FORENSIC ACCOUNTING Money Laundering and organized Finance

FORENSIC ACCOUNTING capital wash and organized FinanceMvirtuosoy clean poses a serious threat to individuals, businesses, m startary systems, markets and governing bodys as this fiscal abhorrence affect the health of human beings and ruin the development of a country, for example underhighly-developed countries loses billions all(prenominal) year to countries such a Switzerland. In the new-fashioned years White Collar crime has fix the potential threat to the continued existence of capitalists delivery , which now force the inter subject and regional government begin to acknowledge that bullion clean has get a threat to the international saving development, financial systems as come up as to the global community. due to the growing of organised crime such as human trafficking, medicine trafficking, terrorism and tax evasion. Money clean is believed to be the third industry by well-nigh academic researchers, with an estimated 2% to 5% of consummate(a) domestic products (GDP) of the founding.This essay leave alone as well as digest a publications recap in night club to better understand the theories of coin launder and the roles and responsibilities of professional bodies. Which besides include the review of transnational and national policies and legislation exemplars designed to veto notes make clean? Final the finding and recommendations of this essay clearly shows turn up which suggest that professionals be vectors and advisers of funds wash, therefore, such extracurricular seems to be made easy by confused professions who collaborate and contribute to this growing problem, in discovericularly the banks, professional bodies such as Auditors, Accountants and Lawyers, ar argued to swindle a pivotal role in smoothing the progress for gold launders to conceal the harvest-feast of their corrupt activities innovationThis line of business go forth attempt to examine the relationship surrounded by currency make clean and Fraud, as well as its global network and the seriousness of these crimes effects in the global economy and the social consequences for the international community. Furthermore, put in plan words the problem of property clean in the UK, reflecting on whether anti-money laundering laws introduced in the past decades has in or so why improved the control of this wicked activity.Summers (2000), states that the observable identify of money laundering is a characteristic of organized crime with researcher and academic estimating that the money laundering flummox about US$100 billion while the British Intelligence estimated that the total add up being laundered annually is about US$500 billion..The illicit drug trade alone is estimated to devote about US$300 billion of which a significant case would require laundering this is also supported by Wolfensohn (2002).As there atomic number 18 many studies that critically examine money laundering and the itemors that contrib ute to money laundering etc, there are still few and far amidst studies in reality looking into the factors that contribute to the increase of money laundering in ontogeny countries and match up to whether develop countries preaching for regulations and monitoring money laundering to the rest of the world , while ignoring their contribution in promoting this conglomerate crime in evolution countries in go and direct.Problem statementWhite Collar crime has become the potential threat to the continued existence of capitalists economy. Money laundering for instance is assumed to take a large portion of white collar crime global, as statistics predict that almost 5% of the world gross domestic product (GDP) is lost to money laundering each year (IMF, Website ).Research identify and objectivesThe primary objective of this essay is to explore and identify the level that underpins the bureaucracy of money laundering, looking at both point of views (Developed Countries perspective a nd growth countries point of view), and measuring the preventing of money laundering. Also as to keep comment on the accuracy to whether the join combat efforts are realistic.Research methodologyThe present pack is an attempt to explore and explain the international judicial systems in combating money laundering and fraud the legal framework in the global scale. The methodology of this study pull up stakes gather information from secondary obtains, which are already in publication, such as academically journals, books, professional articles, the internet and any other publications (Sekaran, 1992). Furthermore, the study volition make an effort to find out the relevance of the information so as to possible present appropriately, to explore some of the factors that are part of the hasten to money laundering and fraud. Therefore as the study will be only based on published secondary information we will reach a conclusion that does not point toward our own opinion but the criti cally review of the conclusion of the previous studies in this control concluded.Assumptions made in this proclaimAs the definition of money laundering constitutes a range of dynamic criminal activities, this study make assumption that money laundering includes trafficking, fraud, corruption and terrorism as all these crimes share a common feature, which lead to proceeds of illicit being laundered in some means or another. Therefore, all these above mentioned crimes are to be money laundering for this study.Investigation OutlineThe