India Internal Security | Regulation of Money Laundering – International Laws/Conventions

Money laundering is a truly global phenomenon. The increasing integration of the world’s financial system, as technology has improved and barriers to the free movement of capital have been reduced, has meant that money launderers can make use of this system to hide their ill-gotten gains. They are able to quickly move their criminally derived cash proceeds between national jurisdictions, complicating the task of tracing and confiscating these assets.

Action at the international level to combat money laundering began in 1988 with two important initiatives:

The Basel Committee on Banking Regulations and Supervisory Practices 

The Basel Statement of Principles on the prevention of criminal use of the banking system was a significant breakthrough on the financial front to have some controlling mechanism for money-laundering on an international plane.

The Statement of Principles does not restrict itself to drug-related money laundering but extends to all aspects of laundering through the banking system, i.e. the deposit, transfer and/or concealment of money derived from illicit activities whether robbery, terrorism, fraud or drugs. It seeks to deny the banking system to those involved in money laundering by the application of the four basic principles:

  1. Know Your Customer (KYC) – This mandates the bank to take reasonable efforts to determine their customer’s true identity, and have effective procedures for verifying the bonafides of a new customer.
  2. Compliance with Laws – Bank management should ensure high ethical standards in complying with laws and regulation and keep a vigil to not provide services when any money-laundering activity is suspected.
  3. Cooperation with Law Enforcement Agencies
  4. Adherence to the Statement

The United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances

This UN Convention was one of the historic conventions inasmuch as the parties to the Convention recognized the links between illicit drug traffic and other related organised criminal activities which undermine the legitimate economies and threaten the stability, security and sovereignty of States and that illicit drug trafficking is an international criminal activity that generates large profits and wealth, enabling transnational, criminal organizations to penetrate, contaminate and corrupt the structures of government, legitimate commercial and financial businesses and society at all levels.

The treaty required the signatories to criminalize the laundering of drug money, and to confiscate it where found. All countries ratifying agree to introduce a comprehensive criminal law against laundering the proceeds of drug trafficking and to introduce measures to identify, trace, and freeze or seize the proceeds of drug trafficking.

Based on the convention many countries have framed their national legislations. Council of Europe Convention on Laundering is motivated by this convention as well as this convention gave a framework for FATF to work.

GPML

The Global Programme against Money Laundering was established in 1997 in response to the mandate given to UNODC by the 1988 UN Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances. GPML mandate was strengthened in 1998 by the United Nations General Assembly Special Session (UNGASS) Political Declaration and Action Plan against Money Laundering which broadened its remit beyond drug offences to all serious crime.

The Financial Action Task Force (FATF)

The Financial Action Task Force (FATF) is an inter-governmental body founded by G7 Countries (Canada, France, Germany, Italy, Japan, United Kingdom), created in 1989, whose purpose is the development and promotion of national and international policies to combat money laundering and terrorist financing. The Forty Recommendations of the Financial Action Task Force on Money Laundering (FATF) have been established as the international standard for effective antimoney laundering measures.

By B2B

Revisiting the Basics

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