Money laundering is a typical worldwide issue that has a combined effect on people and rule of government. The main concept and theme of money laundering is to show a behavioral and course of making dirty money and used it legally (Masciandaro 2007). Money laundering is the act of money gained from illegal activity, such as drug smuggling (Router 2011). Nevertheless money laundering in any country or any specific region may affect its economic, government and social comforts. On other hand it can also said that it can totally lead to the complete ruined of economy of government. It has shocking economic sequences. The main priority of all the countries is to fight with this main crime as it not only affects the country’s policies but it is not incompatible with economic market liberalization (Quirk 1997). The macroeconomic effect of money laundering can be captured in a multiplier model (Masciandaro, 2007). Money laundering can be done through different ways that can involve various businesses, professions and companies. Majorly, the drug trafficker experiences a lot of money laundering problems that shows the requirement to clean the large quantities of money on regular bases. Amazingly, it came to know that the most of money laundering involves professional companies who facilitate service to multiple clients. Many of the factors together have made money laundering much more important than ever before. It is due to enhance in communication and launching of free different technologies that has made world a smaller place (Madinger 2012). Suppression of enhancing crime is much easier preposition now days than a previous time. Criminals have an advantage to move easily with stolen property and materials between countries (Madinger 2012). In the year of 1996, IMF on behalf of the request of economical action task force of Paris make the report which based on the full research of macroeconomic claims of making dirty money. The IMF promotes
Honesty of global financial markets, or “currency convertibility,” through the abolition of exchange controls. This type of liberalization sometimes has negative impact in general because it may open more networks for laundering black money (Quirk 1997).
The law enforcement policies handle the money laundering cases in two different ways. The most important is the organization response, in which the agencies of government deal with the matter of policies (Madinger 2012). Currently, the criminals use various ways to make dirty money and move it to actual land, sweepstakes, worldwide marketing and different renowned companies. The advancement of innovative technologies mainly includes wildest means of internet facility, the making of dirty money is quiet easy and all the launders are able to perform person to in-person dealing (Ping 2010). Money launders criminals usually used some banks and financial institution and professional areas to hide their criminal profit. On the other hand, criminals use some other sectors to which they pay a significant amount of money, and they have different obedience by regulation besides control, or at that place where low danger of finding and raid is possible which include nightclubs, another payment and over cease business service. The different methods of making dirty money involve the use of professional expertise to work with regulation and control of financial sectors
The research will be conducted to study current Anti-Money Laundering regime in Hong Kong and Australia to demonstrate efficacy of policies in the fight against money laundering occurring specifically between the two countries.
Australia and Hong Kong are signatories to the FATF. There would be similar legislation in both countries as policies are recommended and put forward by the FATF. The significance would be on the differences in the application of suggested policies, and the anti-money laundering policies introduced by local governments.
The study delves in the criminal investigations and how findings from these investigations result in the making or amendments of policies to shape the anti-money laundering regime of Australia and Hong Kong.
A report being suggested by the managing director of IMF named Michel Camdessus which was proposed in the year 1998 showed that there is a ratio of about 2 -5% of the worldwide GDP included in money (Gao and Mao, 2007). Since this crime is done in various ways involving many stages which include, 1. Placement: in which the black money or illegal money is saving or putting in the bank.
- Layering: transferring of money to a nation worldwide for the purpose of hiding the illegal concepts of money.
- Integrations: the cleaned money we bought with the layering process is then invested in several different processes.
The same money we got form integration is than go through many different ways of laundering process, through which financial transaction facts is then therefore involve in double manner or even more in counting (Walker, 2009).
The major impact of money laundering is on economic development of any region and country which is not easy to resolve. This type of activity also damages the economic sector of any institution that have a critical effect on development of financial rate, decrease the rate of productivity in saving’s sector by different resources (Brent, 2014).
It is about 20 years ago all the country nationwide revealed a policy against money laundering. Now a day there are about 170 different countries having anti-money laundering policies through which they can easily controlled the crime rate and economic power of their country. However till now there are so many countries that do not developed any successful policy regarding this serious crime. And in few countries such policies are not working properly (Sharman, 2008).
Since the 1970’s, criminal groups in china have been engaged in different actions such as illegal transportation and trading in fishing industry. In the 1980’s, these crime has extended to the export of different products and the importation of these counterfeit goods and transferring an illegal immigration. These criminal groups are also involved in different money laundering crimes such as drug-trafficking, fraud and kidnaping (Gastrow and Peter, 2001).
In Australia researchers were found that the money laundering is characterize by the common and relevant use of structuring dealing to inhibit reporting managements, accounts in untruthful names, and money smuggling. A total estimate of 3.8billion dollar is used in estimate by all types of crimes in Australia including money laundering derived form a business survey report (Stamp and Walker, 2007). A joint effort made by Australian government is to disrupt a sophisticated transitional money laundering cases and they have issue 13 search warrants across the Australia. A combined organization named AUSTRAC (Australian transaction report and analysis center) which work on the laundered money corruption and handle the entire economical intellect component. AUSTRAC in collaboration with different industries of Australia is fighting against the money laundering case in their country (Money laundering 2013).
An assessment is shown recently that amount of black money in the region and outside of Australia for transitional crime is about $10 billion a whole year. Which is a high total cost and it totally affect the government and country’s economy. Organization of any corruption has emerged and moderate law and order condition under the responsibility of separate agencies. The societal, financial, universal, ecological, corporal plus emotional evils that are affected by severe and organized corruption have a large influence on the entire country or organization. The report published in 2011 dealing a case of money laundering in Australia, reveal the fact that the laundering case was become a serious and well managed crime affecting all types of companies and agencies and a forward step has been taken to fight against these severe crime that cause threatening harm to our society (Common wealth, 2011).
A report have been described that the Australian casinos have been recognized by the different crime agencies as major source of money laundering in Australia. Inspite of that, money laundering cases revealed from the Australian casinos is approved to be in a very small number when compare it with the overall volume of money laundered in Australia. On the other hand, the money laundered issue is not yet seen as a noteworthy regulatory issue (Walker, 2004).
