Anti-Money Laundering (AML) Counter-Terrorism Financing (CTF) Automated Compliance Solutions
Following the continued emphasis at the national and even internationally to address the problem of money laundering, this paper seeks to evaluate the effectiveness of such measures in the country. Due to the fast evolution of information technology globally, the paper further analyzes their effectiveness in the 21st century. Through examining their application, the paper will finally present key recommendations that could be used to further address the problem.
Background of the problem
A brief analysis of money laundering
While the definition of the term money laundering as Demetis (415-416) explains has remained the center of a major debate due to the problems extended implications and outlook, it is no doubt that effective and holistic measures should be incorporated to address it. Since the onset of information technology, financial institutions have remained a major target by money launders to facilitate easier transfer of money. It is worth noting that that money laundering rates have in the last few years shifted downwards mainly due to the currently intensified fight against the problem (Norgren, 204-205). However, the fight is considered to be far from over in that the same problem is highly recurrent in other states that lack effective human, financial capital or the necessary goodwill to address it. It is from this consideration that analysts are asking whether it is indeed possible to fully eliminate the problem of money laundering or governments should only focus in reducing its negative implications. The analysis of the mechanisms used by money launders globally brings out the magnitude of the problem. On the other hand, the systems employed indicate the goodwill of the government to address the problem (Stationary Office). Besides, the established legislations and comparison of the employed tactics with those of other countries indicates the position of the United States in fighting the problem globally.
Methods presently employed in money laundering
In his view, Broome (96) indicates that most criminal activities are aimed at making large amounts of profits. The laundering therefore takes three key stages within which the anti-laundering efforts are focused. Angela (142) explains that the first and perhaps the riskiest stage involves placement of the illegitimately acquired money into a non suspecting financial institution. However, due to the difficulties presented in depositing large sums of money, the launders then layer their money into several concealments which they transfer to various institutions as a strategy to avoid suspicion and reduce easier tracking (Farah, 74). Once the money has passed through this stage, it becomes even harder to trace in that launders may even use different individuals such as fiends and relatives to deposit it in the various bank accounts. In addition to that, the launders may further purchase high value items as opposed to taking the money to banks where they are subject to greater scrutiny. Finally, the money reenters economic circulation as legitimate money a stage at which detecting it becomes even more difficult (Hinde, 18-20).
Following the complexity presented in the laundering process, the Palermo and Vienna Conventions expounded the definition of money laundering to include people and entities that support such transactions. According to Demetis (421-422) the Palermo and Vienna Conventions any deliberate transfer of money from proceeds of crime, ownership, concealment or even disguise of any nature is considered to be part of the extended money laundering chain. Demetis (420) further indicates that these conventions consider buying and or being in possession of money with knowledge of it to have been from proceeds to be part of laundering. It is from this complexity that AML and CTF measures have greatly been intensified at all levels of laundering both locally and internationally.
Current thinking
While the problem of money laundering has recently become the center of controversy as launders continue intensifying their technology to affect their unethical objectives, mechanisms to address the problem have equally been heightened. Of particular consideration at this point is the fact that most people fail to conclusively comprehend the concept of money laundering and are therefore often caught up in the final stage of integration a consideration that is raising the urgency of addressing the problem.
Use of anti-money laundering software
In his view, Berti (15-17) explains that the fight against money laundering in the society can only be won by employing technology that is indeed more advanced compared to that being employed by the launders. Anti-money laundering software is a term that his increasingly being used to describe the acceptable and legal controls mostly in the financial institutions to identify and report cases of laundering suspicion to the criminal department. While this method is increasingly gaining popularity and indeed effectively achieving the anticipated goal, its application in other countries as Berti (19) continues to say, has not been very smooth.
Anti-money laundering software employs three basic components that lead to easier identification of launders in financial institutions. To begin with, the currency transaction reporting systems seeks to trace the movement of large sums of money in the financial institutions. Notably, Demetis (426-428) explains that cash transactions that involve amount of money exceeding US 10,000 require effective reporting to establish the authenticity of the source. Though many people at first were complaining of secrecy invasion in their financial operations, they later came to understand that indeed if your transactions are clean there is no need for worry.
Secondly, anti-money laundering software requires financial institutions to establish closer relationship with their clients and therefore know them much better through the customer identity management system. Under this consideration, Angela (145-416) indicates that the banking institutions are required to gather enough financial knowledge of their clients a consideration that makes it easy to link possible fraudulent sources of finances or transactions. However, as Angela (149-151) continues to say, it is the provision of the locally and internationally suspected list of launders that makes it even easier for the banks to countercheck related transactions and therefore report them at the initial most instances.