first section of this essay will provide a brief introduction of the objectives and assumptions made throughout the essay, as well as attempt to introduce the research header and give an overview of the subject area. This will be followed by the second section, which reviews previous studies and the critics of the conclusions of these studies. Section deuce-ace will therefore briefly communicate the theories of money laundering and the factors tha t cause money laundering developing countries, followed by a short history and the definition accepted by this essay. Section four will provide attest found by this study and a critically suggestions. Finally section five will reach a conclusion.Literature ReviewIn separate to understand the present and future of money laundering, it is important to first give a brief explanation of the rearground history of its logical argument. gibe to Bosworth et al, (1994), money laundering originated in the USA during the 1930s,Despite the fact that there are several publications studies in the literature of critically examining the subject area, their point of view seem to give attention to the legal and regulatory framework, adding to analysing the full points of bills placement or analyzing causes and remedies of legislations that contribute to money laundering, thus far, there is little done, in other words a number of empirical studies are rather limited to study whether there is a linkage between the developing and developed countries, and if are there any lessons learned? consort to a study by Wolfensohn (2002), stated that at least US$1trillion is believed to laundered every year using progressively more highly developed methods such as the wiring transfer of funds across boarders, in addition these compound methods involve employing serve and advice of professionals such financial advisers and accountants (Sikka, 2003 Arnold and Sikka, 2001 Aloba, 2002 Bakre, 2007).Mitchell et al., (1996) study exposed actions carried out by some of these professionals and companies in accountancy such as Jackson Company Grant Thornton Partners Coopers and Lybrand and a cabinet minister in the UK government, who were all caught up in money laundering of illegal transferring money from AGIP to Kinz Joallier SARL. The professional body of the demonstrate of Chartered Accountants in England and Wales (ICAEW) was passed on with the case to postigate the professional mi sconduct of its members. Even though the spicy Court had previously dealt with the case and gave its own judgment, which found that the two Accountants who were caught up in the act of money laundering, the courts ruling stated that these professionals actually knew that their action were against the law and obviously laundering money, the Judge found them guilty, however the professional body itself (ICAEW) it appears that did not view it the alike way as the Court did. Furthermore when the probe and disciplinary committee of the ICAEW was criticised it argued in defence that it was not provided with insufficient evidence to warrant the bringing of a disciplinary case against any of its members in this case of money laundering (see Letter of May 9, 1994).On the other hand, BCC I investigated the global closure in 1991 and uncovered a massive amount of criminal activities including money laundering in a number of countries around the world, which involved bribery of government of ficials, implements of war trafficking, the sales of nuclear technologies, the support of terrorism, tax evasion, and smuggling operations, as well as massive financial frauds (Arnold and Sikka, 2001).According to the 400 page report by Arnaud Montebourge (2001) The City is an impenetrable fortress with a status, rights and habitude of its own, a closed universe where every financier, banker or businessman chooses silence above all else. The report stated that it had taken the British an extraordinary amount of time to respond to Swiss tip-offs before edict 19 banks to freeze funds linked to causality Nigerian ruler, Sanni Abacha BBC News, October 10, 2001.A Harvard-educated Colombian economist, Franklin Jurado, used the services of accountants to launder $36 million in profits, from US cocaine sales for the late Colombian drug lord Jose Santacruz-Londono, by wiring it out of Panama, through the offices of Merrill Lynch and other financial institutions, to Europe. In three year s, he opened more than 100 accounts in 68 banks in nine countries Austria, Denmark, the United Kingdom, France, Germany, Hungary, Italy, Luxembourg, and Monaco. many of the accounts were opened in the names of Santacruzs mistresses and relatives, others under assumed European-sounding names. Keeping balances below $10,000 to avoid investigation, Jurado shifted the funds between the various accounts. He established European front companies with the eventual aim of transferring the clean money back to Colombia, to be invested in Santacruzs restaurants, construction companies, pharmacies and real estate holdings (UN, 1998) cited in Garnaut, J. (2006).According to the UN General Assembly, corrupt politicians, government officials and other criminal organizations increasingly sub-contract the task of money laundering to specialized professionals (such as accountants, lawyers and bankers) because the methods required to smother law enforcement officials are becoming ever more convolute d (see UN Special Session on the knowledge do of import Drug Problem 8-10 June, 