While the Financial Action Task Force, an inter-governmental body has set standards and procedures to fight money laundering, the menace continues to grow, with the fear that terrorists are at the receiving end for their nefarious activities.
The New Zealand Government is promoting the Anti-Money Laundering and Financing of Terrorism Bill, saying that it would help New Zealand tackle financial and drug-related crime by detecting, tracing and seizing profits of domestic organised crime groups.
There is little evidence that the statute is working, but we live in the hope that it would eventually, and keep money where it should be- in the “official economy.”
Two years ago, the New Zealand government froze $64 million worth of assets of a group of Australian tax evaders at the request of its counterpart in Canberra.
Putting a value on money laundering is, by its very nature, a matter of ill-informed guesswork. The International Monetary Fund reckons that the amount of dirty money being cleaned through the world’s financial system is a whopping $US 1.5 trillion a year, equivalent to about 5% of Gross World Product.
Laundering has grown hand-in-hand with globalisation, and particularly with the lifting of capital controls and the development of international payment systems.
These allow money to be shifted in seconds between banks in different parts of the world that may not even be aware of each other’s existence.
The sums of money being transferred are huge. Bank of America, for example, sees nearly $US1 trillion pass through its internal wires every day. While the international payment system is crucial to the integrity and stability of the world’s financial markets, it also provides opportunities for crooks to hide their money by shuffling it around the globe.
Private banking is the laundering channel that has received most attention. Clients in this sector tend to be wealthy people who want their affairs handled with discretion, not least because they need help in exploiting opportunities to minimise their tax bills.
Traditionally, a bank that asked too many questions would find its customers taking their money elsewhere. So a “don’t ask; don’t tell” culture developed, in which money laundering was able to thrive.
While some money launderers say that they arrange for money transfer mainly for business purposes to circumvent foreign exchange regulations of a county, law enforcement authorities view it differently.
“Crime is crime and those engaging in money laundering should be aware that they are abetting drug dealers and terrorists since such transactions benefit them.
The Anti-Money Laundering and Financing of Terrorism Bill will be implemented in two stages. The first will cover financial institutions and casinos, and the second will include other industries and professions where money laundering could occur, including lawyers, accountants and real estate agents.
Businesses will be required to make more robust checks on customer identity and verification and have better systems in place to identify and track suspicious activity.
It is time to get the dirt out of the money market and cleanse it with rules and regulations that ensure financial security and social safety. *