The LEAs in Hong Kong are authorized supported with enough investigation controls to follow money laundering investigation which includes production orders, search warrant and witness ordering etc. Furthermore, this is legally permissible to the government through policies to use special investigation techniques which may include delivery controlled, interruption of telecommunication and hidden operations which has a relatively less use in this crime (Cheng 2012). On the closer examination of the appropriate facts data suggest that it is hard to find out the major similarities between the two main developed countries, Australia and Hong Kong. Both countries are administered by rule of law. The relevant factor that has been analyzed by a Hong Kong’s government is to decrease the total quantity of these money laundering cases includes deficient system, low income and lack of worldwide cooperation. Additionally, it can also launched some of its new policies to solve major problems encountered by ruler of administrative specialist in cracking depressed money laundering (Yang 2010).
This area in financial crime is evolving rapidly. There are constant changes to the existing anti-money laundering regime in both countries in recent history and in the current climate.
The topic was chosen as it has great social significance and contributes to my own academic specialisation. New cases, leads and information are uncovered daily which makes research on this area very interesting and very timely. Outcome from this research contributes to the wider body of literature about money laundering investigations in Hong Kong
Part I: Money Laundering and the Society
Clearly, the society and the economy have undergone a major transformation over the last thirty years. The dynamics of business in the international arena, the liberalization of services financial as well as growth and development of a new type of crime and delinquency , called washing or laundering money , due to the speed with which they can move funds and resources financial (Solis, 2001).
The importance of this phenomenon should be measured not only by the huge sums of money involved, but also by the negative consequences that the detriment of society at large, due to the eventual relaxation or destruction of ethical professional, and their potential damage to peaceful coexistence and the structure familiar. We must stop the spread of these activities despite the “defenders of the positive elements” who see this generation of wealth and because of a more dynamic offer – demand for goods and services, or, a contribution to resizing of the banking and financial services (Solis, 2001).
Money laundering, regardless of the positive view that you want to give, is a sustained activity in terms of organized crime, along with other no less serious as drug trafficking , the sale of weapons , the terror and prostitution . Therefore, its presence in daily life is the subject of very diverse initiatives that are intended to avoid the damaging effects such as: the degradation of society, the corruption of public officials, involvement of the private life and even dangerous instability that can be subjected governments and systems complete (Solis, 2001) Economic.
To achieve its objective , the capital weave bleached and are supported by a large and complicated network economy, the dislocation must be the priority if we want to fight effectively against organized crime. Hence the need to be analyzed procedures that allow one way or another the introduction of illegally obtained funds in the system money, but to light public seem lawful activities in everyday life in a country like ours (Solis, 2001).
The activities that give rise to money laundering and take many forms in a changing metamorphosis varies depending on the time, regulation and standards it wants to attack its constitution and the strategy followed by the authorities, whereas, obviously the target of criminals is to avoid such persecution, continue and increase their illegal activities and therefore high yields (Solis, 2001).
Internationally stresses the importance of controls and hinder the blockade from the root. However, as it can not be completely you removed in establishing maximum amounts of managing cash, or oversight in the management of technical modern funds transfer, advocated increasingly to establish a system by which banks and institutions financial declare to a central body with all national and international transactions above a certain amount, being accessible such information to the competent authorities in the fight against money laundering (Solis, 2001).
Definitions and concepts inherent to money laundering
The term laundering or money laundering (in English and German Money Laudering Geldwáschef) is the best known and graphics, it points out that the money black, to wash, bleached and takes on the appearance of legal resources, so enter the market capital . Others prefer to use the term washing or bleaching of capital, recycling of money (in Italy Reciclaggio of Denaro), or financial or improper concealment. The name of money laundering applies also France (Blanchhiment L ‘Argent, branqueamento). (Solis, 2001).
Money laundering, for Escobar (1992), is the procedure illegal and illegitimate whereby funds or proceeds of illegal activities are recycled to the normal circuit of capital or property, and then usufruct by schemes as heterogeneous as tacitly business.
Roberto J. Bulit G. (2001) Money laundering is the action that aims to conversion product money or profits of illegal activity in assets -financial or not to show a legitimate source. Another definition by Gabriel Adriosola (1994) for whom the washing or laundering involves concealing criminal funds and subsequent reentry to the money market as lawful appearance, though indeed prove to disguise illicit profits, “clean “by operatingbusiness and investments diverse  (Solis, 2001).
The Australian Act of 1997, meanwhile, defines it as direct or indirect participation in transactions involving money or other property from a crime . For English law is the “convert or participate in any way in helping you control or retain earnings trafficking drugs , securing such funds or facilitate their investment “. The Act of 1985 notes that Switzerland is performing an act which frustrate the verification of origin, the discovery or confiscation of securities heritage aware or should presume that come from a crime.
In general terms, money laundering refers to any property, money, profit or financial gain obtained unlawfully, and among such methods to those other goods that come from trade in illegal drugs and other illegal acts, whose funds are intended to companies or businesses legally constituted (Solis, 2001).
Then then what is money laundering? The money laundering is the activity by which a person , or organization criminal, financial profits resulting from illegal activities to try to give the appearance of processed resources obtained from legal activities. Like any legitimate business, a company criminal need quick access to the profits gained through the business cycle ( sale of goods or services ). (Solis, 2001).
Unlike a legitimate business, the company can not operate openly criminal. You must grant “the nature , location, source, ownership or Control of benefits “produced by his” business “to avoid detection by the authorities. Then, through money laundering, the criminal (be it a person, an organization, or a person skilled in money laundering) transforms the monetary proceeds derived from criminal activity proceeds, apparently, a legal source (Solis , 2001).
Generally speaking, there is no one of what money laundering definition, and in some cases not even a definition of the term is provided (as in the laws anti-laundering United States, Title 18, Section 1956 and 1957) . However, it can be said that the whole activity of money laundering falls into one of two categories: conversion or movement (Solis, 2001).
The conversion takes place when the products financial change from one form to another, such as when you buy a business or a car with illegal profits: the original illegal products have changed shape: cash, a business or a car. Moreover, a movement occurs when the same financial products change of locations, such as when the funds are transferred electronically to another location (Solis, 2001).
