Ukraine in February 2010 could be again included on the FATF blacklist (the Financial Action Task Force), if it does not approve a new basic profile law by December 31, according to a statement posted on the Web site of the State Committee for Financial Monitoring of Ukraine.
"In spite of the seven-year active work of the Ukrainian government and the parliament and the long-awaited approval of a new basic law by 393 people's deputies in November 2009, Ukraine has been included in 25 countries, which have a real chance of getting outside the civilized financial world and feel the burden of fines," the statement reads.
According to the committee, the risks grew as the Ukrainian president had vetoed the new edition of a law on opposing money laundering and financing terrorism.
As reported, the Verkhovna Rada, Ukraine's parliament, on November 6 amended the law on money laundering, significantly expanding the list of subjects to be monitored first. The Association of Ukrainian Banks called to veto the law, considering its points to contradict a number of articles of the Constitution of Ukraine.
The Ukrainian president vetoed the law on December 8. According to the head of state, the law empowers the State Committee for Financial Monitoring with too much authority to collect information. According to the president'sestimation, such authority does not meet the realistic needs for fighting economic crime and financing terrorism.
Source: The Kyiv Post
Showing posts with label Ukraine. Show all posts
Showing posts with label Ukraine. Show all posts
on Wednesday, June 13, 2012
An organized crime group has been uncovered in Ukraine. Its members, Latvian citizens, were laundering money through multi-million public procurements. However, they still have not been taken into custody and no charges have been pressed against them.
The purchase of the rig was conducted via a fixed tender. Two offshore companies, headed by Latvian citizens Stanislavs Gorins and Eriks Vanagals, offered the rig at exorbitant prices.
Vanagels is connected with the company Stabu 58, which belongs to former security service employees. The company used to earn money by storage of cars seized from intoxicated drivers.
The Ukrainian press informs that the money laundering scheme included not only 71-year-old Vanagel, but also his 44-year-old son.
"Neka personiga" met with Gorins at his office in Riga. The Insurance broker claims that he is not familiar with Vanagels and has no idea who is using his signature on the offshore companies' documents.
Even though it is still not clear whether these persons are capable of implementing such a large-scale money laundering affair, "Business New Europe" reporters have revealed that there are links between Gorins and Vanagels, and both Latvians also had other successful deals in Ukraine.
Source: The Baltic Course
on Saturday, June 9, 2012
The president's veto of the law on opposing money laundering is leading Ukraine to the blacklist of the FATF (the Financial Action Task Force), according to a statement by Ihor Cherkassky, the head of the State Committee for Financial Monitoring of Ukraine, the text of which has been sent to Ukraine.
"Ukrainian President Viktor Yuschenko gave an original "present" to the financial system of Ukraine, having used his right of veto on the law on fighting money laundering and financing terrorism. By his actions, the head of state has brought Ukraine before the so called blacklist of the FATF," the statement reads.
According to the statement, the approval of the corresponding law represented the fulfillment of the obligations Ukraine undertook before the FATF and the international community.
"The fact Ukraine succeeded in persuading international organizations about its ability to approve such a law, which would meet all of the challenges of the modern world, gave the possibility to take our state off the blacklist of the FATF in 2004, and in 2006 to stop the procedure of active monitoring," Cherkassky said.
The statement reads that the Ukrainian parliament approved new wording of the law on Nov. 6.
"While imposing the veto, it was even not taken into consideration that in June 2009, the FATF introduced strict demands on countries, and included our state on a preliminary list of high risk countries," the statement reads.
According to the statement, the only was to avoid Ukraine being put onto the blacklist is for a parliament mission to submit a new law to the FATF European Control Group by Dec. 10.
Source: The Kyiv Post
"Ukrainian President Viktor Yuschenko gave an original "present" to the financial system of Ukraine, having used his right of veto on the law on fighting money laundering and financing terrorism. By his actions, the head of state has brought Ukraine before the so called blacklist of the FATF," the statement reads.
According to the statement, the approval of the corresponding law represented the fulfillment of the obligations Ukraine undertook before the FATF and the international community.
"The fact Ukraine succeeded in persuading international organizations about its ability to approve such a law, which would meet all of the challenges of the modern world, gave the possibility to take our state off the blacklist of the FATF in 2004, and in 2006 to stop the procedure of active monitoring," Cherkassky said.
The statement reads that the Ukrainian parliament approved new wording of the law on Nov. 6.
"While imposing the veto, it was even not taken into consideration that in June 2009, the FATF introduced strict demands on countries, and included our state on a preliminary list of high risk countries," the statement reads.
According to the statement, the only was to avoid Ukraine being put onto the blacklist is for a parliament mission to submit a new law to the FATF European Control Group by Dec. 10.
Source: The Kyiv Post
on Wednesday, May 16, 2012
By Xu Binlan (China Daily)
Updated: 2004-12-25 00:04
China plans to work closer with other countries as it ups the ante in the fight against money laundering and terrorism funding.
The country, a founding member of the Euro-Asian Group on Combating Money-Laundry and Financing of Terrorism (EAG), is playing a very active role promoting co-operation among EAG members, said Ling Tao, director of the Bank of China's bureau in charge of countering money laundering.
The EAG, established in October 2004, also includes Russia, Ukraine, Belarus, Kyrghizstan and Tajikistan.
Ling said the country is applying for membership at the Financial Action Task Force on Money Laundering (FATF), a major intergovernmental organization launched in 1989 by the Group-7 Summit.
"We always have an open, pragmatic attitude in multilateral and bilateral co-operation in the fight against money laundering," he said.
On the home front, Ling said China puts priority on improving its legal system as well as monitoring, analysis and law enforcement systems.
Resources will also go towards building a professional team to fight laundering, which is always linked to other crimes, he said.
