Archive for July, 2006

International Anti-money Laundering Organization will be Based in Toronto

Friday, July 28th, 2006

On July 7, 2006 Canadian officials announced that Toronto will become the permanent base of Egmont Group – an international organization that will be dealing with anti-money laundering and counter-terrorist financing. Canada will spend $5 million to establish the headquarters of the Egmont Group.

Canadian Minister of Finance, the Honourable Jim Flaherty, assumes Canada has taken one of the leading roles in combating money-laundering on the international level.

Hosting Egmont Group is not the only major step Canada has made toward anti-money laundering.

Canada has recently joined the Asia/Pacific Group on Money Laundering (APG) described in the previous blog.

Also, Frank Swedlove, who is a Canadian, has been appointed for 1 year to the presidency of the Financial Action Task Force (FATF).

The Canadian government allocated $64.4 million in the 2006 budget in order to fight against money laundering and terrorist financing. Also, and new anti-money laundering legislation, which will enhance monitoring and intelligence gathering efforts of Financial Transactions Reports Analysis Centre of Canada (FINTRAC), is to be introduced soon.

Asia/Pacific Group on Money Laundering (APG)

Monday, July 24th, 2006


Asia/Pacific Group on Money Laundering (APG) was established in 1997 at the Fourth (and the last) Asia/Pacific Money Laundering Symposium in Bangkok as an autonomous regional anti-money laundering body and a regional response to the problem of the global threat of money laundering.

The APG is working to facilitate adopting, effectively implementing and enforcing internationally accepted anti-money laundering and counter-terrorist financing standards – in particular, the Forty Recommendations and Nine Special Recommendations on Terrorist Financing of the Financial Action Task Force on Money Laundering (FATF).

The Asia/Pacific Group on Money Laundering assists jurisdictions in the region in enacting laws criminalising money laundering and terrorism financing, providing them with legal assistance, implementing comprehensive preventative measures, establishing coordinated systems for investigating and reporting suspicious transactions as well as in related matters.

The Asia/Pacific Group on Money Laundering has the following tasks:

  1. to participate in and cooperate with the global anti-money laundering network – firstly, the FATF as well as some other regional anti-money laundering groups,

  2. to carry out education, research and analysis activities to help understand the money laundering and the financing of terrorism environment as well as the global efforts against them,

  3. to provide and coordinate the technical assistance and training to jurisdictions in the Asia/Pacific region,

  4. to assess APG members’ compliance with the global anti-money laundering and counter-terrorist financing standards.

So, as it has been already mentioned, the FATF is a primary organization for the APG to cooperate with. Some of the future blogs will describe the results of this cooperation. 

Money Laundered Literally

Wednesday, July 19th, 2006

When we talk about money laundering, we do not mean laundering money literally. It is obviously a metaphor.

However, why not laundering money literally?

An amazing incident happened after a bank robbery on June 11, 2006. Two men robbed a bank in Queens and at gunpoint stole 65 000 USD. They were forced to drop about 30 000 USD just outside the bank and escaped with the rest of the money. In the process of the robbery, one of them told the tellers to give no dye packs that banks use to foil robbers and make stolen money unusable. However, this is not what happened. A pack exploded and most of the cash was sprayed with red dye.

What Anthony Digiosaffatte (51) and Paul Villanueva (37) did was putting the cash in a washing machine in mesh laundry bags for washing delicate clothing in order to erase red dye from it.

The two were arrested on June 13, 2006, so they did not manage to benefit from the laundered money:)

FATF 40 Recs

Friday, July 14th, 2006

The 40 Recommendations worked out by the Financial Action Task Force (FATF) is a complete set of anti- money laundering measures that cover the criminal justice system and law enforcement, the financial system and its regulation as well as international co-operation regarding money laundering.

The Recommendations were initially developed in 1990 in order to combat the misuse of financial systems by criminals who launder drug money. Since then, they have been revised and updated twice – in 1996 and 2003. The updated Recommendations now apply also to terrorist financing. Nine more recommendations were added – these are Nine Special Recommendations on Terrorist Financing.