One of the difficulties in identifying the movements of money laundering is that legitimate businesses do every day the same types of conversions or movements for the operation of their business (acquisitions of equity , investments , sales of products, distribution of dividends payment wages ). In the process of money laundering, the criminal has the same intention: to help your business; however, also it has an interest fee: conversions and movements of money laundering allow you to disguise the true source of illegal funds (Solis, 2001).
The history of always
In any country, day by day it is getting a common practice in various economic and social activities, is that industrialized country or development environment; that practice is the corruption , regardless of the political regime for it. Unfortunately this activity is gaining greater strength by its close ties to the drug trade and money flows that accompany this activity.
Money laundering is a concept in expansion and a sentence of not very old origin, but their practice should occur since the society has served as such. Moreover, it is not had a comprehensive understanding of their harmful effects, their amounts were not as great (or so it seemed) like today, and the systems financial were not as regulated with respect to the need for such stratagems . Although there are some examples of plans that hide the criminal origin or nature of the transaction (and can be found from the function of the system banking), commonly around the role of public officials, money laundering phrase starts using more often along with the development of lucrative markets massive drug in 1960 (Solis, 2001).
However, as mentioned, the story begins a few decades ago. Let’s brief history. In several cases, it argues that the first bleached capital occurred in the United States, at the time of the gangsters and Prohibition call. By then, it is said that in Chicago in the 1920s a group of criminals with businesses in the spirit , the game , the prostitution and other illicit activities, bought a chain of laundries. At the end of each day, they gathered the illicit profits from other business profits, being justified as a whole obtained legal activities (Solis, 2001).
Thus the origin of the term “money laundering”, which is relatively recent, dating back to the era of American mobster Meyer Lanski, well known in the time of prohibition. The offender, who was then in New York created a chain of “launderers” that were used to launder the proceeds from the exploitation of illegal casinos. It was enough to put large amounts of cash, which contained casinos within the chain box of laundry; so that those funds from entering the banking circle (Solis, 2001).
However, it has practiced some form of money laundering since it emerged the need to hide the nature or existence of certain financial transfers for reasons whether political , commercial or legal.
For example, by prohibiting the church Catholic usury in the Middle Ages , as not only a crime but as a sin mortal, merchants and lenders decided to charge interest for loans innovated many different practices that anticipate modern techniques of hiding, moving and washing the product of the offense. Its objective was to clear away completely charges for interest (hiding their existence) or appear to be something they were not (disguising their nature). This deception was done in several ways:
When merchants negotiated payments distance, it occurred to them artificially raise the types of change that would cover while paying interest. Where appropriate, they claimed that the interest charged were but a special premium charged to offset the risk (Solis, 2001).
Another way was to pretend that interest payments as profits arise, using something similar to what today is called ” enterprises fictitious “or front companies; They lent capital to a company that recovered as profits.
In addition, financial shelters also have a long history in which they appear as a necessary part for the practice. Among the first users of financial havens include the pirates who preyed on European commerce in the Atlantic in the early seventeenth century. There were ports that openly welcomed the pirates to enjoy the money they spent and when to withdraw from their activities, pirates often sought refuge abroad (Solis, 2001).
Thus, certain outstanding Mediterranean cities competed with each other, as countries today provide safe havens, to provide residence to the pirates (and their money).
At the same time, the pirates sometimes used their money to buy pardons to permit them to return to their country of origin. In fact, in 1612 the first modern amnesty for money from criminal activity may be logged. England offered, at that time, the pirates who abandoned their profession, unconditional forgiveness and the right to hold the proceeds of their crimes, anticipating more than three and a half centuries similar deals to certain prominent drug barons have asked some modern states (Solis, 2001).
Still others point out that this practice had originated after the Second War World, mainly in Germany and Italy , which they sold to Swiss gold they got from the invaded countries. Only Germany, during that period, sold over 1,600 million francs, that is, ten times more than their federal reserves of the metal. That is, of money from illegal activities such as economic and social made significant bleaching have news for at least 60 years.However, as a criminal phenomenon arises relatively recently, or what it is the same, internationally is only in recent years when defined as conduct criminal (Solis, 2001).
More recently, the concept of money laundering originates within the framework of growth of the phenomenon of drug trafficking. Policies against money laundering at national and international level have little time, too often they are considered within the structure of legislative drugs . Although the need to wash the profits from crime have always been connected with a wide range of crime, therefore many countries only criminalize the laundering of money derived from drugs. This prevents understand the economic consequences of organized crime and limited the implementation of policies (Solis, 2001).
The seizure of assets is not nothing new in criminal cases. Many of the history of modern legislation that facilitate and control the freezing or confiscation of income and assets from crime are rooted in the medieval notion of donadios, and have moved to modern law in many countries and by the tradition of common law English (Solis, 2001).
Originally, most of the seizures consisted of penalties imposed for political rather than economic offenses. Later, under common law, any conviction for offenses particularly serious (felony) could be as penalty is confiscation of property and real estate.
While confiscation is usually not as usual, some basic continuity of observed motivation . The initial seizures were justified like those of modern laws of concealment of property terms. In fact, as with some modern laws of confiscation, that penalty income reported by the treasury (Solis, 2001) imposed often.
Decayed even after the policy of depriving all dangerous criminals of their goods, he practiced in peacetime forfeiture and confiscation of property under regulations customs and in wartime against enemies or sympathizers of the enemy. That tradition -the seizure of goods smuggled and the right of war derives mostly modern rationalization of the seizure or confiscation of assets  (Solis, 2001).
While acts of money laundering, the search for financial havens and applications of asset-seizure laws, unprecedented in history, only recently have criminalized the act or attempt to launder the proceeds or property from crime (Solis, 2001).
The term money laundering, as mentioned before, emerged in state States during the 1920s when a group of criminals tried to find a seemingly legitimate source for the money that their shady business generated. The reasons for this may have been the following:
- Hide your successful business in a corrupt police trying to extort protection payments concepts.
- Avoid arousing the interest of its competitors.
- Avoid the possibility of being accused of evading taxes , weapon used in 1930 against offenders for which did not prosper any other office.
To achieve these objectives criminal gangs sometimes acquired business services payable in cash, and often chose to buy laundries, car wash services, in order to mix legal and illegal funds and declare their total income as profits from their businesses cover (Solis, 2001).