In China, it is mostly related to smuggling, drug trafficking and terrorism.
Some estimates peg the amount of money laundered in the country at US$20 billion every year.
However, legal experts said the country's definition of money laundering is too narrow to deal with increasingly sophisticated operations.
To address this problem, the nation's law-making body, the National People's Congress, set up a team to draft a new law in March 2004.
Ling, whose bureau co-ordinates anti-money laundering efforts at the central government, said 23 related government departments have been mobilized to play a part in the fight.
The next step will be to enhance inter-provincial co-operation, he said.
Banking, securities, real estate and insurance have been marked as sensitive sectors.
Law firms, accounting firms and jewellery companies are also in the list of places that need to be scrutinized, he said.
The People's Bank of China in 2003 issued regulations on reporting of suspicious transactions by financial institutions. The regulations mainly affect banks.
Ling said similar regulations and monitoring systems will be developed for other sensitive sectors.
According to Ling, authorities are paying close attention to key cities such as Shanghai and Shenzhen and major areas like Southwest China's Yunnan Province and Northwest China's Xinjiang Uygur Autonomous Region.
Source: China Daily
Updated: 2004-12-25 00:04
China plans to work closer with other countries as it ups the ante in the fight against money laundering and terrorism funding.
The country, a founding member of the Euro-Asian Group on Combating Money-Laundry and Financing of Terrorism (EAG), is playing a very active role promoting co-operation among EAG members, said Ling Tao, director of the Bank of China's bureau in charge of countering money laundering.
The EAG, established in October 2004, also includes Russia, Ukraine, Belarus, Kyrghizstan and Tajikistan.
Ling said the country is applying for membership at the Financial Action Task Force on Money Laundering (FATF), a major intergovernmental organization launched in 1989 by the Group-7 Summit.
"We always have an open, pragmatic attitude in multilateral and bilateral co-operation in the fight against money laundering," he said.
On the home front, Ling said China puts priority on improving its legal system as well as monitoring, analysis and law enforcement systems.
Resources will also go towards building a professional team to fight laundering, which is always linked to other crimes, he said.
In China, it is mostly related to smuggling, drug trafficking and terrorism.
Some estimates peg the amount of money laundered in the country at US$20 billion every year.
However, legal experts said the country's definition of money laundering is too narrow to deal with increasingly sophisticated operations.
To address this problem, the nation's law-making body, the National People's Congress, set up a team to draft a new law in March 2004.
Ling, whose bureau co-ordinates anti-money laundering efforts at the central government, said 23 related government departments have been mobilized to play a part in the fight.
The next step will be to enhance inter-provincial co-operation, he said.
Banking, securities, real estate and insurance have been marked as sensitive sectors.
Law firms, accounting firms and jewellery companies are also in the list of places that need to be scrutinized, he said.
The People's Bank of China in 2003 issued regulations on reporting of suspicious transactions by financial institutions. The regulations mainly affect banks.
Ling said similar regulations and monitoring systems will be developed for other sensitive sectors.
According to Ling, authorities are paying close attention to key cities such as Shanghai and Shenzhen and major areas like Southwest China's Yunnan Province and Northwest China's Xinjiang Uygur Autonomous Region.
Source: China Daily
on Tuesday, May 8, 2012
Ukraine's military might is damaged by selling armament to Georgia below the market price, the parliament's investigating body says.
"Arms were being supplied for less than fair value, and even that cash wasn't reaching the country's budget," said Valery Konovalyuk, the director of the investigation commission of the Ukraine's Supreme Rada (parliament), the Russia Today reported on its website.
Kyiv has been accused of secretly stuffing Tbilisi's arms caches with the weapons prior to and immediately after Georgia's attack on South Ossetia in southern Caucasus.
The Party of the Regions, Ukraine's pro-Russian opposition party, lobbied for creation of a fact-finding body to investigate the allegations. The party has been a vocal critic of Kyiv for supporting the Georgian invasion, which 'forced' a stiff response from Russia.
Konovalyuk, who heads the fact-finding investigation, said that over four years, USD 2.5 billion worth of weaponry and ammunition were shipped to Georgia, but the Ukraine government has only received USD 200 million.
“The money was laundered through short-lived stooge firms,” the official said.
The practice went on for years thanks to the involvement of President Viktor Yushchenko who had "forced those officials to take steps" in violation of the Ukrainian legislation.
The president is also accused of allegedly depriving the country of the much-needed weaponry, to provide arms for Georgia.
The commission has also asked permission for looking into the large-scale arms shipment by the Ukrainian freighter MV Faina which was intercepted by the Somali pirates off the Horn of Africa in September.
“We are on the verge of a huge political scandal that could have immense political repercussions,” Konovalyuk was earlier quoted by The New York Times as saying on the matter.
Source: Press TV - Iran
"Arms were being supplied for less than fair value, and even that cash wasn't reaching the country's budget," said Valery Konovalyuk, the director of the investigation commission of the Ukraine's Supreme Rada (parliament), the Russia Today reported on its website.
Kyiv has been accused of secretly stuffing Tbilisi's arms caches with the weapons prior to and immediately after Georgia's attack on South Ossetia in southern Caucasus.
The Party of the Regions, Ukraine's pro-Russian opposition party, lobbied for creation of a fact-finding body to investigate the allegations. The party has been a vocal critic of Kyiv for supporting the Georgian invasion, which 'forced' a stiff response from Russia.
Konovalyuk, who heads the fact-finding investigation, said that over four years, USD 2.5 billion worth of weaponry and ammunition were shipped to Georgia, but the Ukraine government has only received USD 200 million.
“The money was laundered through short-lived stooge firms,” the official said.
The practice went on for years thanks to the involvement of President Viktor Yushchenko who had "forced those officials to take steps" in violation of the Ukrainian legislation.
