Legal Article on Money Laundry

Abstract

Money laundry poses a significant threat to the global financial system which have social impacts market stability and public spending on services. This article highlights the negative impacts of money laundry on economic global system .Here we will give some case studies of countries affected by their failure to oppose money laundering This article will discuss different measures took by international organizations and countries.

Introduction

Money laundry is one of disasters that hits the global financial system .The main problem here is not differentiating between legal and illegal funds .The legal question her what common stages in money laundry and if there are other methods recorded by countries. What procedures have been took by countries to face this disaster as it affects GDP (government domestic production). The article examines notable cases as HSBC, Danske bank and Malaysia and highlights the efforts of EU and different national laws in same mena region for anti-money laundry.

Background

Here we can say that money laundry is a crime under the umbrella of financial crimes firstly what is financial crimes

Financial crimes are criminal activities carried out by individuals or criminal organizations to provide economic benefits through illegal methods these methods can take different forms as money laundry fraud cybercrimes terrorist financing tax evasion and bribery and corruption1 This article focus on Money laundering so it defined as a process of converting cash, funds or property derived from criminal activities to give it a legitimate appearance. It is a process to clean ‘dirty’ money in order to disguise its criminal origin 2.money laundry involves complex transactions of dirty that gain from organized crimes as drug trafficking to mislead the authorities from knowing the real source of money or tracking it. How money laundry works there are common  stages of money laundry commonly they are three stages 1- placement 2- layering 3-integration: 1- placement dirty money is introduced into financial system 2- layering creating complex transaction to obstacle the authority from tracing the source of fund / money 3-integration reinvesting the money in legitimate economy through clean investments. By knowing common stages we can say that the majority of countries have recorded same way in money laundry as having unreal business or false claiming in owning an asset that helped the criminal in having this dirty money due to of common bases all the countries can have the same regulations as KYC “ know your customer” this concept have been took by the banks worldwide  or CDD ”customer due diligence” this have been took by a lot of commercial online stores contrary to amazon for example anyone can make order without knowing his identity which lead to false imagination of having a business with high revenues while on the other side he is the buyer and the seller at same time .As we see common stages around the world let us see common measures took by one of mena regional organization as  EU directions gave concern AMLD anti money laundering directives in 2020 AMLD designed to bring more transparency to improve the fight against money laundry and terrorist financing and tightens regulatory controls across more sectors.3US with major money laundry scandals as Bank Secrecy Act 1970 lead to give bank permission to report suspicious transactions and Money laundry control act 1986 makes money laundry as federal crime.

After seeing common measures took by same regional countries let see the different measures took by other reginal countries as UEA Egypt and Lebanon. Egypt have strong money laundry laws and regulations by criminalizes money laundry with penalties up to life imprisonment and fines up to 10 million but it requires banks or financial institutions to report an unusual transaction to Egyptian financial intelligence unit FIU having more stricter KYC rules that let the citizens develop their information on bank system every 3 years while foreigners every 1 year and the high risk clients their transactions being tracked by the bank manager and central bank of Egypt by usage of AI systems. UEA criminalizes money laundry by 10 years in prison and fines up to 5 million AED have obligations concern KYC also there central bank mandates real time reporting which are the large cash transactions and the great step they took is having stricter laws regard informal money transfers “hawala”.

Lebanon penalties from 3 to 7 years prison and fines up to 200 million LBP the great progress here is having legislation allows the judges to access the bank records in money laundry cases. Great remark all of them are members in FATF (  Financial Action Task Force)  Article will give quick glimpse on most famous scandals that happened in the world regard money laundry HSBC unaccountable London-headquartered HSBC was accused in 2012 of degenerating into a preferred financial institution for Mexican and Colombian drug cartels and other wrongdoers 4 by allowing illegal transactions for criminal enterprises and sanctioned governments including Cuba Iran Sudan and Syria. Credit Suisse settled for $536 million in 2009. 5 by failing the bank to stop drug cartels from laundering money US authorities have receive compensation from bank equal to 1.9 billion dollars and this lead to major consequences as the bank announced it is withdrawing from U.S. mass market retail banking by selling some parts of its money losing business 6. But the most significant thing happened is taking real steps from the bank for prevention of money laundry like real time transaction monitoring become mandatory for high risk clients stricter KYC rules as using AI to flag unusual transaction enhancing due diligence EDD by involving gathering and analyzing information about high risk customers or business relationships to identify and mitigate potential of other financial crimes7.

Danske bank 8

Denmark’s largest bank have laundered 200 billion frank by reciving funds from Russia Azerbaijani and organize crime companies due to blatant negligence in KYC and Mirror trades fake transactions happened without knowing it is source this lead to one of the largest fines in the corporate history have been held 2 billion frank and open to be more as they pay other 4 billion for settlement and fines  the bank have got the lesson and closed the branch of Estonia which recived the money have hired more than 1,000 AML staff got an AI system for monitoring the transactions they cooperate with EU DOJ US and Danish regulators by sharing their data to help in facing this crises. 

By the end of the articles the money laundry is a common issue between countries majority and have same stages and same field of money laundry as real states investment There are different way record for money laundering as luxury goods (buying gold with untraceable cash ) or by Hawala as it is not registered currency traders move funds outside the banking system , the last but not the least is trade laundry ( company claims to import gold or oil by 50 million and hiding  20 million dirty money fund in it ). To face the development of technology and criminal minds in this era we can recommend more rapid progress regard this crime as it harms all the world financial system with recommendations to the countries to sign protocol with the countries facing the same issue and help it in solving or having a commission to review and lead the countries without harming country’s economic or politics or by having general principles in global convention regard banking system like KYC and managing the high risk clients and have global bureau for anti-money laundry and organizes crimes experts and detectives for exchanging there different visions and national laws and have strict rules concern Hawala in medial east region and online payment methods our target here is having world anti-money laundry or reginal anti-money laundry as facing somehow same circumstances and political risks .

Conclusion

Money laundry is global crime that behind it horrible crimes facing money laundry will help and focus in there trends and trying to rapid AML protocol or laws will lead to decreasing the world crimes that harms the population interests around the world. The key finding here is common stages that can be faced by the whole world and the specialty of facing this crime.  

References

1)https://www.sanctionscanner.com/knowledge-base/financial-crime-977 accessed [March 26, 2025]

2) https://amlcft.bnm.gov.my/what-is-money-laundering accessed [March 24 2025]

3) EU Anti-Money Laundering Directives(AMLD)-LSEG http://www.lseg.com accessed [March 27 2025]

4) Reuters https://www.reuters.com/business/finance/us-fed-terminates-enforcement-action-against-hsbc-2022-09-02/  accessed [March 27 2025]

5) Investopedia https://www.investopedia.com/stock-analysis/2013/investing-news-for-jan-29-hsbcs-money-laundering-scandal-hbc-scbff-ing-cs-rbs0129.aspx#toc-hsbcs-entanglement-with-mexican-drug-cartels  accessed [March 27 2025]

6) Reuters https://www.reuters.com/business/finance/us-fed-terminates-enforcement-action-against-hsbc-2022-09-02/ accessed [March 27 2025]

7) iDenfy https://www.idenfy.com/blog/enhanced-due-diligence/ accessed [March 26 2025]

8) https://www.elucidate.co/blog/what-the-danske-bank-scandal-can-teach-us-about-financial-crime-risk-management-in-correspondent-banking accessed [March 27 2025]