Any illegitimate activity that involves a group of people or an individual is planned and executed for the one same reason – to make money. Thanks to the developments in financial information systems and on-line communications, money can be sent, received and transferred locally as well as internationally with ease. Likewise, security measures have also been made more stringent to make it difficult for unauthorized individuals to track or detect the source of the accounts.
However, the movement of money is done with such high speed and anonymity that it often becomes easy for criminals to clean their black money. Criminals can disguise the origin of the wealth and hide from prying legal eyes when they launder their money. They make sure that they hide the money trail and protect their asset bases with a fool proof technique.
The task to prevent money laundering has become difficult for officials. Luckily, there are many anti-money laundering techniques that have been introduced and developed to help banks and financial institutions identify black money sources.
There are various consequences of money laundering. Proceeds collected from illegal activities like human and drug trafficking, illegal sale of arms, unauthorized trade of drugs and financial frauds wreak havoc on the national economy. The power of organized crimes can be expanded into institutions which causes adverse effects on both local and national scales.
Financial institutions can be derailed and economies destroyed if money laundering is not tackled and prevented on time with efficiency. The political, social and economic consequences can be highly damaging if criminal groups continue to increase in number. These groups live on money laundering and are financed through illegal activities.
Since financial markets of emerging economies are volatile in nature, social and political destabilization is inevitable. It is important, therefore, for governments to have a game plan in order to deal with money laundering and to put a stop to financial crimes in the country.
The chaos created as a result of this increasing financial crime results in a booming crime industry. The respect for individual human rights and sanctity of personal information is affected. These further results in a chaotic society, where criminals have more control and authority than the laws of society.
If we examine the current scenario of the financial world, criminal organizations have access to and are capable of breaking into government agencies. They can do that through heavy bribery. They can corrupt public and private sectors and mould situations according to their will and interests.
The expansion of criminal activity worldwide can be controlled and stopped to a certain level via anti-money laundering investigation techniques. It is the only possible measure of success that helps in detecting and interpreting the illegal sources of funds.
Money laundering can be identified using three very distinctive steps which are placement, layering and integration. The first step identifies and recognizes the placement of assets and funds into the financial system through illegal means. The assets and funds that have been obtained by illegal means are then identified in the system.
The second step is about breaking down the details of the funds and assets. The source, ownership and audit trail are identified in this step. This brings the asset value and the fund source into a clear picture. The final step involves identifying where the funds have been used. It becomes very difficult at this stage to identify clean money from illegal one.
The last stage is a challenge for investigators. The money is used by the criminals and terrorists in buying luxury items like cars and property. The integration of these funds in the economy completes the money laundering process.
It is not possible to assess the scale a money laundering activity is being carried on. No two countries can have the same effects of illegal financial activities. Not all such activities are reported. The activities differ and so do state laws that have different sanctions and punishments. One cannot compare the two same scenarios based on different countries and their respective laws.
The three steps mentioned above are universal when it comes to investigation for money laundering. Although the crimes and levels may differ, these can be used to identify crimes worldwide. When we look at organized crimes, following a money laundering trail can lead to the root of an organization involved in other illegal activities.
The behavioral assumptions, the networks and even the analysis of the cases are different. It is a challenge for financial crime investigators to identify money laundering activities. Once investigators can get to base with a trail, things can get easier.
The sources of the funds is the most difficult to find. Once investigators can get their hands on the source, success comes closer. The statistics of an economy can also help investigators to identify discrepancies and put their finger on suspicious activities.
Studying the economic statistics is another challenge on its own. Accurate data is not always available for review and financial crime investigators can get lost in the huge amount of data provided. Given the sources and the number of activities that take place in an economy, it is very easy to get lost in identifying the right from wrong.
Criminals take time to build their empire and get organized. Using anti-money laundering techniques can provide a solid base to combat financial crime.