is Money Laundering?
widespread is the Problem?
Money Laundering Process
of the Process
Can We Prevent It?
on Financial Institutions
Areas Prone To Money Laundering
Effects On Financial Institutions
"London washes whiter".Financial institutions are at the very forefront of the battle against the money launderers. It is not only their institutions that the money launderers target in their various nefarious schemes but under current legislation they are responsible for policing the financial dealings and reporting any suspicious transactions and also transactions over a reporting limit of £10,000 (In the UK).
Financial institutions are affected by money laundering;
i) THE LEGAL POSITION
Employers’ Legal Obligations.
These arise from the Money Laundering Regulations 1993. The Regulations impose a number of statutory obligations on all financial institutions.
If employers fail to do this, they are committing an offence, which is punishable by a maximum of 2 years’ imprisonment, a fine, or both.
However, the law also imposes an obligation on people personally and they must take this responsibility seriously. If not, and they knowingly help a money launderer, or if a transaction, a client or a colleague causes them to suspect money laundering - and they fail to report their suspicions…. they can go to gaol. For example "tipping off" someone they are under investigation is an offence and upon conviction punishable by up to five years imprisonment.
ii) THE FINANCIAL POSITION
Because of the need to set up and maintain various procedures in order to comply with their legal obligations' businesses face compliance costs. The Regulations affect the financial and professional services sector. Within this sector they apply to:
iii) COMPLIANCE COSTS
The Regulations require that financial institutions put in place systems to deter money laundering, and to assist the relevant authorities to detect money laundering activities. In order to do this, it has meant that financial institutions have had to incur additional costs and these costs are most likely to increase in the areas of administration, training and provision of storage space for records.
Costs occur here because of the need for businesses to obtain evidence of identity from their customers when doing business of ECU 15,000 or more. ( Regulation 7(5) ) They must also keep records of identification evidence and financial dealings for five years. ( Regulation 12(2) ) Other costs which may occur would be if an institution had to introduce new systems of control - for example, new computer software, which they would not otherwise have introduced. This will not be the case however, for all businesses. For members of self regulatory organisations, who are already required to identify customers, and for other firms which may require identification for professional reasons, the main change is likely to be in the nature of the evidence required and the time for which it must be kept. Firms that already have well-developed procedures in these areas, such as Banks and Building Societies, will find that the costs of compliance will be relatively lower.
All relevant staff of institutions affected are required to have initial and recurrent training in:
There will be one-off costs in producing new procedures and training manuals.
Provision of Storage Space
The record-keeping requirement (Regulation 12(1) ) will have implications for the amount of storage space needed and the subsequent costs this will incur.
The costs will vary considerably for the different types of business institution affected and it is difficult to produce estimates for ‘typical’ institutions as the Regulations will apply to a wide variety of businesses in terms of staff numbers, volume of transactions, and existing degree of money laundering compliance. A table has been produced by HM Treasury (28 July 1993) derived from figures supplied by a number of individual institutions and trade associations.
In May 1992, HM Treasury issued a consultation paper in order for businesses to give their views on the cost of the proposed Regulations. One thousand copies were issued to a cross section of the affected professional bodies and businesses. Consultees were asked "to identify and quantify any additional direct or indirect costs (recurring and non-recurring)" that would be likely to arise as a result. Very few of the respondents commented on the costs. This suggested that costs arising from compliance were not a major cause for concern.
HM Treasury has produced what it calls ‘very broad brush estimates’ based on illustrative assumptions.