Money laundering

Contemporary Review, June, 2002 by Keith Suter

At a deeper level, the issue involved is national sovereignty. This works for the benefit of the criminals and against the honest citizens. Thus, international co-operation needs more creative thinking. First, there has to be an improvement in the sharing of information between national police systems. The risk here of course is that wealthy criminals can offer bribes to the police to get access to inside information on the current detection operations -- but that is a risk that has to be taken. Second, there should be standard legal procedures across national boundaries so that evidence collected in one country is admissible in the court of another country. Third, there need to be better witness protection programmes. Fourth, there should be the waiver of bank-secrecy arrangements. Finally, perhaps eventually the International Criminal Court, which is about to come into operation, could expand its ambit to include these crimes.

A large proportion of money laundering activities involve innocent parties who are just doing their daily job unaware of their role in a crime. Here are some ideas for people working in the banking system and elsewhere on how to minimize the risk of being caught up in money laundering. First, 'know your customer'. This means that financial institutions and others should know the identities of their customers and do not, by allowing anonymous or false names dealings, facilitate crime or impede law enforcement and revenue efforts. Second, always regard with suspicion a request by a client to preserve their anonymity.

Third, avoid association with any arrangement that involves the misrepresentation of the true nature of a transaction, the true source of funds, or the true ownership of an asset. Finally, be wary of all large cash transactions from persons or companies that are not known to you or your company. Request that the transaction be done via a bank cheque.

These are all basic commonsense ideas. But, as the majority of honest staff and customers at the Bank of Credit and Commerce International found to their cost, it is easy to fall victim to money laundering.

To sum up, money laundering is part of the downside of the globalization process. The same attributes of globalization, more open borders, increased volume of international trade, advances in technology and communications that have benefited developed countries, have also facilitated the growth of international crime, such as money laundering. Globalization presents the opportunity for domestic crime to transform itself into an international security issue. Organized crime, drug trafficking and money laundering are not new in themselves. What is new is the expanding scale of those operations; the ability of such operations to threaten important national and international interests; and the increasing complexity of responding to international criminal activity.

As with so many other aspects of the globalization process, the international community has been slow to respond or even to understand what has been happening. However, there are now some signs of progress being made.