From his study, Berti (17-19) conclusion concurs with those of Farah (69) and Norgren (2003) on the efficacy of analyzing an individuals financial activities to identify possible deviations which can be used as possible indicators of laundering transaction. Anti-money laundering software third component is Suspicious Activities Reports where transactions suspected to have possible links with laundering are recorded for further investigations by the bank and criminal agencies. As Norgren (203-204) further explains, the anti-money laundering software is a highly integrative tool and created a highly viable model of detecting cases of laundering.
Use of currency and foreign transaction reporting regulations for banks
Owing to its inherent vast repercussions in the society, money laundering attracts some of the toughest penalties in the United States. This policy has been very critical in the nations fight against laundering and related criminal activities such as drug trafficking and terrorism. As a result, this legislation established the office of the Office of the Comptroller of the Currency (ICC) which would monitor the national banks compliance with its demands (Hinde, 18-20). OCC as Hinde (20) continues to say has been very crucial in the following mechanisms to fight laundering.
Broome (99-100) explains that OCC operates in conjunction with Financial Crimes Enforcement Network (FinCEN) to establish the different areas of high intensity money laundering. From this consideration, Berti (20-21) indicates that financial institutions in such areas are put on higher alert in dealing with their clients. Particularly, OCC cooperation with other financial institutions is helpful in gathering the necessary information about the possible suspects and also in establishing the epicenter of the money laundering problem. Taking into consideration that OCC is further empowered to forcefully conduct investigations when some financial institutions fail to cooperate, it becomes easier to trace possible layering of the laundered finances in the whole nation. In his view, Farah (78) supports the work of OCC in anti-money laundering operations he however indicates that there should be established stronger checks and balances for the same actions.
The Stationary Office and Jeanne (69) indicate that one of the mostly made observation incase of money laundering event is the rise of currency flows in a country or a region. As a result, this consideration could easily be assessed to determine the possible sources of the same finances. OCC operates in liaison with banks to regularly assess their overall transactions in relation to the currency flows in a region. Broome (65-66) explains that excessive cash flows destabilize the forces of the market and therefore risking it with possible crash. The currency and foreign transaction reporting regulations are considered to be effective in that they empower the OCC in conjunction with respective criminal agencies to seize property and or freeze laundering related accounts as involved parties are subjected to further scrutiny for possible prosecution (United States, Government Accountability Office).
In his view, Margaret (36-37) commends the OCC operations for incorporating a highly expansive analysis to detect and counter money laundering. In banking transactions, tracking all the involved parties and related activities is indeed easy because the finances are held in an individuals account. Under this consideration banking institutions form an immediate details hub to OCC which further traces laundering activities even to the external countries. As indicated earlier, AML and CTF establishments are based on the highest possible ethical considerations which consider laundering to be unlawful and therefore unacceptable irrespective of the country of occurrence. Margaret (37) further indicates that external operations may at times be obstructed especially when the launders originate form countries that have poor relations with the United States. However, any transaction with people from such high intensity money laundering regions is further evaluated by the local banks in the US.
While emphasizing on the efficacy of the position that banks and other financial institutions hold in the fight against laundering, Demetis (428) explains that their operations are specially focused to not only deter but eliminate the same problem from the society. As a result, OCC emphasizes on internal controls that must be adhered to in order for the laundering operations to be effected at all levels. Particularly, they are required to set up programs with clear reporting mechanisms in their currency procedures and monitoring. There is particular emphasis on the mode of book keeping that facilitates used of anti-money laundering software. To articulate the above consideration, OCC requires banks to subject their staff to special anti-laundering related training which facilitate clear analysis at all levels of the banks management (Angela, 153-154).
Policies and regulations on AML and CTF compared to other states
Analysts and scholars argue that the ability to address money laundering in any nation can only be successful when it is entrenched in the existing policies and laws. By emphasizing different laws that tackle the problem from various dimensions, Hinde (18-20) argues that it becomes very easy to create the necessary anti-money laundering niche in the community. It is from this consideration that the following major policies and legislations have critical bearing to the financial institutions and further expanded to the society.
The Bank Secrecy Act of 1970
This legislation was established in the year 1970 as cases of money laundering assimilated a critical upward shift in the nation. As Cassella (282) records, with most launders of this period being involved in large cases such as tax evasion and other criminal activities, the battle was becoming hard for the law enforcement agencies. Banking institutions were therefore seen as the central most entities that were required for the laundering transaction to take place effectively.