In doing combined in one stage the three phases of the normal cycle of money laundering. By this process may seem elementary, it remains the core of most of the strategies current money laundering. Schematically dirty or illegal money will follow these stages:
It is to enter the economy the money earned from illicit and where it is very important multiplying circuits to reduce risks associated. The placement is carried out mainly by the introduction of economic financial system and other sectors with high liquidity resources. Two ways to increase the circuits through which passes the money of illegal origin are:
- Clandestinely carrying cash to various tax havens and
- I circulate in the country of origin, through companies that handle cash and whose activity is difficult to control (casinos, tours show-busines, nightclubs, export , tourism , parking, betting offices).
It is to entangle the tracks with the aim of gradually complicate and hide the origin of illicit resources. It can be done through the installation of front companies in financial markets known for their respect to the banking sector  Money, always split, circulates including multiple wire transfers, thus diluted in complex financial arrangements.
It is to reconstruct the initial sums from the screen societies worldwide distributed (or spread over several banks premises). Thus, the money in the form of false invoices and fictitious loans, converges to greater financial market, as Wall Street, and is in charge of financial or completely legitimate business enterprises, but under the influence of organizations criminal. Henceforth it is reinvested in ordinary economic circles.
Finally, this circuit allows money to flow freely into the world economy (through real estate trade, exchange, metals precious works of art , among other things) and the disposal of its owners, who henceforth will own a major trading house (Solis, 2001).
Whatever the agent serves laundering money or whatever mazes using the principles are basically the same operational.
Here it is clear that money laundering is more than smuggle or hide funds murky origin, although such activities are an essential ingredient of the process. That is, the operation to conceal the criminal money, for example, spending it anonymously or moving it to a country where there are no sanctions against the use of money of illicit origin, that operation is not really money laundering, because the only thing has done is to hide the existence of illicit funds of surveillance authorities on where the underlying offense. But if money is given to the appearance of a legitimate source somewhere where there are sanctions against illicit origin, then if we can say that has been washed, as has disguised its origin (Solis, 2001).
Although it is a matter of wide spread, it can be said that has not yet acquired the reaction and attention that could be expected, or until recently has been given some attention  It is like facing widespread crimes under the sign of impunity or dissimulation. However, recognizing the existence of corruption and money laundering is not sufficient to understand why and how it develops, nature, strategies, how to enter a strategic circlesnation , defining their objectives between one place and another, nor can understand why it has become such a major problem for society, besides the great challenge and risk for governments and multinational organizations (Solis, 2001).
Washing aids elements
Of course, corruption is present in this action . On many occasions he is seen as accidental action of dishonesty and, above all, because discretion is associated with the element, besides evading controls to state, by engaging a person that gives something back to evade the law, while another allows and encourages such behavior, in breach of the rule of law (Solis, 2001).
Moreover, corruption hampers entrepreneurship and discourages job creation lawful and thus does not contribute to the development of the market home. Moreover, it undermines national unity, increases the problems social, undeniably weakens the image of the government and tends to put the political stability of the entire endangered nation . Corruption also damage the relationship between the rulers and the ruled, which generates social irritation is becoming more frequently and when it is linked with impunity, reduces the confidence of the population in their institutions  Therefore the Corruption must be located as a global phenomenon whose effects can range from preventing economic development, to corrupt social values and social stability limit of a particular geographic region (Solis, 2001).
Corruption reaches to take various forms, regardless of whether there grades, levels and means of expression. Thus, it can be political, ideological, detached, organized, public or private. We can associate the degree of institutionalization, the pace at which changes the social fabric and the performance culture. While voluntary transactions involving bribery, extortion also means, while the threat of a penalty, the violence of authority , the power of the corruptor or corrupted, or simply the refusal of an official to comply with its obligations , forcing enter in the transaction  (Solis, 2001).
Thereupon corruption become means for influence, that may be illegal and illegitimate. Upon reaching influence public decisions, those who use it seek to participate in the formulation of the decision or the decision itself, in the application of the rules relating to the administration public, as well as in the definition and implementation of the framework policy against offenders  (Solis, 2001).
Basically, the levels at which corruption influences transactions between limited individual and authority, but is actually the State itself may become shaped like a mafia organization, where corruption is the result of transactions between the groups social and members of the community politics. Therefore, the people, while they may lack a culture civic, would certainly obliged to participate in operations corrupt, while the law would only be a formality unenforceable and refusal to enter the game could translate into violence by instances of authority (Solis, 2001).
Opening a parenthesis, in the case of Mexico , we can say that the problem of corruption is exacerbated by the existence of tolerance and permit, as well as the practice of not file complaints for fear of reprisals, in addition to cultural factors which they have allowed the reproduction of patterns with the same nature.
Corruption also distinguishes between formerly ideological “left” and heritage known as the “right” . In many developing countries, corruption is seen as part of the official public daily life, that is, as an organized due to the lack of a real sanction. This results in the deterioration not only of the institutions but also of the authorities.
Corruption, and with it the organized crime , has other implications which are worth mentioning. It can occur at specific levels of the official hierarchy or the entire national structure. Therefore, it is considered as corruption:
- The fraud .
- Misappropriation of public funds.
- Money laundering, in recent years.
The bribe is understood as the promise or giving of any undue pecuniary or other advantage, directly or through third persons or entities, to urge the authorities to act or fails to perform the appropriate role for the purpose of create or retain business. In particular, this practice acquired by individuals and employers undermines the efficiency of the government and the system of supervision (Solis, 2001).
It is appropriate to indicate that the measurement of the total output of a nation is a science imperfectly, even in those countries where statistics are reliable government. Unreported economic activity (the underground economy or black market) is one of the most important features in the world economic stage, usually causing the fund is low (with high tax rates for participants in the formal economy), lower costs in security and social ups and downs in public regulations (Solis, 2001).