The president is also accused of allegedly depriving the country of the much-needed weaponry, to provide arms for Georgia.
The commission has also asked permission for looking into the large-scale arms shipment by the Ukrainian freighter MV Faina which was intercepted by the Somali pirates off the Horn of Africa in September.
“We are on the verge of a huge political scandal that could have immense political repercussions,” Konovalyuk was earlier quoted by The New York Times as saying on the matter.
Source: Press TV - Iran
on Thursday, April 5, 2012
The Council of Europe's Committee of experts on the evaluation of anti-money laundering measures and the financing of terrorism (MONEYVAL) is satisfied with the efforts made by the Ukrainian authorities to combat money laundering and the financing of terrorism, the press service of Ukraine's State Financial Monitoring Committee (SFMC) reported on Tuesday.
As SFMC Chief Ihor Cherkassky said, the assessment of Ukraine's achievements by the CE Committee has confirmed the considerable progress made by the Ukrainian state in that field.
"Ukraine has managed to create a really effective and modern system, which has become a reliable tool in fight against economic crimes," he said.
The report on Ukraine's anti-money laundering and combating the financing of terrorism covered the end of 2008. It was adopted by MONEYVAL at its 29th plenary meeting in Strasbourg on March 16-20, 2009.
The report sets out Ukraine's levels of compliance with the FATF [Financial Action Task Force] 40 plus 9 Recommendations. The evaluation also includes Ukraine's compliance with Directive 2005/60/EC of the European Parliament and of the Council of October 26, 2005, on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and the Commission Directive 2006/70/EC of August 1, 2006 laying down implementing measures for Directive 2005/60/EC of the European Parliament and of the Council as regards the definition of 'politically exposed person' and the technical criteria for simplified customer due diligence procedures and for exemption on grounds of a financial activity conducted on an occasional or very limited basis.
The experts highly estimated the performance of the appropriate structure of the Ukrainian financial intelligence, its high professional standards, which is the result of the financial intelligence departments' membership of international organizations. Currently, the SFMC is the full-fledged national center for collecting and analyzing information about suspicious financial operations.
Source: KyivPost
As SFMC Chief Ihor Cherkassky said, the assessment of Ukraine's achievements by the CE Committee has confirmed the considerable progress made by the Ukrainian state in that field.
"Ukraine has managed to create a really effective and modern system, which has become a reliable tool in fight against economic crimes," he said.
The report on Ukraine's anti-money laundering and combating the financing of terrorism covered the end of 2008. It was adopted by MONEYVAL at its 29th plenary meeting in Strasbourg on March 16-20, 2009.
The report sets out Ukraine's levels of compliance with the FATF [Financial Action Task Force] 40 plus 9 Recommendations. The evaluation also includes Ukraine's compliance with Directive 2005/60/EC of the European Parliament and of the Council of October 26, 2005, on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing and the Commission Directive 2006/70/EC of August 1, 2006 laying down implementing measures for Directive 2005/60/EC of the European Parliament and of the Council as regards the definition of 'politically exposed person' and the technical criteria for simplified customer due diligence procedures and for exemption on grounds of a financial activity conducted on an occasional or very limited basis.
The experts highly estimated the performance of the appropriate structure of the Ukrainian financial intelligence, its high professional standards, which is the result of the financial intelligence departments' membership of international organizations. Currently, the SFMC is the full-fledged national center for collecting and analyzing information about suspicious financial operations.
Source: KyivPost
on Sunday, February 26, 2012
The traffic of heroin is the main criminal activity in the so-called South East criminal hub in Europe, according to the Europol Report.
Europol, or the European Police Office, released their Europol Organized Crime Threat Assessment (OCTA) in which the criminal activities on the old continent are divided in five hubs where the hub is a conceptual entity that is generated by a combination of factors such as proximity to major destination markets, geographic location, infrastructure, types of organized crime groups and migration processes concerning key criminals or organized crime groups in general.
The OCTA is an assessment of current and expected trends in organized crime affecting the EU and its citizens. Based on analysis Europol assess that the most significant criminal sectors now are drug trafficking, human trafficking, illegal immigration, fraud, counterfeiting and money laundering.
Bulgaria falls within the South East hub where the “Balkan route” from Turkey to the EU is used for heroin traffic by Turkish criminals, often in cooperation with Bulgarian crime groups.
“The South East criminal hub is based upon its geographical location between Asia and Europe. Logistically, the importance of the Black Sea and related waterways define the hub and will create opportunities for both legal trade and organized crime. Opiates reach Europe through the Balkan routes and the Northern Black Sea route across Central Asia and Russia. The significance of the port of Constanta in cocaine traffic is growing, and cocaine seems to be increasingly arriving into the EU via Turkey and/or the Balkans. This may also be the effect of the already well-established role of West Africa as a transit zone,” the report reads.
Bulgarians and Serbians also play key role in the traffic of synthetic drugs to the Middle East. Nigerian criminal groups, residing in Bulgaria, are in constant touch with such Nigerian groups in Italy providing cocaine for the Italian market, Europol notes.
In addition to synthetic drugs Bulgaria plays a key role in the distribution of counterfeit EUR bills and fake bank debit and credit cards.
The Southeastern hub is also very active in cigarettes contraband from the Ukraine and Moldova to the EU. In addition, the Ukraine is a transit center for cocaine, human trafficking and illegal immigrants through Albania, Serbia, Kosovo, Monte Negro and Macedonia to the EU.
The other hubs are:
1) The North West criminal hub. It is a distribution centre for heroin, cocaine, synthetic drugs and cannabis products. Its influence extends to the UK, Ireland, France, Spain, Germany and the Baltic and Scandinavian countries.
