Financial crimes are the reality of today’s world as it has been since people started using any form of money. Anti money laundering is a checking system that global governments have enacted to make sure that criminals do not successfully conceal the proceeds of crimes. Anti money laundering laws target financial crimes and the efforts made by criminals to use the funds they have illegally acquired by funneling them through legitimate businesses.
AML laws have been expanded to ensure that terrorists do not easily access funds that enable them to carry out terrorist activities. This expansion of AML laws was the outcome of the 9/11 terrorist attacks in the United States. As an obligation, all financial institutions are made to comply with these rules and also inform their customers that they are mandated to adhere to anti money laundering regulations.
Some of the AML demands from financial institutions such as banks and brokers require that all suspicious transactions are reported to relevant regulatory authorities. This also implies that all funds transacted through such entities up to $10,000 are reported as a routine. Other rules that must be complied with are ensuring that institutions keep up-to-date financial records to enable law enforcement agencies to follow the trail of illicit funds.
How Criminals Launder Illicit Funds
In the real sense of the word, to launder means to clean up. This means that criminals such as robbers, embezzlers, corrupt politicians and tax evaders among others tend to clean up their criminally acquired funds by using legitimate businesses as fronts. They practically use such businesses that are in the good books of the law to create the impression that the illegally acquired funds were proceeds from such legitimate ventures.
At times, they succeed in using corrupt but legitimate businesses such as brokers who accept their funds for huge commissions. Generally, AML policies have far reaching effects on the activities of criminals, especially those with global outlook. The fact that huge funds are reported and law enforcement agencies can lay hands on financial records have contributed in the tracking of many illicit funds and prosecution of the criminals behind them.
Origin of AML Laws
Most countries that have active governments have anti money laundering laws. These originated from the 1989 consensus reached by a few countries to counter financial crimes. This led to the formation of the Financial Action Task Force (FATF). This organization had its mandate expanded to cover terrorism financing.