For example, among the most industrialized and developing countries, the underground economy in Italy is estimated around 26% of their gross domestic product for 1994, followed by Belgium with 21%, Sweden, Norway and Denmark with 18.3, 17.9 and 17.6%, respectively (Solis, 2001). In several of these nations developed this type of economy depends on the level of corruption, although this is difficult to measure, so the index is based on the product and perception of the people working in institutions and businesses in each country; therefore the definition that could be used on corruption is the misuse of public power for private uses (Solis, 2001).
|Ghost economy as a percentage of GDP . Industrialized countries, 2014|
|Source: Friedrich Schneider, University of Linz.|
Faced with these scenarios, Nigeria is perceived as the most corrupt nation in 2011, followed by Bolivia and Colombia. Mexico appears immediately after Russia and Pakistan, on the opposite side of the coin, Denmark was ranked as the least corrupt country, followed by two other European countries: Finland and Sweden.
|Corruption Perceptions Index 2014|
|Most corrupt countries||Place||Countries with less corruption||Place|
|Source : Transparency International|
What conditions or factors promoting corruption? In accordance with the International Monetary Fund, trade restrictions, controls on prices , government subsidies, the existence of multiple exchange rates and low salaries of public services, are elements that favor. Therefore, the consequences of corruption and lower economic growth cause misapplication of resources, discourage investment and reduces the effectiveness of distributive income (Solis, 2001).
An effective measure to further combat money laundering, is the unification of legislation in important part of the barrier to be built; the other for close international cooperation between judicial and administrative authorities of different countries, as criminals in their bleaching activity require the international stage. Thus, regional and multinational cooperation must play an important role around the called bank secrecy, which despite being a very valuable aspect has deleted to prevent, following the same benefits to hide illegal activities. They must also recognize that the controls established should play a central role in the prevention of money laundering, not just used to report certain information to the authority. The controls must also obey a comprehensive business strategy based mainly on financial intermediaries (and desirably non-financial as well) adequately know their customers , so enabling them to identify the pattern of behavior of its financial activities and reporting the authorities when their customers leave their normal pattern of behavior.
Nationally and internationally it is important to ensure that financial institutions declare suspicious transactions swiftly, but without alerting customers which are presumed deposit funds derived from criminal activities. Starting against collaboration, it should be exempted from such companies, its officers and employees from liability any, as a result of information provided in good faith.
To support this thesis , these institutions should strengthen procedures to audit internal, secure information and ensure the training of personnel regarding the rules and principles set out to combat money. It is important to note that the measures and recommendations established by bodies such as the Financial Action Group (WAG) are not specifically complex or difficult, provided there is political will to act, in addition to not compromise freedom to carry out lawful operations, or they threaten economic development , but must look for balance for these recommendations might not be an excessive burden for the healthy operation of the financial system.
Regardless of controls or barriers are in place to combat money laundering, any national and international regulations must always keep in mind the fundamental principle of building a culture of ethics and professional legislation, unwavering compliance with the rule of law.
Above do not inevitably affect the political, economic and social stability of nations.
Part II: Money Laundering in Hongkong
(Work in progress)
As China continues to carry out its campaign against corruption, with resonant arrests, Hong Kong, a major Asian financial centers, have discovered a problem related to money laundering is through same banking system in Hong Kong as some Chinese capital raised illegally move. In recent months, the efforts of many corrupt officials were found to export funds from corruption, although local financial structures prove insufficient to identify some of those transactions, particularly when they occur through Internet Banking. The case that rocked the former British colony primarily involving HSBC, the British banking giant born in Hong Kong. Last month, the company was ordered to pay a fine unprecedented 1.92o million after being found by the US courts have favored responsible for the recycling of dirty money, and having failed to block finances terrorism. This week, however, the local court sentenced to ten years in prison Juncheng Luo, a Chinese 22 years, having recycled 13 million euros in the space of eight months, all transfers through the Internet. The Luo is the most significant event in Hong Kong. Young, Guangdong, had created a bank account with Chiyu Banking Corporation, a subsidiary of China Bank of China, on behalf of an alleged relative mentioned only as “Uncle Pang” which helped pay the bills hospitaliarias father Luo , died in 2002. After the death of the mother of Luo later, “Uncle Pang” apparently requested the young to help him create a company and open an account in your name. Thus, in the space of eight months, Luo made 4,800 3,500 deposits and transfer money from your account at the Chiyu Bank, between 2009 and 2010. In pronouncing his sentence, Judge Esther Toh said the increase in transactions in the illegitimate money former British colony. “The executive of Hong Kong could consider instituting harsher penalties,” he said, so that the whole reputation as a financial center is maintained. According to police, the suspect transactions last year, until September, were of 17,795. While 2011 they were around 20 287. In April, Hong Kong introduced a new law, called Ordinance financial institutions against money laundering and counter terrorist financing. This, after being criticized by the Financial Action Task Force, an international body created in 1989, which accused the former colony of not being provided with international standards to counter financing and money laundering. Edward Chow Kwong-fai, vice directore the Hong Kong Federation of Business and Professionals interviewed by the Hong Kong newspaper South China Morning Post, he said that “with the new law came into effect more severe measures” and “what should be is reinforced monitoring of the Monetary Authority of Hong Kong, “with central banking functions, pointing to the lack of controls to deal with the facility to transfer capital.
Shah v HSBC Private Bank and the system of consent
Daily billion US dollars invested in speculative operations are moved around in this world. The profitability of these depends on which are carried out in the quickest way. Sometimes a few minutes are enough for an investment unprofitable and go to generate losses. Compliance with the law on prevention of money laundering by financial institutions may in some cases delay the execution of an operation ordered by a customer and, therefore, affect their profitability. And the situation may worsen if the delay is due to some kind of action in bad faith by the financial institution or any employee thereof.
There is a general obligation that weighs on financial institutions that imposes the obligation to maintain confidentiality about the affairs of his client (banking secrecy). Therefore, they cannot disclose customer information to third parties, unless they are authorized to do so, which only occurs in exceptional circumstances. One such exception is the enabling disclosure of customer data when there is suspicion of money laundering. According to the law on prevention of money laundering, financial institutions and other regulated entities are obliged to submit Suspicious Activity Reports (SARs) when they suspect or have reasonable grounds to suspect that goods from criminal activity (or related with the financing of terrorism). Financial institutions and their employees are not liable for the disclosure of customer information if they act in compliance with its obligations within the framework of the fight against money laundering.
