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Ten years of combating money laundering
“From May 1994, two people used an accounting firm to launder the proceeds of sales of amphetamines. They regularly handed over to their accountant, brown-paper envelopes or shoeboxes containing US$ 38 000 to US$ 63 000 in cash, without any receipt being delivered. The accountant had set up a company and opened trust accounts for his clients, as well as personal bank accounts in the name of their parents. Some of the funds were used to buy lorry parts abroad, which were then resold in the country of origin, some were used to buy real estate. According to the investigation, the accountant and three of his colleagues had laundered about US$ 633 900 in return for a 10% commission”. This case, which is a classic example of a simple money laundering scheme, is quoted in an annex to a report by FATF, the Financial Task Force on Money Laundering, whose secretariat is located at the OECD.
FATF is celebrating its tenth anniversary this year. Established at the G-7 summit in Paris in 1989 FATF currently comprises 26 countries—both OECD and non-OECD—and two international organisations. It is funded by contributions from its member countries. In April 1990 FATF issued a report containing forty recommendations designed to provide a complete blueprint for action against money laundering, covering the criminal justice system and law enforcement, the financial system and its regulation, and international co-operation. According to the IMF, money laundering represents between 2% and 5% of world GDP, which is between US$ 590 billion and US$ 1.5 trillion for 1996. FATF’s recommendations are designed to get that figure down. They do not constitute an international convention. Rather, each FATF member has made a firm political commitment to combat money laundering. In 1996 the recommendations were modified to take account of recent trends in money laundering and potential future threats.
Besides monitoring, via mutual evaluations, the progress made by countries in implementing measures to counter money laundering, FATF must continually review the latest trends in money laundering techniques and counter-measures. To take one example: when the euro is introduced in the form of notes and coins between 1 January and 30 June 2002, money launderers may try to take advantage of the huge volume of transactions to “inject” criminal proceeds. The experts are also worried about the possibility that the burden of work on financial institution employees during this period may be such that they will be less likely to detect evidence of money laundering. FATF has also stressed the importance of off-shore centres which are reluctant to co-operate, and the role of providers of professional services—lawyers, accountants, financial advisors and agents who set up front companies—in money laundering. In coming years, one of the main challenges facing the authorities responsible for combating money laundering will be posed by the development of new payment technologies. Online banking, for example, makes its possible to conduct some types of financial transactions via a web site. But it is not always possible to check the identity of the person carrying out a transaction on the Internet.
The gold market is another vehicle for possible money laundering which FATF countries are increasingly aware of. Gold is both a commodity and, to a lesser extent, a means of exchange for covering transactions involving criminal proceeds between Latin America, the United States and Europe. There are also other money laundering channels in the world, notably between the Gulf States and certain South Asian countries. It is for this reason that the ministers of member countries have asked the FATF to promote the implementation of a world-wide network against money laundering, including new countries (see News) and FATF-type regional bodies engaged in the same combat.
http://www.oecd.org/fatf/