Analyzing the Illicit Finance

Illicit Finance

Why is the internet important to money laundering?

A large number of nations now have aggressive policies in place against money laundering, rendering it exceedingly difficult for offenders to apply traditional money laundering tactics. But this also leads them to strive at creating new tactics with the Internet being one of the popular new modes they employ (Kassner, 2013).

Globalization and the Internet have made it possible to pay for services online. Several online merchants and customers make use of the numerous web-based payment services available. A number of these individuals aren't eligible to own credit cards or have no bank accounts. Thus, web-based payment services enable them to purchase products/services online and transfer cash directly. Numerous online sellers are very willing to get paid online, since they are cheaper than credit card payments (Delta & Matsuura, 2008).

The web-based payment services may be located anywhere in the world and clients can fund online accounts using credit cards, money order, and wire transfer. The accounts enable them to shop online, gamble, gain access to adult websites, and take part in auctions on the internet. Individuals residing in the United States can even avail themselves of online payment websites located overseas and transfer funds by mail or electronically to their personal accounts (Delta & Matsuura, 2008).

A majority of web-based payment systems come with their own set of terms and conditions. They are under no compulsion to provide consumer protection or follow financial regulations. Thus, an individual who is defrauded might not be able to recover his funds, which is why numerous fraudsters take advantage of such payment systems. These services carry out direct transactions between two parties on an international scale. Hence, they have a major role to play in the practice of money laundering, since a particular nation's jurisdiction is unable to pursue legal action the moment the funds move to a foreign country. While service users make use of payment modes like wire transfer, credit cards, and bank accounts for funding their accounts, a majority of online payment service providers lack suitable recordkeeping and customer identification methods. Thus, when service providers accept cash for funding an account, law enforcers are not able to do anything (Delta & Matsuura, 2008).

Internet-based payment systems offer clients the feature of anonymity, which makes money laundering rather easy to carry out. This makes the Internet a key tool for such offenders (Delta & Matsuura, 2008).

What are some of the anti-money laundering techniques and when can these be most successful?

The global community has prioritized the battle against the illegal practice of money laundering as well as funding of terrorist outfits. Some aims of this endeavor are: protection of the global financial system's stability and integrity; making it harder for criminals to derive any profit out of their criminal actions; and preventing resources from reaching terrorists (IMF, 2016).

Hunting down any deposit's source is an extremely daunting task as roughly 700,000 wire transfers take place per day across the globe. Differentiating clean from dirty money is not easy. Within America, law enforcement and legislation are the two principal means utilized by governmental authorities, for spotting and combating money laundering (Layton, n.d.).

Innumerable legislative acts help the U.S. deal with money laundering, some of which are:

The Money Laundering Control Act of 1986 has identified money laundering as a crime itself, rather than simply a part of some crime. The Money Laundering Suppression Act of 1994 commands banks to institute their respective task forces against money laundering, for weeding out internal suspicious activities, while the U.S. Patriot Act of 2001 establishes compulsory bank patron identity checks and offers resources for tracking alternative/underground banking transactions frequently utilized by terror organizations' money handlers. A more exhaustive list of legislations against money laundering passed by the U.S. government may be obtained in the FDIC: Bank Secrecy Act and Anti-Money Laundering website (Layton, n.d.).

Besides legislation aimed at detecting money-laundering operations, another aspect of the battle is undercover stings. The Atlanta-based sting operation 'Juno' by the Drug Enforcement Administration (DEA), which concluded in the year 1999, is one key example. The operation entailed providing drug traffickers with resources to facilitate money laundering. Undercover agents of the DEA struck bargains with drug traffickers for turning drug dollars into pesos via the Colombian Black Market Peso Exchange. This operation successfully concluded with as many as forty arrests, 3,600 kg of cocaine, and confiscation of drug proceeds amounting to ten million dollars (Layton, n.d.).

What is the connection between terrorism and criminal organizations in terms of illicit finance?

The key area of operation of criminal organizations is profit-making crimes. The organizations are established to serve this purpose and take systematic advantage of crime opportunities on a large scale. Such organizations glean a cornucopia of wealth; however, their operations are accompanied by innumerable problems as well, include the inability to easily conceal or use the money generated. Sudden utilization of wealth from mysterious sources appears suspicious. Investigators can quickly find a connection between illegal activities, cash generated, and the criminal (Thony, 2002).

Therefore, criminal organizations find it essential to, (1) Wipe out the connection between the cash and associated crime; (2) Obliterate the connection between the cash and the person now owning it, and lastly (3) Safeguard the income against being confiscated. The aforementioned activities represent money-laundering's very nature, which typically develops in the following three stages:

1. Introduction of funds derived out of crime into the financial/banking system: The first stage is now increasingly risky, on account of the intensified focus of suspicious cash movements by authorities in law enforcement organizations, and the current widespread obligation of banks to report any suspicious cash transfer.

2. Money laundering stage or Subjecting the funds to a sequence of financial processes, aimed at misleading investigators and making them appear like 'clean money': This step typically makes use of offshore mechanisms. Several transfers between launderers' banks and financial havens, interspersed by devices like false loans and false invoices, eventually deceive investigators with regard to the cash source.

3. Reintroduction of funds into legal economy, via consuming luxury items: This is crucial to money launderers, as profitable criminal outfits aim at, firstly, being able to use up their black money. This they achieve by investing in usual assets (e.g., real estate, company shares, etc.), investing in cinemas, hotels, casinos, restaurants, and other economic entities themselves capable of turning into money laundering tools, and businesses wherein cash payments are the norm (so dirty money mingles easily) (Thony, 2002).

One may view terrorism funding and money laundering as separate activities. Criminal-fund laundering attempts to legalize dirty money, while terrorist-finance laundering attempts to obscure legal assets (e.g., supposed charities or public funding). The above distinction is of no use, as public policies endeavor to tackle the problem of the funds and their source rather than the problem of dirty money processing. In this respect, terrorist and criminal assets pose similar threats to public institutions and financial systems. Also, clearly, the strategies devised for fighting offenders when they guide funds across financial systems might be equally successful in fighting the issue of terrorist financing (Thony, 2002).

Additionally, mysterious ties usually unite terrorism and organized crime. Some kind of dispassionate alliance develops between terrorist and criminal organizations in several cases, fueled by their converging interests: terror groups profit from the funds criminal gangs generate, whereas the latter successively gain from guerilla and terrorist groups' ability of doing damage. The bizarre similarity between guerilla/terror movements' geography and that of drug lords is self-explanatory. FARC (Revolutionary Armed Forces of Colombia) movements are observed in coca-growing regions, whereas Africa's civil wars have been occurring in places where natural resources (like precious stones) are extracted. Meanwhile, Myanmar's Khun Sa group and Afghanistan's Al-Qaeda carry out their operations in the largest opium-growing areas of the world. Cambodia, Sri Lanka, Chechnya, and the Balkans are also areas of interest to those attempting to study how ideology becomes a cover for criminal organizations organized crime, or how such organizations aid terrorist activities (Thony, 2002).