Normally, when a financial institution (or its employees or managers) report their suspicions in good faith, it is exempt from any kind of liability (civil, criminal …).According to the FATF Recommendations, version February 2012, the presentation in good faith of an STR to competent authorities by the financial institutions, their directors, officers and employees shall not constitute violation of any restriction on disclosure of information imposed by contract or by any law, regulation or administrative action, and for them not imply any liability.
The obligation to submit such reports in principle simple compliance is generating intractable disputes in some countries. Including the existence of good faith when it presents the ROS, the possibility of requiring liability in case of damage to a client or on the confidentiality -or not- of the identity of the employees of financial institutions occur who report their suspicions about the operations of a client.
It is not easy to determine what is meant by reporting “good faith “. The reference to good faith in international recommendations and the regulations in some countries seems to imply that if an operation is reported the customer may require the financial institution to prove his suspicion, especially if communication would It has caused any damage. We discuss today whether financial institutions may be forced to reveal how, when and who has reported the suspicion. This may require knowledge of the identity of those involved in the reporting process. If the identity of such persons is not revealed, the plaintiff client could be a disadvantage, because it will not be able to know whether the report has been made in good or bad faith. This is the question that has been raised in the UK, under the case Shah v. HSBC Private Bank.
Mr. Shah is a businessman with interests in various countries, including Zimbabwe. He and his wife were clients of HSBC Private Bank (UK) Limited in London since 2002. Between September 2006 and February 2007, Mr. Shah ordered the bank conducting four transfers from your account. HSBC suspected that the funds deposited in the account were proceeds of crime. As a result, he disobeyed the instructions of Mr. Shah and proceeded to report their suspicions to the Serious Organised Crime Agency (“SOCA”), in accordance with the provisions of Part 7 of the Proceeds of Crime Act 2002 (“POCA”) , requesting authorization to turn operations. On four occasions he presented his reports and awaited the consent of the SOCA before executing the transfers ordered. From the order making the transfers and the presentation of ROS elapsed between one and two days. The explanation given by the bank HSBC Mr. Shah for the delay in processing the payments was that he was fulfilling the obligations under UK law.
In September 2006, Mr. Shah was asked by a creditor (a former employee) to explain to him why he had not received the money he owed on your account. Mr. Shah told him that the reason for not yet had the money was the bank’s compliance with its legal obligations HSBC in the UK. This information to your creditor spread rumours in Harare (capital of Zimbabwe) that Mr. Shah was suspected of money laundering in the United Kingdom (this subject went to the police of that city to discuss the situation). After a meeting with the head of the Africa department of HSBC Bank, Mr. Shah was warned that there were investigations into their business, but had ended. Therefore, Mr. Shah requested details of the reports to the SOCA HSBC bank, which was denied by the bank. Following this refusal to provide details, Mr. Shah claimed that he was unable to explain to the Zimbabwean authorities the investigations to which was submitted in the UK, which led to the confiscation of their investments.
Mr. Shah claims that as a result of this performance of HSBC, the Zimbabwean authorities considered him suspicious washing and frozen and then seized their investments (which was done through private companies), which caused losses of more than 300 million US dollars.
The proceedings at first instance
In September 2007, Mr. Shah gave detailed instructions to sue the HSBC alleging breach of duty (breach of contract) for not complying with his instructions and for not providing information to which he was entitled, causing losses claimed. Further he claimed that the suspicions that led to the presentation of ROS were irrational, recklessly caused by erroneous bank itself, thus requiring HSBC to prove such suspicions.
In November 2007, HSBC filed its defense arguing (among other things): 1) suspected that the four transactions, which was never carried out immediately, constituted money laundering; 2) that it had submitted a SAR and requested the consent or authorization of the SOCA to exercise them in accordance with the law; and 3) it would have been illegal to do it before. The bank argued that it could have committed a crime if he had made transfers while there were suspicions of money laundering. Therefore, he requested that the claim be dismissed or to proceed by summary trial.
First the HSBC bank succeeded in its request for summary judgment. The judge rejected the basis for the request of Mr. Shah (the bank acted as a result of an irrational suspicion, recklessly caused by the incorrect bank itself) and dismissed the action in the light of the evidence presented by HSBC and absence of any allegation of bad faith by the applicant (Case Shah & anr v HSBC Private Bank (UK) Ltd (2009) Case No. SSI / 08 / 0530IHQ / 08/0786).
The procedure before the Court of Appeal
Mr. Shah appealed, claiming, among other things, that HSBC had not submitted the reports to the SOCA as quickly as possible. But the key issues raised by the appeal were:
- If the bank had a duty to disclose the documents on which it based its suspicion and whether it implied a duty to disclose the names of bank employees who report their suspicions, and;
- If so, if the bank has the right to remain anonymous for reasons of public interest.
The Court of Appeal ruled in favor of HSBC in the first point (that is, it was not required to disclose the names of employees) and, therefore, did not have to decide on the second point ( Jayesh Shah, Shaleetha Mahabeer v HSBC Private Bank (UK) Limited (2011) Case No HQ07X03152).
The bank is required to prove that you have a genuine suspicion . According to the jurisprudence that exists in the UK on suspicion, this is not a serious obstacle, since the threshold for “suspicion” is very low and subjective. Indeed, according to the judgment Da Silva v R  1 WLR 303, the suspicion exists when a person can think that there is a possibility, which is not something fanciful, that there are facts that support the suspicion. It is not enough a vague sense of worry, unease or discomfort. This is because the law does not require that the suspect be “clear” or “firmly grounded and oriented toward specific or based on reasonable facts.” Being so low that threshold, the Court of Appeal held that the identification of employees was not information relevant to the case.
The Court of Appeal briefly addressed a complicated issue that could lead to the conclusion that the bank had no genuine or suspect good faith . Indeed, he noted that it cannot be dismissed as mere fantasy that a bank employee apparently requested a loan of $ 1.5 million to Mr. Shah, and that the loan was rejected. It seemed to be suggesting that the employee in question had a grudge and made a false report, so the suspicion was “fanciful”. Also it appeared to suggest that the employee was trying to punish Mr. Shah for not granting the request not to transfer certain funds to another bank. With these large sums of money at stake, you cannot rule without bad faith on the employee. In these circumstances, the Court notes, it can be important to determine the identity of employees involved in the reporting process. However, it considered that the suggestion that the employee was trying to punish Mr. Shah for not granting the request not to transfer certain funds to another bank was “purely speculative”, “no evidence to support it” and “no positive argument to this effect it is contained in the writings.” Also, the compliance officer also gave evidence that the employee in question was not the source of internal communications. Therefore, although the employee’s actions were described as “extraordinary”, they did not provide any basis for concluding that it was necessary to disclose the identity of the individuals who filed the report.
