Anti-money laundering and combating the financing of terrorism
What is money laundering?
An act of laundering money (money laundering) is determined in the international convention (United Nations Convention against Transnational Organized Crime, Palermo, 2000) as below:
The conversion or transfer of property, knowing that such property is the proceeds of crime, for the purpose of concealing or disguising the illicit origin of the property or of helping any person who is involved in the commission of the predicate offence to evade the legal consequences of his or her action;
The concealment or disguise of the true nature, source, location, disposition, movement or ownership of or rights with respect to property, knowing that such property is the proceeds of crime;
The acquisition, possession or use of property, knowing, at the time of receipt, that such property is the proceeds of crime;
Participation in, association with or conspiracy to commit, attempts to commit and aiding, abetting, facilitating and counseling the commission of any of the offences established in accordance with this article.
There are a number of incidences of detecting predicate offences using the advantages of anti money laundering framework (access to bank information, knowing the customer, reporting suspicious transactions, public advertising in order to prevent etc.) Moreover, the framework is broadly used for imposing responsibility to banking and financial institutions for supporting money laundering activities.
The following figure shows the steps of money laundering:
What is terrorism financing?
Terrorist financing provides funds for terrorist activity. It may involve funds raised from legitimate sources, such as personal donations and profits from businesses and charitable organizations, as well as from criminal sources, such as the drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion. Terrorists use techniques like those of money launderers to evade authorities' attention and to protect the identity of their sponsors and of the ultimate beneficiaries of the funds. However, financial transactions associated with terrorist financing tend to be in smaller amounts than is the case with money laundering, and when terrorists raise funds from legitimate sources, the detection and tracking of these funds becomes more difficult.
Terrorism is usually funded by the following sources: These include:
Since the methods and types of money laundering are identical to the financing of terrorism, these two kinds of offences are tightly connected. But they are committed separately in nature. For instance, money laundering is aimed to be appeared as legitimate, while the financing of terrorism is intended to spend the legitimate income for illegal activities.