Money Laundering

Table of contents

Abstract

Declaration of Authorship

1.0 Summary of the presentation topics

2.0 Methods combating money laundering
2.1"Know your customer" principle
2.2 Observation of accounts and transactions
2.3 Announcement of suspicious transactions

3.0 Legal measures against money laundering

4.0 Outlook

References

Footnotes

Abstract

This essay deals with the subject of money laundering, its effects and measures. It starts with a short summary of the presentation contents as a kind of introduction. The second section shows three methods combating money laundering. With the third section, legal measures against money laundering are presented. An outlook completes this essay.

Various measures are initiated to combat money laundering. Until now, methods have improved, but this has not had the effect yet that money laundering gets less attractive. Methods have to be modulated, countries should continue to work together to maximize success in obstruction of money launderers . Only if this way will be followed on, money laundering will perhaps some day loose attractiveness and importance.

1.0 Summary of the presentation topics

Money laundering is defined as systematically camouflage and skillfully obfuscation of property values by the use of financial transactions. (http://www.wirtschaftslexikon24.net) The intention of money laundering is to "clean" money so that it can be legally accessed or distributed via legitimate financial channels and credible institutions. The driving force behind all money laundering activities is profit maximization.

The presentation gave an overview about money laundering.

Within the introduction some reasons for money laundering were named, such as hiding wealth, avoiding prosecution, evading taxes, increasing profits and becoming legitimate.

Three stages classify money laundering: Placement, layering and integration. Placement is the first step to bring in the money that has an illegal source. Mostly, the transfer into the financial and economical cycle takes place with small partial amounts to avoid attracting interest.

Layering means an active camouflage of the property holdings and is realized with a great number of transactions which complicate the search for the origin of the transactions.

After the finalization of these actions, the money laundered can be used for legal business activities and will then be integrated into the normal business flow. This third step is called "integration".

Money laundering has socio-economic effects, effects on organized crimes, increases drug trafficking and dealing and undermines the integrity of entire financial systems.

Since 1988, there are various agreements to fight against money laundering, as for example the Vienna Agreement (1988), the Money Laundering Act (Geldwaschegesetz [GwG] for Germany) and the Banking Act (in Germany regulated in the Kreditwesen- kontrollgesetz [KWG]).

2.0 Methods combating money laundering

One of the principle aims of combating money laundering is to avoid or to minimize its effects. There are three different types that can be distinguished.

2.1 "Know your customer" principle

The main instrument combating money laundering is the prohibition of anonymous economic transactions. In this context the "know your customer" principle has been established. Banks, assurances and lawyers have the responsibility to identify their customers before starting any business activity with them. This method is called "control of identification". Additionally, they have to ask for the economical beneficiary.

In 2001, the bank's obligation for executive care for the identifying process of customers was described by the Basel Committee on Banking Supervision.

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