However, the Court of Appeal opens the possibility that the financial institution has to disclose details surrounding the reporting process. Weighing the public interest in confidentiality and the public interest in public justice, the Court ordered the bank to identify the departments where they had worked the individuals involved and give each of them a letter. Thus, the plaintiff has the opportunity to get an idea about the number of employees involved in the reporting process on the four occasions. If it is evident that repeatedly reports are made four times by one or two individuals, then the plaintiffs may request the detailed identity of such employees. If several employees involved, then it is harder to get the detailed identity of such employees.
The Court adopted this decision in light of three circumstances. First, the applicants are not, and were not at the time, involved in money laundering according to the police investigation. Secondly, bank employees are not at risk of reprisals or physical damages from the plaintiffs. Third, the reality of the situation was such that the applicants had already an idea of identity, at least some of the people involved.
Part III: Money Laundering in Australia
Why Do Delinquents Legalize Money? Case of Australia
Money laundering is perilous to Australia. It is the general cardinal for almost all the grave and systematized criminal activity.
From illicit undertakings such as bootlegging, burglary, tariff elusion, people trafficking, arms smuggling, counterfeiting and fraudulent exercises the criminals generate profits. To exculpate or shroud its illegitimate derivations, they rely on legalizing or decontaminating this ‘filthy’ affluence.
Disguised proprietorship in illegitimate earning conducts to give the impression of rightful sources is few of the practices involved in money laundering. The criminals in this way are encouraged to upsurge revenues through venture capital, accrue funds, preclude trial, elude tariffs, to shroud and accrue affluence, and finance further offending doings, counting coercion.
It is also a core element to grave levy sham/ tax elusion and a peril to proceeds.
Money laundering is often an international misdemeanor. To transfer unlawful capitals to multinational consortiums’ home-bases, to dissociate felonious wages from the initiating crime and ‘flourish’ it in some foreign country, to acquire asset or distinguishable worth portable goods and chattels for financing or deferred arrival to Australia, and to pay for imported illicit goods and services the money are laundered. The Australian controlling and law enforcement bureaus face intricate trials and this global aspect generates openings for felon groups. For illegal amenities and freights, certain regions and countries are deemed substantial money laundering perils because they are beginnings or shipment points while others due to favored tax are alluring for money laundering. For money laundering, transit countries or source for unlawful supplies or amenities, and high criminal networks residing places are prospectively to persist as high-risk terminuses places for money laundering.
How is money laundering defined by the Criminal Code? The Criminal Code Act 1995(criminal code), Division 400 broadly defines money laundering as including more than just disguising the criminal instruments or proceeds. ‘Engagement with’ the crime proceeds or the instruments makes one felony, according to the Criminal Code. A banking transaction ‘dealing’ individual, involved in engaging, importing, exporting, disguising or placing of money, possessing or receiving defines the term, ‘deal with’. The proceeds of crime ( such as shopkeeper carrying on their usual business) is then transferred to an innocent third party that receives money, without being aware of the fact that under the Criminal Code, the money receipt under the Criminal Code does not establish felony.
How Is Money Legalized?
To deal with the criminal profits, be it other property or money dealing matters, varied methods are used by the convicts for the purpose. These methods, as with other criminal activity, advance to evade law enforcement and controlling measures and to ill-use technology and market progressions, including coupling new technologies or products, such as m-commerce and e-commerce (buying and selling through mobile wireless devices).
From gaming to baking, international trade to luxury goods, preferred allowance to cash concerted businesses, money laundering occurs. It can include:
» relocating other property or money across borders (for example, jewellery, global funds transfers, allowances, massive cash trafficking and cross-border movement of jewellery and precious metal)
» domestically disguising other property or money (for instance, procuring high-value goods, gambling real estate and putting money into lawful businesses).
What Is The Money Laundering Phase?
The three-stage process that felons may use to make funds give impression of lawfulness and to disguise the illegal funds source are described in the money laundering phase.
- » In the conventional system, proposing illicit finances (for instance, making ‘planned’1 cash dealings into bank accounts).
- » Shifting, parting or masquerading assets or illicit funds or assets to mask their actual source (for example, using a labyrinth of intricate transactions including accounts, multiple banks, trusts or accounts and corporations).
» Integration. Procuring luxury goods and high-value assets, financing these now dissociated funds or belongings in further legitimate business or criminal activity. The assets or funds, at this stage appear to have been legally obtained.
What Are The Key Features Of Money Laundering In Australia?
The vibrant and apt nature of systematized crime is reflected in money laundering. In the contemporary Australia’s money laundering environment, four main behaviors have been distinguished:
- » Merging (Or Co-Mingling) Legal and Illegitimate Economic Doings. For instance, through front companies and cash-intensive businesses. Offering a sanctuary for criminal enterprise and this process of rehabilitating felonious advances is a deeply ingrained money laundering methodology.
- » Interlocking Professional Proficiency. To disguise their illegal workings, including money trials, and to enrich their competency to function both in criminal and lawful markets, the networks and the criminal groups, both engage in the professional ( such as accountants and lawyers) services .
- » Involving Expert Money Laundering Consortiums. Based in Australia and overseas, expert organizations are offering particular money laundering amenities to inland and transnational delinquent groups functioning in Australia.
- » The ‘Globalization’ Of the Australian Structured Crime Environment. For major crime groups operating in Australia, there is nearly always an international factor to the money laundering cycle.
What Are The Major Money Laundering Channels?
Several boulevards and sectors of the money laundering are ill- used by the planned crime. Money transfer, banking system and discrete transmittal services are the chief money laundering means. High- value goods and the gaming sector constitute the other important channels. Global trade, investment agents, less evident networks or enablers include electronic payment systems, legal entity structures, cash intensive businesses, professional advisers, legal entity structures, cash intensive businesses, electronic payment systems, bearer negotiable instruments and cross-border cash movement.
