 8).
3.1.1. Definitions of transnational organised crime
The significance of transnational organised crime (TOC) is, that it transcends cultural, social, linguistic, and geographical borders. It has never been so flexible, sophisticated, and diversified. TOC has gone global and achieved macro-economic proportions. With its power it can infiltrate government agencies or institutions, business and politics and has a significant impact on corruption as well as hindering social and economic development (UNODC 2017b). The UNODC defines TOC groups as follows:
Abbildung in dieser Leseprobe nicht enthalten
Figure 6 - The UNODC's definition of TOC (UNODC 2017b)
The FBI classifies the most significant key areas of TOC enterprises including sophisticated organisations (i.e., mafia), drug organisations, motorcycle gangs or street gangs as follows:
Abbildung in dieser Leseprobe nicht enthalten
Figure 7 - Key Areas of TOC - (FBI 2017b)
TOC groups are believed to adopt and integrate new technologies into their undertakings. In addition, technology has become a fundamental and lasting tool for them. In the Serious and Organised Crime Threat Assessment (SOCTA) 2017 of Europol it is suggested that document fraud, money laundering and the online trade in illicit goods and services are considered as the main engines of TOC as the following figure shows.
[...]
- Citar trabajo
- Mick Still (Autor), 2018, The Impact of Money Laundering on Organised Crime and Terrorism, Múnich, GRIN Verlag, https://www.grin.com/document/497999
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