2) The South West criminal hub. The impact of this market is felt especially in the criminal markets of cocaine, cannabis, trafficking in human beings and illegal immigration. West and North West Africa as well as other parts of this continent have emerged as significant feeders for either the South West criminal hub or, increasingly, directly to important markets and distribution centers in the EU.
3) The North East criminal hub. This area is and will continue to be strongly influenced by feeders and transit zones located just outside the eastern EU borders (the Russian Federation/Kaliningrad, the Ukraine and Belarus). Illicit flows may be traced from the East towards the West (women for sexual exploitation, illegal immigrants, cigarettes, counterfeit goods, synthetic drugs precursors and heroin) but also vice versa (cocaine and cannabis products).
4) The Southern criminal hub. The role of this hub is central in relation to cigarette smuggling, the smuggling and distribution of counterfeit products and the production of counterfeit EUR bills.
Source: Novinite
Europol, or the European Police Office, released their Europol Organized Crime Threat Assessment (OCTA) in which the criminal activities on the old continent are divided in five hubs where the hub is a conceptual entity that is generated by a combination of factors such as proximity to major destination markets, geographic location, infrastructure, types of organized crime groups and migration processes concerning key criminals or organized crime groups in general.
The OCTA is an assessment of current and expected trends in organized crime affecting the EU and its citizens. Based on analysis Europol assess that the most significant criminal sectors now are drug trafficking, human trafficking, illegal immigration, fraud, counterfeiting and money laundering.
Bulgaria falls within the South East hub where the “Balkan route” from Turkey to the EU is used for heroin traffic by Turkish criminals, often in cooperation with Bulgarian crime groups.
“The South East criminal hub is based upon its geographical location between Asia and Europe. Logistically, the importance of the Black Sea and related waterways define the hub and will create opportunities for both legal trade and organized crime. Opiates reach Europe through the Balkan routes and the Northern Black Sea route across Central Asia and Russia. The significance of the port of Constanta in cocaine traffic is growing, and cocaine seems to be increasingly arriving into the EU via Turkey and/or the Balkans. This may also be the effect of the already well-established role of West Africa as a transit zone,” the report reads.
Bulgarians and Serbians also play key role in the traffic of synthetic drugs to the Middle East. Nigerian criminal groups, residing in Bulgaria, are in constant touch with such Nigerian groups in Italy providing cocaine for the Italian market, Europol notes.
In addition to synthetic drugs Bulgaria plays a key role in the distribution of counterfeit EUR bills and fake bank debit and credit cards.
The Southeastern hub is also very active in cigarettes contraband from the Ukraine and Moldova to the EU. In addition, the Ukraine is a transit center for cocaine, human trafficking and illegal immigrants through Albania, Serbia, Kosovo, Monte Negro and Macedonia to the EU.
The other hubs are:
1) The North West criminal hub. It is a distribution centre for heroin, cocaine, synthetic drugs and cannabis products. Its influence extends to the UK, Ireland, France, Spain, Germany and the Baltic and Scandinavian countries.
2) The South West criminal hub. The impact of this market is felt especially in the criminal markets of cocaine, cannabis, trafficking in human beings and illegal immigration. West and North West Africa as well as other parts of this continent have emerged as significant feeders for either the South West criminal hub or, increasingly, directly to important markets and distribution centers in the EU.
3) The North East criminal hub. This area is and will continue to be strongly influenced by feeders and transit zones located just outside the eastern EU borders (the Russian Federation/Kaliningrad, the Ukraine and Belarus). Illicit flows may be traced from the East towards the West (women for sexual exploitation, illegal immigrants, cigarettes, counterfeit goods, synthetic drugs precursors and heroin) but also vice versa (cocaine and cannabis products).
4) The Southern criminal hub. The role of this hub is central in relation to cigarette smuggling, the smuggling and distribution of counterfeit products and the production of counterfeit EUR bills.
Source: Novinite
on Wednesday, February 22, 2012
A reputed Russian organized crime figure long sought in a 1990s fraud case involving a Philadelphia-area company has been placed on the FBI's ten most wanted list.
The FBI said Thursday that 63-year-old Semyon Mogilevich is wanted for alleged involvement in racketeering, fraud, and money laundering. Authorities consider him armed and dangerous.
Federal authorities in 2003 accused the Ukrainian-born Russian citizen of a massive scheme to defraud thousands of investors in the stock of YBM Magnex, headquartered in Newtown, Bucks County. Authorities say investors lost more than $150 million before trading of company stock was suspended in May 1998.
In July, Mogilevich was released from pretrial detention in Moscow, 18 months after his arrest on tax evasion charges.
Source: Philly
The FBI said Thursday that 63-year-old Semyon Mogilevich is wanted for alleged involvement in racketeering, fraud, and money laundering. Authorities consider him armed and dangerous.
Federal authorities in 2003 accused the Ukrainian-born Russian citizen of a massive scheme to defraud thousands of investors in the stock of YBM Magnex, headquartered in Newtown, Bucks County. Authorities say investors lost more than $150 million before trading of company stock was suspended in May 1998.
In July, Mogilevich was released from pretrial detention in Moscow, 18 months after his arrest on tax evasion charges.
Source: Philly
on Thursday, February 22, 2007
If you shop with a major bank, chances are that all the transactions in your account are scrutinized by AML (Anti Money Laundering) software. Billions of dollars are being invested in these applications. They are supposed to track suspicious transfers, deposits, and withdrawals based on overall statistical patterns. Bank directors, exposed, under the Patriot Act, to personal liability for money laundering in their establishments, swear by it as a legal shield and the holy grail of the on-going war against financial crime and the finances of terrorism.
Quoted in Wired.com, Neil Katkov of Celent Communications, pegs future investments in compliance-related activities and products by American banks alone at close to $15 billion in the next 3 years (2005-2008). The United State's Treasury Department's Financial Crimes Enforcement Network (finCEN) received c. 15 million reports in each of the years 2003 and 2004.