1998). Professionals (such as Accountants, lawyers and bankers) are used not only to conceal the origin of the source of the proceeds, but to manage the attendant investment into legitimate real estate and other as machinates.Money LaunderingIntroductionIn anticipation of comparatively recently notion of money laundering were subjects that, although continuously account and chattered about, were not studied to a great extent. it gives a quite out of the ordinary impression for the fact that well know crime stories such as the Medellin cartel to the notorious Al-Qaida network that have been taking place up to the September 11. Therefore, this can be arguable that beyond doubt it point out that organised crime has evolved a great deal fitting itself into a far-reaching socio-political changes, complex technical developments and diverse culture environments. According to Murilo Portugal, Deputy Managing Director of the IMFGlobal financial stability hinges on joint action at the international level, but also on effective national systems. Robust anti-money laundering and combating the financing of terrorism regimes are an important pillar of the international regulatory and supervisory system and part and parcel of the current efforts to strengthen the global financial framework..Therefore, due to the out of the ordinary of money laundering and the new developing complexity of the techniques used by launders it is hard to keep accurate information of this mixture of crime.What is Money Laundering?Although the observable fact of money laundering has taken on increase attention, from every country in the world its notion is still a controversy in the criminological phraseology. In anticipation of the concept of money laundering phrase, which has almost been talked about and documented over for the past seven-spot decades, it is extraordinary that this subject has been given fewer r esearch studies, regardless of the fact that organised crime has been part of the society for such a long time.Money laundering has been defined as the cover up of unlawfully get your hands on assets or proceeds so the can be then made to appear as they have been acquired in a lawfully manner. On the other hand, money laundering can mean different thing to different countries and organisation as there are variations on the definition of money laundering, nevertheless, almost certainly accepted definition that fit within the framework and the global idea intended to provide a global definition of money laundering is the one outlined (UN Organised Crime Convention). Article 6 of the convention regards the following conduct as money laundering(i) the conversion or transfer of property, knowing that such property is the proceeds of crime, for the purpose of hide 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(ii) The concealment or overwhelm 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(iii) The acquisition, possession or use of property, knowing, at the time of receipt, that such property is the proceeds of crime.According to FATF, money laundering is defined as. . . the processing of a enormous number of criminal acts to generate profit for individual or group that carries out the act with the intention to disguise their illegal origin in order to legitimize the ill gotten gains of crime. Any crime that generates significant profit extortion, drug trafficking, weapons system smuggling and some kind of white collar crime whitethorn create a shoot for money laundering (FATF).The process of money LaunderingAlternatively money laundering operates in the same manner as a lawful business in terms of the financial operations. Therefore money launders in their set of business operations act upon the intention of introducing funds originated from criminal activities into the economy so that it appears legitimate. For this to be achieved funds or proceeds need to pass through a long way before it take on the appearance of a legal financial transaction. The procedures used in a money laundering process, theoretically, include three all-embracing stages known as placement, layering and integration.(I) Placement This is the first stage in the money laundering process. It involves the introduction of the proceeds of criminal activity into the main stream financial system. This may involve the opening of bank account with genuine or fictitious names and the subsequent lodgement of funds in the account. This is the most vulnerable stage(ii) Layering This process involves the creation of a complex layer of financial transactions with the aim of evading the audit trail. The launderer may as well decide to leveraging high valued commodities such as automobiles, jewellery, etc., and exporting to a different jurisdiction. Or better still, it may involve the purchase of shares of companies at the stock market(iii) Integration This stage involves the recycling of the laundered wealth to the direct benefit of the Launderer to appear as if it was derived from legitimate activity .It may involve the selling off of some valuable items which were purchased during the layering process.Causes of Money LaunderingIn a recent study ( cited on Ribeiro, 2002Galvao, 2000) it is argued that money laundering causes bizarre changes, such as when the demand of money increases it also increases the risk and precariousness of the banking sector and financial systems. In addition, money laundering creates corruption, fraud, bribery, white collar crime and all other