As far as different countries have different financial and legal systems, the 40 Recommendations set minimum standards for action for countries and then countries should implement some measures in accordance with their particular circumstances and legal frameworks.

The 40 Recommendations have been recognized implemented or adopted on an international level and they have been a crucial contribution to anti-money laundering all over the world.

Money Laundering in Cyberspace

Saturday, July 8th, 2006

Money laundering can take place in practically any location, on the web includingly. International experts believe that the Internet is especially vulnerable to be used by criminals for laundering money.

In cyberspace, money can be laundered through Internet casinos, online banking and web-based financial services. By means of Internet communication, money launderers can stay anonymous.

Internet banking makes it more difficult to locate money launderers, Internet bank accounts can be accessed from anywhere, so online banking is one of the beloved ways of money laundering for many criminals.

Regarding this, the Financial Action Task Force (FATF) described in the post on June 17, deals with working out new ways of anti-money laundering and of diminishing the risk that exists at any stage of the contact via Internet between a new customer and a financial institution. In case of Internet banking, there is a risk of working with money launderers especially if the bank account is opened by e-mail and fax, without customer’s personal visit to the bank. So, this complicates the possibility to detect crime.

Internet-based gambling operations also serve as a financial haven for ”dirty” money laundering operations. The FATF reported that there is evidence of using online casinos to commit crimes and launder the proceeds.

It is also problematic to track laundered money because gambling records are software based and, as to the gambling place, they are often located in offshore jurisdictions, that’s why it is extremely difficult to find out the physical presence of the records. It has already been discussed in post on May, 9 that offshore tax havens have not only legitimate uses, however, it goes without saying that money laundering can occur anywhere in the world – either offshore or “onshore”. Another problem of tracking gambling records is that these records do not necessarily exist at all.

To conclude, money laundering in cyberspace has many types and takes many directions, and does require more attention and discussion in next posts.

What is there universal about money laundering?

Monday, July 3rd, 2006

Money laundering is a common problem for international community of the world, therefore numerous governments and jurisdictions commit themselves to taking action regarding anti-money laundering.

Since money laundering is so wide-spread across the world, it is much easier to talk about its regularities that about its irregularities and individual peculiarities in particular countries. The general framework of regular money laundering features is very important to understand this universal phenomenon.

The United Nations Office on Drugs and Crime has worked out the Ten Fundamental Laws of Money Laundering that reveal the way money laundering works. These are as follows:

  1. The more successful a money laundering apparatus is in imitating the patterns and behaviour of legitimate transactions, the less the likelihood of it being exposed.
  2. The more deeply embedded illegal activities are within the legal economy and the less their institutional and functional separation, the more difficult it is to detect money laundering.
  3. The lower the ratio of illegal to legal financial flows through any given business institution, the more difficult it is to detect money laundering.
  4. The higher the ratio of illegal “services” to physical goods production in any economy, the more easily money laundering can be conducted in that economy.
  5. The more the business structure of production and distribution of non-financial goods and services is dominated by small and independent firms or self-employed individuals, the more difficult the job of separating legal from illegal transactions.
  6. The greater the facility of using cheques, credit cards and other non-cash instruments for effecting illegal financial transactions, the more difficult it is to detect money laundering.
  7. The greater the degree of financial deregulation for legitimate transactions, the more difficult it is to trace and neutralize criminal money.
  8. The lower the ratio of illegally to legally earned income entering any given economy from outside, the harder the job of separating criminal from legal money.
  9. The greater the progress towards the financial services supermarket and the greater the degree to which all manner of financial services can be met within one integrated multi-divisional institution, the more difficult it is to detect money laundering.
  10. The greater the contradiction between global operation and national regulation of financial markets, the more difficult the detection of money laundering.

Also, 26 countries and territories – members of Financial Action Task Force (discussed in the previous blog) established 40 recommendations setting a universal standard for combating money laundering.

Universal problems call for universal solutions. But it goes without saying that the universality of this particular problem by no means signifies simple solutions. Still, what the UN and the FATF have done helps much.