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Money Laundering

Money laundering – giving a legitimate look to the ownership, use, or disposal of money or other property obtained as a result of a crime, that is, their transfer from the shadow, informal economy to the official economy in order to be able to use these funds openly and publicly. Official documents refer to “legalization (laundering) of money or other property obtained by criminal means.”

In this case, the form of funds can change both from cash to non-cash (for example, through instant payment terminals), and vice versa (for example, by winning the lottery or buying a winning lottery ticket from the legal owner, including for an amount exceeding the amount of the winnings) …

Definition

In laundering, the true source of income is concealed, real transactions are substituted with formal ones, the economic meaning is distorted, while at the initial stage of money laundering, documents can be forged, documents of third parties are used, for the final legalization of funds, the norms of laws on a bona fide acquirer and many others are used.

It is often claimed that the term originated in the United States in the 1920s when the American mafia began to buy up and massively open automatic laundries to legalize illegal cash. In a wide network of small establishments with low prices, automatic machines, and a large number of customers, it is very difficult to control revenue, which makes it possible to add large amounts of illegally received cash to real revenue.

However, American author Jeffrey Robinson points out that this is not the case. He says that the term money laundering was first used by the British newspaper The Guardian during the Watergate scandal in connection with the illegal campaign financing of Richard Nixon.

In the context of globalization, offshores are often used for money laundering – countries of “tax haven”, in whose banking systems the anonymity and confidentiality of beneficiaries are ensured.

Anti-money laundering

(English anti-money laundering, abbreviated AML)

Creating an effective system for combating money laundering requires interaction between the following authorities:

  • legislative bodies;
  • executive authorities or ministries;
  • judicial authorities;
  • law enforcement agencies, including police, customs, etc .;
  • financial intelligence units;
  • regulatory authorities, including the central bank, other financial institutions, certain non-financial organizations, and professionals.

In addition, there is a need for interaction between private institutions, in particular banks and other financial institutions.

To coordinate international efforts to combat money laundering in 1989, at the G7 summit in Paris, an international Financial Action Task Force on Money Laundering (FATF) was created.

After Russia was included in the FATF “blacklist” in June 2000, a draft law was finalized to strengthen the anti-money laundering measure in the country's financial system, and in 2001, a specialized body was created within the Ministry of Finance – the Committee of the Russian Federation on Financial Monitoring (CFM), which headed by Viktor Zubkov. As a result, in October 2002 Russia was excluded from the “blacklist”, and in June 2003 it was itself admitted to the FATF.

In 2004, the KFM was transformed into the Federal Service for Financial Monitoring (FSFM).

The Egmont Group is an informal association of financial intelligence units (FIUs) of the world, which is also involved in the fight against money laundering.

In 2006, the authorities explained the need to declare cash currency by citizens crossing the borders of the European Union and the United States, the fight against terrorism and money laundering.

Many banks, including Russian ones, actively use the “Know your customer” principle. Thus, the bank reduces the risks of involving its clients in transactions related to legalization (laundering) of income or financing of terrorism, which threaten the reputation of the bank. The bank is interested in the origin of the client's funds in order to make sure that the capital does not have a criminal origin and is not used for criminal purposes.

Money laundering – the concept was first used in the 80s. in the United States in relation to income from the drug business and refers to the process of converting illegally obtained money into legal money. This review presents a systematic summary of the most common legal and illegal money laundering methods, contributing factors, the main signs of money laundering, and the rules that govern money laundering, compiled on the basis of the Institute for Enterprise Issues.

Factors contributing to money laundering

  • A high share of unofficial incomes of the population and business, the existence of a parallel economy, or “black market”.
  • The imperfection of mechanisms for control and monitoring of the activities of financial institutions, non-compliance with international standards for regulating financial activities, developed by specialized international organizations.
  • The spread of corruption among state executives, law enforcement, and judicial authorities.
  • The existence of “free trade zones” within the country, with a preferential procedure for regulating operations and monitoring the activities of institutions.
  • Impossibility or limitation of the ability to exchange financial information with foreign law enforcement agencies.
  • Inadequate procedure for establishing financial and non-financial institutions, opening branches outside the country, and licensing financial activity, which does not take into account or does not adequately take into account the need to identify the real owners/owners of companies (especially when ownership can be carried out through nominal holding).
  • Legislating the secrecy of financial transactions, insufficient requirements for transparent financial transactions, and ownership of assets.
  • Miscalculations in the regulation of currencies, exchange transactions, and other cash transactions. Widespread use by enterprises, banks of operations involving offshore companies.
  • The existence of anonymous monetary accounts and financial instruments, including stocks and bonds, for which bearer payments are permissible.
  • The existence of the possibility of exchanging electronic money, unofficial cryptocurrency, non-bank settlement funds by further payment to the bank accounts of legal entities or individuals.
  • Access of financial institutions to international centers for gold bullion trading, precious stones, and precious metals trading.

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