From this legislation, Margaret (61) argues that it has been possible to establish key initiatives in the banking industry such as standardized book keeping, reporting and cooperation in identifying pointers to money laundering. This legislation further empowered the Office of the Comptroller of the Currency to seizure assets of people and even institutions that support money laundering at any level. Though it was considered to work as a threat in the nation, Hinde (2005) argues that bank institutions were held responsible for the assets attached to possible banking transactions of their customers. The legislation further set the penalties to cases of laundering at double the amount involved or twenty years imprisonment for every laundering case (Angela, 153). While designating specific areas such as Mexico boarders to be more prone to laundering compared to others, the legislation further required banks to establish compliance officers to tighten the grip against the vice in such areas.
Cassella (284-285) argues that the efficacy of this legislation was further reinforced by the establishment of the Money Laundering Act on 1986 which criminalized any form of transactions structuring aimed at facilitating laundering of money without being directly involved. Indeed, this addition has been very critical in holistically addressing the problem from the grassroots.
The United States Patriotic Act
Following the September 11th terrorist attack in New York, this legislation was passed as a buffer to terrorism and related money laundering activities. As Cassella (283) indicates, Title III of this act links money laundering with terrorism and therefore considers addressing it to be a crucial step towards winning the fight on terror. To address the problem therefore, the following three considerations have been emphasized in this legislation.
Despite Title III being a section of the patriotic Act, Broome (104-106) indicates that it is also a full act of congress by itself and intensifies money laundering fight at the local and international level too. Angela (48) indicates that the act first seeks to strengthen the banking rules against money laundering at the international scene. Owing to its strategic position and influence at the international market, the United States greatly influenced majority of its local banks that had international branches in other countries to expand and articulate the money laundering regulations globally. Notably, following the September 11th terrorist attack, most countries felt greatly threatened and were therefore ready to incorporate viable measures to avoid such incidences. Foreign governments as Angela (153) explains, established measures that sought to identify possible money laundering in their countries and across the boarders.
In Subtitles II, United States, Government Accountability Office (56) indicates that the law sought to further strengthen communication between financial institutions and the law enforcement agencies. From a critical point of view, Cassella (280) argues that addressing money laundering is a communication issue in that the available information creates room for further investigation and ultimately brings the money launders to books. As a result, this section further strengthened the previous bank practices of maintaining the necessary records and observing possible abnormalities in the consumers financial trends at all times. As indicated earlier, the application of this consideration has been credited with pro-activeness towards citing the laundering problem in the nation (United States, Government Accountability Office).
Subtitle three on the other hand as Meyer puts it, seeks to further deter launders by seeking to increase penalties they face after being proved guilty of money laundering. Psychologists indicate that increasing the penalties that people face after committing crime is one of the most effective methods in deterring new entrants into such types of crime and therefore reduces the actual numbers and possibility of similar crimes in future. However, Meyer adds that this increase may fail to effectively deter others especially the hard criminals. In addition to that, it creates the challenge for the criminals to establish much better technology to perfect their art in committing crimes. It is from the above consideration that this legislation requires effective cooperation between the different entities at the local as well as the international setting.
Other countries initiatives and their effects
In his view, Jeanne (49) argues that the fight against money laundering cannot be won alone in that most of the launders indeed come from outside or move from the country to affect it from outside. Owing to the great threat posted to countries and their economic progresses, many countries have assimilated anti-money laundering techniques for their financial institutions. In Canada, Jeanne (49) adds that the fight against money laundering has largely been interrelated with terrorism and trade in drugs. As a result, Jeanne (43) adds that the National Money Laundering Combat Initiatives have brought together key stakeholders such as banks and the local security agencies to address the problem. In the UK, Margaret (45) argues that the nation is more threatened compared to others in the European Union especially due to its special ties with the United States on the fight against terror. In the year 2000 therefore, the Terrorism Act was passed to increase focus on resources that terrorists were using and consequently blocking them as a method to curtail funding of their activities. The Proceeds of Crime Act of 2002 and the Serious Organized Crime and Police Act of 2005 further empowered the law enforcement agencies in operating with banking institutions to detect and bring to justice money launders (Angela, 153-154). In both cases, the countries operate in conjunction with the United States towards addressing the problem of laundering and terrorism.
Conclusion
It is from the above discussion that this paper concludes by supporting the thesis statement, at a time when information technology has increasingly and is expected to continue having major negative implications due to its use by terrorist and money laundering groups, effective application of Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Automated Compliance Solutions form the best method of addressing the problem. The problem of money laundering came out as a well rooted issue at the local and international level. However, though Anti-Money Laundering (AML) and Counter-Terrorism Financing (CTF) Automated Compliance Solutions appear top have leaped greatly in the fight, it is fart from over especially from poor cooperation with international countries.
Therefore, the government should seek to create more intensive technologies to identify and apprehend the launders in the society. Besides, it should also increase the penalties of the launders and assimilate better corrective methods to reduce resilience of similar habits. Finally, the international cooperation should be propagated further to trace launders even outside the US with ease.
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