What is Money Laundering?
Money laundering is the generic term used to describe the process by which criminals disguise the original ownership and control of the proceeds of criminal conduct by making such proceeds appear to have derived from a legitimate source.
The processes by which criminally derived property may be laundered are extensive. Though criminal money may be successfully laundered without the assistance of the financial sector, the reality is that hundreds of billions of dollars of criminally derived money is laundered through financial institutions, annually. The nature of the services and products offered by the financial services industry (namely managing, controlling and possessing money and property belonging to others) means that it is vulnerable to abuse by money launderers.
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Why is money laundering illegal?
The objective of the criminalisation of money laundering is to take the profit out of crime. The rationale for the creation of the offence is that it is wrong for individuals and organisations to assist criminals to benefit from the proceeds of their criminal activity or to facilitate the commission of such crimes by providing financial services to them.
How is the offence of money laundering committed?
Money laundering offences have similar characteristics globally. There are two key elements to a money laundering offence:
The necessary act of laundering itself i.e. the provision of financial services; and A requisite degree of knowledge or suspicion (either subjective or objective) relating to the source of the funds or the conduct of a client.
The act of laundering is committed in circumstances where a person is engaged in an arrangement (i.e. by providing a service or product) and that arrangement involves the proceeds of crime. These arrangements include a wide variety of business relationships e.g. banking, fiduciary and investment management.
The requisite degree of knowledge or suspicion will depend upon the specific offence but will usually be present where the person providing the arrangement, service or product knows, suspects or has reasonable grounds to suspect that the property involved in the arrangement represents the proceeds of crime. In some cases the offence may also be committed where a person knows or suspects that the person with whom he or she is dealing is engaged in or has benefited from criminal conduct.
What is Financial Action Task Force (FATF)?
AML rules and regulations rose to global recognition when the Financial Action Task Force (FATF) was formed in 1989, setting international standards for fighting money laundering. The aim of enforcement groups like the FATF is to maintain and promote the ethical and economic advantages of a legally credible and stable financial market and to ensure Individual and Companies process their Financial transaction with credibility and Proper Documentations Perfections.