But this is a drop in the seething ocean of illicit financial transactions, sometimes egged on and abetted even by the very Western governments ostensibly dead set against them.
Israel has always turned a blind eye to the origin of funds deposited by Jews from South Africa to Russia. In Britain it is perfectly legal to hide the true ownership of a company. Underpaid Asian bank clerks on immigrant work permits in the Gulf states rarely require identity documents from the mysterious and well-connected owners of multi-million dollar deposits.
Hawaladars continue plying their paperless and trust-based trade - the transfer of billions of US dollars around the world. American and Swiss banks collaborate with dubious correspondent banks in off shore centres. Multinationals shift money through tax free territories in what is euphemistically known as "tax planning". Internet gambling outfits and casinos serve as fronts for narco-dollars. British Bureaux de Change launder up to 2.6 billion British pounds annually.
The 500 Euro note makes it much easier to smuggle cash out of Europe. A French parliamentary committee accused the City of London of being a money laundering haven in a 400 page report. Intelligence services cover the tracks of covert operations by opening accounts in obscure tax havens, from Cyprus to Nauru. Money laundering, its venues and techniques, are an integral part of the economic fabric of the world. Business as usual?
Not really. In retrospect, as far as money laundering goes, September 11 may be perceived as a watershed as important as the precipitous collapse of communism in 1989. Both events have forever altered the patterns of the global flows of illicit capital.
What is Money Laundering?
Strictly speaking, money laundering is the age-old process of disguising the illegal origin and criminal nature of funds (obtained in sanctions-busting arms sales, smuggling, trafficking in humans, organized crime, drug trafficking, prostitution rings, embezzlement, insider trading, bribery, and computer fraud) by moving them untraceably and investing them in legitimate businesses, securities, or bank deposits. But this narrow definition masks the fact that the bulk of money laundered is the result of tax evasion, tax avoidance, and outright tax fraud, such as the "VAT carousel scheme" in the EU (moving goods among businesses in various jurisdictions to capitalize on differences in VAT rates). Tax-related laundering nets between 10-20 billion US dollars annually from France and Russia alone. The confluence of criminal and tax averse funds in money laundering networks serves to obscure the sources of both.
The Scale of the Problem
According to a 1996 IMF estimate, money laundered annually amounts to 2-5% of world GDP (between 800 billion and 2 trillion US dollars in today's terms). The lower figure is considerably larger than an average European economy, such as Spain's.
The System
It is important to realize that money laundering takes place within the banking system. Big amounts of cash are spread among numerous accounts (sometimes in free economic zones, financial off shore centers, and tax havens), converted to bearer financial instruments (money orders, bonds), or placed with trusts and charities. The money is then transferred to other locations, sometimes as bogus payments for "goods and services" against fake or inflated invoices issued by holding companies owned by lawyers or accountants on behalf of unnamed beneficiaries. The transferred funds are re-assembled in their destination and often "shipped" back to the point of origin under a new identity. The laundered funds are then invested in the legitimate economy. It is a simple procedure - yet an effective one. It results in either no paper trail - or too much of it. The accounts are invariably liquidated and all traces erased.
Why is It a Problem?
Criminal and tax evading funds are idle and non-productive. Their injection, however surreptitiously, into the economy transforms them into a productive (and cheap) source of capital. Why is this negative?
Because it corrupts government officials, banks and their officers, contaminates legal sectors of the economy, crowds out legitimate and foreign capital, makes money supply unpredictable and uncontrollable, and increases cross-border capital movements, thereby enhancing the volatility of exchange rates.
A multilateral, co-ordinated, effort (exchange of information, uniform laws, extra-territorial legal powers) is required to counter the international dimensions of money laundering. Many countries opt in because money laundering has also become a domestic political and economic concern. The United Nations, the Bank for International Settlements, the OECD's FATF (Financial Action Task Force), the EU, the Council of Europe, the Organisation of American States, all published anti-money laundering standards. Regional groupings were formed (or are being established) in the Caribbean, Asia, Europe, southern Africa, western Africa, and Latin America.
Money Laundering in the Wake of the September 11 Attacks
Regulation
The least important trend is the tightening of financial regulations and the establishment or enhancement of compulsory (as opposed to industry or voluntary) regulatory and enforcement agencies.
New legislation in the US which amounts to extending the powers of the CIA domestically and of the DOJ extra-territorially, was rather xenophobically described by a DOJ official, Michael Chertoff, as intended to "make sure the American banking system does not become a haven for foreign corrupt leaders or other kinds of foreign organized criminals."
Privacy and bank secrecy laws have been watered down. Collaboration with off shore "shell" banks has been banned. Business with clients of correspondent banks was curtailed. Banks were effectively transformed into law enforcement agencies, responsible to verify both the identities of their (foreign) clients and the source and origin of their funds. Cash transactions were partly criminalized. And the securities and currency trading industry, insurance companies, and money transfer services are subjected to growing scrutiny as a conduit for "dirty cash".
Still, such legislation is highly ineffective. The American Bankers' Association puts the cost of compliance with the laxer anti-money-laundering laws in force in 1998 at 10 billion US dollars - or more than 10 million US dollars per obtained conviction. Even when the system does work, critical alerts drown in the torrent of reports mandated by the regulations. One bank actually reported a suspicious transaction in the account of one of the September 11 hijackers - only to be ignored.
The Treasury Department established Operation Green Quest, an investigative team charged with monitoring charities, NGO's, credit card fraud, cash smuggling, counterfeiting, and the Hawala networks. This is not without precedent. Previous teams tackled drug money, the biggest money laundering venue ever, BCCI (Bank of Credit and Commerce International), and ... Al Capone. The more veteran, New-York based, El-Dorado anti money laundering Task Force (established in 1992) will lend a hand and share information.