financial crimes. It is also worth contemplating whether some of the key drivers of money laundering in developing countries are due to the complexes of westbound regulations? According to Linell (1999), the western countries such as USA UK, approach the challenge against money laundering from a cost to benefit approach. For example the enforcement officers evaluate the cost of resources and compare it with the value of the crime in order for them to investigate evidently this is an open door to launders to curse developing countries. Another report by Moore (2004), accuses Britain to be a safe Haven for money laundering. Moores reports found fairly estimate that between 25bn to 40bn of dirty money is laundered in the UK each year from all over the world. This opens a question to whether globalization and engineering, developed countries and professionals could be the main drivers of money laundering in developing countries (Killick, M. (2004).Globalisation and TechnologyTo understand how increasing engineering science can have an adverse effect on money laundering, it is worth reflecting why the criminal considered technology as their shelter to hide their proceeds. Drawing attention to the revolutionary impact of technological advancement on organized crime, particularly money laundering as well as the concept of globalization, it is clear for one to argue that the combination of these two has deregulated the simply customs of state control over their own rule or location. There is no doubt even there is a lack of academically evidence to support this, globalization and technology has created more opportunities for criminality than it has for preventing them committing these crimes. for example, Tinker (1980), argues that globalisation has created profit generation organisations, such as the MNCs that work against the moral of local economy, particularly in developing countries.Money Laundering and the Professions in Developing CountriesWhat is the relationship between the professionals such as the Accountants, Auditor and the Lawyers, and money laundering within the developing countries? Can their role be found been in a contradictory to be of capital hookup ambition. According to Hoogvelt and Tinker, 1978 the money launders and the professional groups are seen as a protection of capitalism for the developed capitalist countries. For this reasons, capitalistic purpose of the Western frugal powers, reflected within the formation of the multinational corporations (MNCs) as well as other overseas capitalists which produce offsprings of capitalist relations in developing countries, is arguable be the cause of contradictory placement between the corrupt ruling leaders and those you have influential powers in developing countries and the good governance, accountability and transparency-preaching Western capitalist world ( Bakre, 2005, 2006a).Wade, 1996 suggested that the alleged reason of bringing investments to developing countries is chiefly based on the highly praised globalization. On the other hand, one can question whether globalisation benefits these developing cou ntries. Hirst and Thompson, 1996, argue that this capital mobility is not in point of fact turning out a certain shift of investment and employment from the developed countries to the developing countries. Therefore, the notion that these developed countries and globalisation would be of care to boast the economies of these developing countries.This seems to suggest that the MNCs and other foreign capitalists operating in foreign countries may not be relied upon to subordinate their own capitalistic interest to the interest of those countries where they operate, especially developing countries. However, the notion that the developed capitalist economies would help to jump start and boost the economies of developing countries through investments, which would eventually get unloosen of corruption and poverty, has been the acclaimed cornerstone of globalization ( Groom, 2001).Accountants and AuditorsThe external auditors, PriceWaterhouse, were in the dual position of acting as toff ee-nosed consultants and tax advisors to the BCCI management to further their private interests, while the State was relying upon them to perform public interest functions by acting as an external monitor and independent quasi-regulator (Arnold and Sikka, 2001). For this reason, it can be argued that Britain and other western countries are still providing safe haven for money launderers and those who commit financial crimes (Moore, 2004). Another evidence is found in the document on BBC News website( ),it accuses Londons development to be clearly doing well as a go forth of its banking secrecy codes, which ignores the publics interest. Another example is the report by the African Business (online), which claim hundreds of billions of rand from white-collar crime have been laundered through South Africas financial system, but no convictions have that been made (African Business, July 1, 2002). Deloitte progress to forensic services manager, Rupert Haw, says the global trend sugge sts that crime bosses earn their income in developing countries but invest it in more secure and sophisticated financial systems in developed countries (African Business, July 1, 2002)The Duty to Report abominable Conducts.It is obvious that for effective enforcements to tackle money laundering and fraud, the state should put in place a clear role of reporting duties for individuals and