Concerted international action against money laundering is crucial, as the global financial system is linked as never before. Money can enter the system at one point, be moved electronically around the globe and then exit at another. Once illegal funds have been accepted by a financial centre or institution, they can be passed along from one country to another. The initial 'placement' stage offers the greatest opportunity for detecting the proceeds of crime. But, as the funds are 'layered' through a series of transactions – many across international borders - it becomes increasingly hard for other institutions or regulators to spot the suspect funds. The challenge is huge: money-laundering transactions are estimated to equate to 2-5% of global GDP or around US$1.5 trillion per year.
Laundering the proceeds of drug trafficking or any other serious criminal activity is an offence in UK. All credit and financial institutions in the UK are legally required to report suspicious transactions, identify customers, maintain records and have appropriate training systems in place. More than 70,000 disclosures (up 100% on 2001) were made by the financial sector in the UK to the Economic Crime Unit of the National Criminal Intelligence Service in 2002.
Over the past decade the UK has worked with partners abroad to develop a framework for international co-operation on money laundering. A key element in this framework is codes and standards, which capture best practice in the control of money-laundering and provide a focus for each country's efforts to strengthen its systems. At home, the recently enacted Proceeds of Crime Act has further strengthened the UK's anti-money laundering regime.
Financial Action Task Force
In 1989 the G7 Group of Countries responded to the growing threat posed by money laundering – particularly in connection with drug trafficking – by setting up the Financial Action Task Force (FATF). The group membership has gradually expanded to 31 countries.
FATF experts developed a list of 40 recommendations in anti-money laundering best practice. Following the terrorist attacks of September 11, the FATF came up with a further 8 Special Recommendations to tackle terrorist financing. The 'FATF 40+8' are widely accepted as the international standards on anti-money laundering and countering the finance of terrorism. The UK has implemented all 40 + 8 FATF recommendations and encourages their widest international adoption and application.
Regional Initiatives
The FATF's successful approach is based on mutual assistance and peer pressure. Regional anti-money laundering groups have been created, including the Council of Europe's anti-money laundering committee (MONEYVAL), the Caribbean Financial Action Task Force (CFATF), the Asia Pacific Group against Money Laundering (APG), the South American Financial Action Task Force (GAFISUD) and the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). These groups have been increasingly successful in promoting best practice on money laundering. In the UK, the Foreign and Commonwealth Office has been an active supporter of a number of these group.
The UK also hosts the Egmont Group secretariat whose members consist of the Financial Intelligence Units of 59 countries allowing for the exchange of information between law enforcement agencies.
While much progress has been made there remains much to do. Three immediate challenges are:
- To get away from purely drug-related definitions of money laundering and address the issue from an all crimes perspective – i.e. irrespective of whether or not the predicate offence was drug-related.
- To further strengthen the system for exchanging information between law enforcement agencies. Well-staffed financial intelligence units (FIUs) have a vital role to play in this, because they bring about interagency co-operation within individual countries, a vital pre-condition for effective co-operation between countries.
- To improve the framework for exchange of evidential information. Each country has its own legal system and traditions, and an understandable need to follow due process – in the UK, for example, this includes Data Protection and Human Rights Act legal requirements.