More than 150 countries promised to co-operate with the US in its fight against the financing of terrorism - 81 of which (including the Bahamas, Argentina, Kuwait, Indonesia, Pakistan, Switzerland, and the EU) actually froze assets of suspicious individuals, suspected charities, and dubious firms, or passed new anti money laundering laws and stricter regulations (the Philippines, the UK, Germany).
A EU directive now forces lawyers to disclose incriminating information about their clients' money laundering activities. Pakistan initiated a "loyalty scheme", awarding expatriates who prefer official bank channels to the much maligned (but cheaper and more efficient) Hawala, with extra baggage allowance and special treatment in airports.
The magnitude of this international collaboration is unprecedented. But this burst of solidarity may yet fade. China, for instance, refuses to chime in. As a result, the statement issued by APEC in November 2001 on measures to stem the finances of terrorism was lukewarm at best. And, protestations of close collaboration to the contrary, Saudi Arabia has done nothing to combat money laundering "Islamic charities" (of which it is proud) on its territory.
Still, a universal code is emerging, based on the work of the OECD's FATF (Financial Action Task Force) since 1989 (its famous "40 recommendations") and on the relevant UN conventions. All countries are expected by the West, on pain of possible sanctions, to adopt a uniform legal platform (including reporting on suspicious transactions and freezing assets) and to apply it to all types of financial intermediaries, not only to banks. This is likely to result in...
The Decline of off Shore Financial Centres and Tax Havens
By far the most important outcome of this new-fangled juridical homogeneity is the acceleration of the decline of off shore financial and banking centres and tax havens. The distinction between off-shore and on-shore will vanish. Of the FATF's "name and shame" blacklist of 19 "black holes" (poorly regulated territories, including Israel, Indonesia, and Russia) - 11 have substantially revamped their banking laws and financial regulators.
Coupled with the tightening of US, UK, and EU laws and the wider interpretation of money laundering to include political corruption, bribery, and embezzlement - this would make life a lot more difficult for venal politicians and major tax evaders. The likes of Sani Abacha (late President of Nigeria), Ferdinand Marcos (late President of the Philippines), Vladimiro Montesinos (former, now standing trial, chief of the intelligence services of Peru), or Raul Salinas (the brother of Mexico's President) - would have found it impossible to loot their countries to the same disgraceful extent in today's financial environment. And Osama bin Laden would not have been able to wire funds to US accounts from the Sudanese Al Shamal Bank, the "correspondent" of 33 American banks.
Quo Vadis, Money Laundering?
Crime is resilient and fast adapting to new realities. Organized crime is in the process of establishing an alternative banking system, only tangentially connected to the West's, in the fringes, and by proxy. This is done by purchasing defunct banks or banking licences in territories with lax regulation, cash economies, corrupt politicians, no tax collection, but reasonable infrastructure.
The countries of Eastern Europe - Yugoslavia (Montenegro and Serbia), Macedonia, Ukraine, Moldova, Belarus, Albania, to mention a few - are natural targets. In some cases, organized crime is so all-pervasive and local politicians so corrupt that the distinction between criminal and politician is spurious.
Gradually, money laundering rings move their operations to these new, accommodating territories. The laundered funds are used to purchase assets in intentionally botched privatizations, real estate, existing businesses, and to finance trading operations. The wasteland that is Eastern Europe craves private capital and no questions are asked by investor and recipient alike.
The next frontier is cyberspace. Internet banking, Internet gambling, day trading, foreign exchange cyber transactions, e-cash, e-commerce, fictitious invoicing of the launderer's genuine credit cards - hold the promise of the future. Impossible to track and monitor, ex-territorial, totally digital, amenable to identity theft and fake identities - this is the ideal vehicle for money launderers. This nascent platform is way too small to accommodate the enormous amounts of cash laundered daily - but in ten years time, it may. The problem is likely to be exacerbated by the introduction of smart cards, electronic purses, and payment-enabled mobile phones.
In its "Report on Money Laundering Typologies" (February 2001) the FATF was able to document concrete and suspected abuses of online banking, Internet casinos, and web-based financial services. It is difficult to identify a customer and to get to know it in cyberspace, was the alarming conclusion. It is equally complicated to establish jurisdiction.
Many capable professionals - stockbrokers, lawyers, accountants, traders, insurance brokers, real estate agents, sellers of high value items such as gold, diamonds, and art - are employed or co-opted by money laundering operations. Money launderers are likely to make increased use of global, around the clock, trading in foreign currencies and derivatives. These provide instantaneous transfer of funds and no audit trail.
The underlying securities involved are susceptible to market manipulation and fraud. Complex insurance policies (with the "wrong" beneficiaries), and the securitization of receivables, leasing contracts, mortgages, and low grade bonds are already used in money laundering schemes. In general, money laundering goes well with risk arbitraging financial instruments.
Trust-based, globe-spanning, money transfer systems based on authentication codes and generations of commercial relationships cemented in honour and blood - are another wave of the future. The Hawala and Chinese networks in Asia, the Black Market Peso Exchange (BMPE) in Latin America, other evolving courier systems in Eastern Europe (mainly in Russia, Ukraine, and Albania) and in Western Europe (mainly in France and Spain).
In conjunction with encrypted e-mail and web anonymizers, these networks are virtually impenetrable. As emigration increases, diasporas established, and transport and telecommunications become ubiquitous, "ethnic banking" along the tradition of the Lombards and the Jews in medieval Europe may become the the preferred venue of money laundering. September 11 may have retarded world civilization in more than one way.
http://www.theconservativevoice.com/article/22965.html
Quoted in Wired.com, Neil Katkov of Celent Communications, pegs future investments in compliance-related activities and products by American banks alone at close to $15 billion in the next 3 years (2005-2008). The United State's Treasury Department's Financial Crimes Enforcement Network (finCEN) received c. 15 million reports in each of the years 2003 and 2004.
