Page 28 - Banking Finance February 2025

ARTICLE

difficult for the regulatory authorities and for financial to disrupt economic stability, erode the credibility of financial
institutions to find the criminal offence behind this money. institutions, and lead to other financial crimes.

Integration the Stage Three: A country's economy is devasted when money launderers
take hold of various assets in that country. They sell their
This is the last stage where criminals reintroduce their dirty
money into the economy. This is done in a manner that assets either with inflated or deflated prices. In both cases,
makes money appear to be from a clean source. The dirty the outcome is loss to people and loss of revenue for the
government. This eventually results in the non-
money is now ready to be used as clean money. Criminals
implementation of various socio-economic development
start enjoying the money legitimately with minimum
programs, run by the government, due to a lack of revenue.
suspicion of authorities. Once the money is reintroduced into
the financial system, it becomes most difficult to differentiate In this way, a country falls into a trap, and it becomes
difficult for it to become a developed country.
it from clean money. Few examples of this stage of money
laundering are:
The developed and advanced economic centres are also
a. Criminals invest laundered money in buying different
things such as luxury cars or Yachts, artwork, preferred by money launderer for constructing large
restaurants, other retail businesses etc. even at a high amounts of transactions by mixing them with clean money.
cost. Income generated out of these assets make They do it by making relations with officials holding
administrative & government authorities. These relations
criminals to enjoy their criminal proceeds.
enable criminals to have unfettered access to systems and
b. Criminals also integrate their criminal proceeds into real controls, thus enabling them to manage their criminal
estate assets at inflated prices, this makes money flow activities in a continuous manner.
freely in the formal economy of the country.
Association with Other Risks: Primarily the criminality of
Money laundering with its three different stages is depicted money laundering has led to the failure of various financial
as under: institutions viz. First Internet Bank, European Union Bank,
Riggs Bank etc. The economies
of our neighbouring countries
Pakistan & Sri Lanka have
experienced instability and
continue to face significant
challenges due to the
predominance of money
laundering crime. Few other
risks associated with it are as
under:
a. The jurisdictions with less
stringent laws for 'AML
Compliance' lose their
reputation. Funds moving
through these jurisdictions are
subject to enhanced due
diligence & more scrutiny,
Menace of Money Laundering: which results in less inflow of funds. Because of this,
these jurisdictions become unable to take part in various
As per estimation made by the United Nations Office on
development programs run by different global
Drugs and Crime (UNDOC), an amount equivalent to $800
development institutions.
billion to $2 trillion in US dollars is laundered annually. This
menace adversely affects people, society, business & b. Any jurisdiction failing either in the implementation of
economy, and governance of countries. It has the potential a stringent AML & CFT framework or in the prevention

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