Drafting out the money laundering nature within and across these channels is the aim of this report. To identify and attend money laundering perils, by underscoring the kinds of money laundering methods, the report will help the industry to equip itself with protective actions, AUSTRAC and other government agencies have pinpointed. An informed industry is a resilient industry.
For its CTF/ AML framework, Australia has purposely assumed a risk foundation. This identifies that industry sectors are suitably positioned to pinpoint and cope up with the money laundering jeopardies they face. It also acknowledges that the degree and characteristic of money laundering stakes differ with and outside the sectors.
Significant Money Laundering Channels:
The Banking System
‘…The jeopardies of detection for the criminals are offset through bank cash liquidity, deposits security and the efficacy of services such as loans and fund transfers…’
At some stage, through the banking system a substantial amount of money laundering activity instigates. The banking sector offers openings to mask and obscure illegal transactions, thus the banking sector appears to be an attractive sector to money launderers. The efficacy of amenities such as safety of deposits, loans and funds transfer, counterweigh the detection perils for the criminals.
What Are The Links Between Money Laundering And The Banking System?
- » Accounts. Before transferring the bank accounts to the foreign and Australian economic markets, the bank accounts are exploited to launch illegal money into the economic system, the financial intelligence indicates. To facilitate ‘front businesses’ as legal setups, the felons can also pursue account opening procedures to create false customer profiles.
- » International Funds Transfers (‘Wire’ Transfers). Banking systems are the major funds transferring ways to swiftly locate money amidst transnational frontiers to transfer the criminal proceeds promptly to overseas territories, where they can take benefit of attributes such as bank secrecy laws to accomplish the money laundering process.
- » Loans. To gradate and incorporate illegal capitals into other resources such as motor vehicles and real estate, the loans are used by the criminals. By gaining loans, they can legalize funds, which they then remunerate using smaller constituted cash amounts or total cash imbursements. Under the semblance of payments, the loans are necessarily procured as ensconce for legalizing criminal profits. Considerable cash activity may draw more loan related operations. In a bid to attempt and void themselves from wary financial activity, the criminals in false name may also obtain loans.
- » Bearer Negotiable Instruments (Bnis). To traffic high-value resources across transnational frontiers, a dense and well-suited condition is offered by the money orders, traveller’s cheques, bank drafts, promissory notes and BNIs. In order to obfuscate the linkage to original crimes, the criminals may endeavor to acquire BNIs with co-joint funds (comprising of criminal proceeds and the legitimate business earnings).
- » Safe Deposit Boxes. To save the criminal proceeds and tools including firearms, drugs and cash, the criminals misuse the privacy of safe deposit boxes. To impede law enforcement investigations, they can exercise deceitful identities to tenure multiple boxes across varied bank branches.
What Methods Are Used To Launder Money Through The Banking System?
In order to get around the anti-money laundering controls which have been put in place by Australian operating banks, the criminals use a range of stratagems. These strategies include:
- » Structuring. Under the CTF/AML Act elude levitating wariness or drawing indispensible registration of AUD 10,000 or more, by breaking the banking substantial sums of cash into smaller amounts.
- » Complex Company Ownership Structures. To project the eventual funds source and the advantageous holders of those funds, these structures which can compromise numerous units, in several territories are used.
- » Third Parties or Third Party Accounts. To distort the relationships between criminals, their criminal proceedings and bids to launder funds, these parties and accounts are used. On behalf of criminals, numerous third parties conduct transactions through a technique called ‘smurfing’. Into several minor amounts, the large cash amounts are broken and then passed on to third parties to bank in accounts extended in diverse financial institutions. In the money laundering activity, these third parties may be conniving or involved.
- » Identity Crime. The relationship between the fund and their original origin or source is hindered through transactions made using purloined, deceitfully acquired or conjured identities.
PARAGON OF HOW AUSTRALIA IS COUNTERING TO THIS THREAT
The banking institutions were obliged to recognize third parties undertaking threshold transactions of AUD 10,000 or more, in accordance with ATM/CLF provision that came into effect on 1 October 2011. With respect of the transaction being conducted, it is necessary to report the account holder details. Individuals attempting to masquerade their earnings by retrieving or operating other person’s account, or who try to dissociate themselves from a transaction or account would easily be identified through this novel affirming prerequisite.
Pinpointing combatting identity crime as an access to other grave criminal activity, an important precedence action in the Commonwealth Organized Crime Response Plan has been made by the Australian Government. In March 2011, three Commonwealth identity crime offences were proclaimed by the Australian Government to facilitate confronting this snag. An array of elementary control, pertaining to distinctive crime, where a person plans to perpetrate, or expedite the directive of, a Commonwealth felonious transgression is hindered by these offences. Up to 5 year incarceration these delinquencies are indictable.
Accused Remunerated For Armenian Cocaine Shipments with Global Transfers
After the revelation of the fact that over $100,000 had been transferred out of Australia, an investigation in the year 2005 was carried out to expose a major drug smuggling operation. While attempting to transfer $100,000 to Armenia through a bank, one of the suspects was arrested. Through cash, the suspect had attempted to pay for the international funds transfer. Ensuing the suspect’s arrest, the group’s customary funds transfers to Armenia were terminated, a period of time. In an attempt to avoid detection by the authorities, the group employed different funds transferring method.
» In the last week of each month, funds being transferred overseas
» With cash being paid and the international funds transfers being conducted. Nevertheless, into amounts less than $10,000, the cash payments for these transfers were seemingly structured to avoid the cash transaction reporting threshold
» At the same time four individuals from the group sending funds overseas. Through various branches of diverse area offices in the interior suburb, the group would travel to one suburb and transfer the funds
» to the same branch of the same Armenian bank, the funds always being sent
The group over a four-year period transferred nearly $1.8 million to Armenia. The transferred funds in order to buy cocaine for ingression into Australia were consequently sent to the United States, the authorities believe.
For owning a money-making amount of smuggled cocaine, the two members of the group were apprehended and decreed to six years detention in 2010.
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