But this is a drop in the seething ocean of illicit financial transactions, sometimes egged on and abetted even by the very Western governments ostensibly dead set against them.
Israel has always turned a blind eye to the origin of funds deposited by Jews from South Africa to Russia. In Britain it is perfectly legal to hide the true ownership of a company. Underpaid Asian bank clerks on immigrant work permits in the Gulf states rarely require identity documents from the mysterious and well-connected owners of multi-million dollar deposits.
Hawaladars continue plying their paperless and trust-based trade - the transfer of billions of US dollars around the world. American and Swiss banks collaborate with dubious correspondent banks in off shore centres. Multinationals shift money through tax free territories in what is euphemistically known as "tax planning". Internet gambling outfits and casinos serve as fronts for narco-dollars. British Bureaux de Change launder up to 2.6 billion British pounds annually.
The 500 Euro note makes it much easier to smuggle cash out of Europe. A French parliamentary committee accused the City of London of being a money laundering haven in a 400 page report. Intelligence services cover the tracks of covert operations by opening accounts in obscure tax havens, from Cyprus to Nauru. Money laundering, its venues and techniques, are an integral part of the economic fabric of the world. Business as usual?
Not really. In retrospect, as far as money laundering goes, September 11 may be perceived as a watershed as important as the precipitous collapse of communism in 1989. Both events have forever altered the patterns of the global flows of illicit capital.
What is Money Laundering?
Strictly speaking, money laundering is the age-old process of disguising the illegal origin and criminal nature of funds (obtained in sanctions-busting arms sales, smuggling, trafficking in humans, organized crime, drug trafficking, prostitution rings, embezzlement, insider trading, bribery, and computer fraud) by moving them untraceably and investing them in legitimate businesses, securities, or bank deposits. But this narrow definition masks the fact that the bulk of money laundered is the result of tax evasion, tax avoidance, and outright tax fraud, such as the "VAT carousel scheme" in the EU (moving goods among businesses in various jurisdictions to capitalize on differences in VAT rates). Tax-related laundering nets between 10-20 billion US dollars annually from France and Russia alone. The confluence of criminal and tax averse funds in money laundering networks serves to obscure the sources of both.
The Scale of the Problem
According to a 1996 IMF estimate, money laundered annually amounts to 2-5% of world GDP (between 800 billion and 2 trillion US dollars in today's terms). The lower figure is considerably larger than an average European economy, such as Spain's.
The System
It is important to realize that money laundering takes place within the banking system. Big amounts of cash are spread among numerous accounts (sometimes in free economic zones, financial off shore centers, and tax havens), converted to bearer financial instruments (money orders, bonds), or placed with trusts and charities. The money is then transferred to other locations, sometimes as bogus payments for "goods and services" against fake or inflated invoices issued by holding companies owned by lawyers or accountants on behalf of unnamed beneficiaries. The transferred funds are re-assembled in their destination and often "shipped" back to the point of origin under a new identity. The laundered funds are then invested in the legitimate economy. It is a simple procedure - yet an effective one. It results in either no paper trail - or too much of it. The accounts are invariably liquidated and all traces erased.
Why is It a Problem?
Criminal and tax evading funds are idle and non-productive. Their injection, however surreptitiously, into the economy transforms them into a productive (and cheap) source of capital. Why is this negative?
Because it corrupts government officials, banks and their officers, contaminates legal sectors of the economy, crowds out legitimate and foreign capital, makes money supply unpredictable and uncontrollable, and increases cross-border capital movements, thereby enhancing the volatility of exchange rates.
A multilateral, co-ordinated, effort (exchange of information, uniform laws, extra-territorial legal powers) is required to counter the international dimensions of money laundering. Many countries opt in because money laundering has also become a domestic political and economic concern. The United Nations, the Bank for International Settlements, the OECD's FATF (Financial Action Task Force), the EU, the Council of Europe, the Organisation of American States, all published anti-money laundering standards. Regional groupings were formed (or are being established) in the Caribbean, Asia, Europe, southern Africa, western Africa, and Latin America.
Money Laundering in the Wake of the September 11 Attacks
Regulation
The least important trend is the tightening of financial regulations and the establishment or enhancement of compulsory (as opposed to industry or voluntary) regulatory and enforcement agencies.
New legislation in the US which amounts to extending the powers of the CIA domestically and of the DOJ extra-territorially, was rather xenophobically described by a DOJ official, Michael Chertoff, as intended to "make sure the American banking system does not become a haven for foreign corrupt leaders or other kinds of foreign organized criminals."
Privacy and bank secrecy laws have been watered down. Collaboration with off shore "shell" banks has been banned. Business with clients of correspondent banks was curtailed. Banks were effectively transformed into law enforcement agencies, responsible to verify both the identities of their (foreign) clients and the source and origin of their funds. Cash transactions were partly criminalized. And the securities and currency trading industry, insurance companies, and money transfer services are subjected to growing scrutiny as a conduit for "dirty cash".
Still, such legislation is highly ineffective. The American Bankers' Association puts the cost of compliance with the laxer anti-money-laundering laws in force in 1998 at 10 billion US dollars - or more than 10 million US dollars per obtained conviction. Even when the system does work, critical alerts drown in the torrent of reports mandated by the regulations. One bank actually reported a suspicious transaction in the account of one of the September 11 hijackers - only to be ignored.
The Treasury Department established Operation Green Quest, an investigative team charged with monitoring charities, NGO's, credit card fraud, cash smuggling, counterfeiting, and the Hawala networks. This is not without precedent. Previous teams tackled drug money, the biggest money laundering venue ever, BCCI (Bank of Credit and Commerce International), and ... Al Capone. The more veteran, New-York based, El-Dorado anti money laundering Task Force (established in 1992) will lend a hand and share information.
