MONEY LAUNDERING & TERRORIST FINANCING
Money laundering and terrorist financing can undermine the integrity and stability of financial markets and institutions. It is a global problem.
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The global nature of the world’s financial systems provides criminals with unlimited opportunities to launder money; global money laundering transactions are estimated at 2.7% of global GDP, or roughly US$1.6 trillion annually. Many hundreds of billions of pounds of international criminal money is laundered through UK banks, including their subsidiaries, each year.
So what do we mean by money laundering (ML)? And how is this different to terrorist financing (TF)?
A simple definition of money laundering is the practice of disguising the origins of illegally obtained money: the method by which the proceeds of crime are made to appear legitimate. Money laundering always involves funds or value derived from the proceeds of crime; for example, the Taliban has financed its military efforts through the sale of opium. The purpose of money laundering is to break the connection between the proceeds of crime and the original crime.
Terrorist financing is the provision or collection of funds with the intention that they should be used (or in the knowledge that they are to be used), in full or in part, in order to carry out acts that are associated with the support of terrorists or terrorist organisations, whether to further their causes or to commit acts of terrorism. Terrorism financing may involve either the funds or value derived from the proceeds of crime or may involve legitimate funds earned from employment or the conduct of legitimate business transactions, as was the case in the London 7/7 bombings, which were funded almost entirely from wages earned by the perpetrators. The purpose of terrorism financing is to finance illegal terrorist activities, or support persons engaged in illegal activities or who intend to engage in illegal terrorist activities.
Given the differences between these two areas, you may be wondering why they are often referred to in the same sentence?
Both money laundering and terrorism financing share the following common elements:
They both involve money or other forms of value.
They both involve the movement of money or value, for example, from one person to another, one account to another, one institution to another, one country to another, one asset class to another.
They are both keen to disguise the source and destination of funds.
HOW CAN WE HELP?
It is increasingly important to have robust processes for ‘knowing your customer’ and analysing the payments that they make. ML regulations require financial institutions to screen not just their customers, but also related third parties, such as suppliers and the entities with whom their customers are sending or receiving funds. Enhanced due diligence may also be required, depending on the perceived risk of the third party.
We are able to offer a unique combination of expertise, relevant experience and value through globally proven methodology and tools for assessing and communicating the business impact of ML regulations and laws. Examples of what we offer our clients include:
Compliance Reviews, including reviewing and testing your ML policy and procedures.
Governance & Controls, along with ML risk assessments and controls testing.
Data & Analytics, including forensic analysis, investigations and data mining.
Training & Awareness.