companies as well as professional boards involved in preventing. According to Masciandaro and Portolano (2003) Barret (1997), money laundering threatens the growth of the economy and the socio economic development of a country. Therefore, the development and robust economy can only achieved if both developing countries and developing countries put a balancing effort in combating money laundering, such as good governance and regulations that are not charlatan.From this perspective, the next following paragraphs will provides the evidence, which suggests that the developing countries and its ruling e lites, public bodies, professional bodies and individuals as mentioned above are hypocrites in their role to prevent money laundering in developing countries. According to a reportHypocrisy of the developed countries and global bodies evidencesMoney laundering is a global problem which significantly affects both developed and developing countries. This essay suggests that the problem should be tackled by both developed and developing countries, rather than shifting the burden on poor developing nations that have no resources to combat this global crime Ekaette, 2002.At the same time, readily available evidence indicates that some authorities in African countries steal government funds that are meant to serve the public and wire the money into some implicit accounts in banks in England, Switzerland, France, Germany, the USA, the Cayman Islands and Bahamas and Agabi, 2002. As in the case of the former Zaire (Congo) President Mabuto Seseko who was helped by the British government to w in the elections in a fraudulent way. Furthermore, during is time in power it is claimed the western opportunely looked the other way and maintain their silence, while he was stealing the state money, laundering funds into overseas bank accounts (mainly Switzerland).With the continued proclaim from the several developing countries to those countries that function as haven for ransack funds from developing countries to assist in the recovery of the stolen funds in their banks, many of the countries, particularly the former colonial power, Britain, have refused to cooperate. While some others (such as Switzerland) have been promising to cooperate, sometimes these promises end up not being followed by these Countries.Secondly, from a developing countrys point of view, the Western countries uses criticisms of the developing countries as in the case of (Mabuto Seseko) as a means of benefiting from the issue of money laundering, while pretending to be implementing actions of the same an ti-money laundering and anti-corruption preaching Western economic powers suggest hypocrisy. For example, while countries such as South Africa and Nigeria, and 28 other developing countries have so far given their support to the United Nations Convention Against Corruption, except France, all the other member countries of the so called Financial Action Task Force, FATF, that have been jointly threatening Africa countries economic sanctions, have not yet endorse the UN Conventions Against Corruption (see This Day, June 9, 2007). Moreover, it was during the 2002 meeting on the Global Organisation of Parliamentary against Corruption (GOPAC) that Australia, Canada and Italy1made pledges to set in motion machinery to amend their banking laws to facilitate easy recovery of the developing countries looted funds in the banks in their countries The Guardian, November 5, 2002. Strangely enough, while countries such as USA, Britain, France, Germany, and Switzerland which serve as havens for lo oted funds from African countries expressed serious concern over the growing incidence of corruption especially in developing countries, such pledges were not made by any of these countries.For example in the case of , Raul Salinas de Gotari, brother of the former President of Mexico, Carlos Salinas de Gotari was able to transfer $90 million to $100 million between 1992 and 1994 by using a private banking relationship formed by Citibank New York in 1992 (see US General Accounting Office, 1999). The funds were transferred through Citibank Mexico and Citibank New York to private banking investment accounts in Citibank London and Citibank Switzerland. Yet, Britain and the United States are both powerful and leading member countries of the Financial Action Task Force (FATF) that claim to be scrap money laundering globally.ConclusionNonetheless, it is clear from available evidence shown in this essay that money laundering is one of the major challenges faced by the developing countries and if it is not tackled In time it will became the main destructive force to the economic and social development of this countries as it affect economic growth, reduces productivity in the economys real sector by diverting resources and encouraging crime and corruption, and can distort the economys long-term economic development. This essay highlighted observable facts of Money Laundering and its origins, as well as the patterns and implications it has in the developing countries. it is essential to make a note of the hypocrites approach the western countries take, however a accurately study is recommended to in effect identify whether this claims exist. The resources against money laundering should be strengthened to ensure that the professional and MNCs wont continue to nuisance the financial systems. Final Global responses to the challenges of money laundering should be tighter than at present.