More than 150 countries promised to co-operate with the US in its fight against the financing of terrorism - 81 of which (including the Bahamas, Argentina, Kuwait, Indonesia, Pakistan, Switzerland, and the EU) actually froze assets of suspicious individuals, suspected charities, and dubious firms, or passed new anti money laundering laws and stricter regulations (the Philippines, the UK, Germany).
A EU directive now forces lawyers to disclose incriminating information about their clients' money laundering activities. Pakistan initiated a "loyalty scheme", awarding expatriates who prefer official bank channels to the much maligned (but cheaper and more efficient) Hawala, with extra baggage allowance and special treatment in airports.
The magnitude of this international collaboration is unprecedented. But this burst of solidarity may yet fade. China, for instance, refuses to chime in. As a result, the statement issued by APEC in November 2001 on measures to stem the finances of terrorism was lukewarm at best. And, protestations of close collaboration to the contrary, Saudi Arabia has done nothing to combat money laundering "Islamic charities" (of which it is proud) on its territory.
Still, a universal code is emerging, based on the work of the OECD's FATF (Financial Action Task Force) since 1989 (its famous "40 recommendations") and on the relevant UN conventions. All countries are expected by the West, on pain of possible sanctions, to adopt a uniform legal platform (including reporting on suspicious transactions and freezing assets) and to apply it to all types of financial intermediaries, not only to banks. This is likely to result in...
The Decline of off Shore Financial Centres and Tax Havens
By far the most important outcome of this new-fangled juridical homogeneity is the acceleration of the decline of off shore financial and banking centres and tax havens. The distinction between off-shore and on-shore will vanish. Of the FATF's "name and shame" blacklist of 19 "black holes" (poorly regulated territories, including Israel, Indonesia, and Russia) - 11 have substantially revamped their banking laws and financial regulators.
Coupled with the tightening of US, UK, and EU laws and the wider interpretation of money laundering to include political corruption, bribery, and embezzlement - this would make life a lot more difficult for venal politicians and major tax evaders. The likes of Sani Abacha (late President of Nigeria), Ferdinand Marcos (late President of the Philippines), Vladimiro Montesinos (former, now standing trial, chief of the intelligence services of Peru), or Raul Salinas (the brother of Mexico's President) - would have found it impossible to loot their countries to the same disgraceful extent in today's financial environment. And Osama bin Laden would not have been able to wire funds to US accounts from the Sudanese Al Shamal Bank, the "correspondent" of 33 American banks.
Quo Vadis, Money Laundering?
Crime is resilient and fast adapting to new realities. Organized crime is in the process of establishing an alternative banking system, only tangentially connected to the West's, in the fringes, and by proxy. This is done by purchasing defunct banks or banking licences in territories with lax regulation, cash economies, corrupt politicians, no tax collection, but reasonable infrastructure.
The countries of Eastern Europe - Yugoslavia (Montenegro and Serbia), Macedonia, Ukraine, Moldova, Belarus, Albania, to mention a few - are natural targets. In some cases, organized crime is so all-pervasive and local politicians so corrupt that the distinction between criminal and politician is spurious.
Gradually, money laundering rings move their operations to these new, accommodating territories. The laundered funds are used to purchase assets in intentionally botched privatizations, real estate, existing businesses, and to finance trading operations. The wasteland that is Eastern Europe craves private capital and no questions are asked by investor and recipient alike.
The next frontier is cyberspace. Internet banking, Internet gambling, day trading, foreign exchange cyber transactions, e-cash, e-commerce, fictitious invoicing of the launderer's genuine credit cards - hold the promise of the future. Impossible to track and monitor, ex-territorial, totally digital, amenable to identity theft and fake identities - this is the ideal vehicle for money launderers. This nascent platform is way too small to accommodate the enormous amounts of cash laundered daily - but in ten years time, it may. The problem is likely to be exacerbated by the introduction of smart cards, electronic purses, and payment-enabled mobile phones.
In its "Report on Money Laundering Typologies" (February 2001) the FATF was able to document concrete and suspected abuses of online banking, Internet casinos, and web-based financial services. It is difficult to identify a customer and to get to know it in cyberspace, was the alarming conclusion. It is equally complicated to establish jurisdiction.
Many capable professionals - stockbrokers, lawyers, accountants, traders, insurance brokers, real estate agents, sellers of high value items such as gold, diamonds, and art - are employed or co-opted by money laundering operations. Money launderers are likely to make increased use of global, around the clock, trading in foreign currencies and derivatives. These provide instantaneous transfer of funds and no audit trail.
The underlying securities involved are susceptible to market manipulation and fraud. Complex insurance policies (with the "wrong" beneficiaries), and the securitization of receivables, leasing contracts, mortgages, and low grade bonds are already used in money laundering schemes. In general, money laundering goes well with risk arbitraging financial instruments.
Trust-based, globe-spanning, money transfer systems based on authentication codes and generations of commercial relationships cemented in honour and blood - are another wave of the future. The Hawala and Chinese networks in Asia, the Black Market Peso Exchange (BMPE) in Latin America, other evolving courier systems in Eastern Europe (mainly in Russia, Ukraine, and Albania) and in Western Europe (mainly in France and Spain).
In conjunction with encrypted e-mail and web anonymizers, these networks are virtually impenetrable. As emigration increases, diasporas established, and transport and telecommunications become ubiquitous, "ethnic banking" along the tradition of the Lombards and the Jews in medieval Europe may become the the preferred venue of money laundering. September 11 may have retarded world civilization in more than one way.
http://www.theconservativevoice.com/article/22965.html
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