Thanks to author John Taylor for this blog on money laundering...
There are two key issues in the fight to combat money laundering and corruption - which go hand in hand.
Firstly there is the question of poverty and wealth in countries which lack proper systems of control and accountability either through despotism or the breakdown of law and order. GOPAC ('Global Order of Parliamentarians Against Corruption') recognises that regimes that lack systems of accountability and transparency typically allow for high levels of money laundering and corruption. Some of the poorest countries in the world are the most corrupt, as measured by Transparency International's Global Corruption Report.
Secondly is the question of wealth. The purpose of money laundering is to hide the sources of money or other assets obtained by illegal means, for example wealth generated through crime such as drug or people smuggling or as a result of corruption or theft of state or personal assets.
There are areas of the world which specialise in non-disclosure, that is they have local laws which create the systems whereby the true ownership of assets can, quite legitimately remain concealed behind shell companies or in protected trusts fronted by lawyers who claim client confidentiality when questioned. Here rich people squirrel away assets from the taxman, vengeful ex – spouses or regulatory authorities behind legal walls which are almost impossible to penetrate even at government level.
Money laundering is big business. Textbooks often describe the average money launderer either as criminals washing illegal proceeds of crime by setting up fake restaurants or smuggling the money in suitcases out to the Channel Islands, or sometimes as former officials of corrupt regimes buying luxury properties in London but, in fact, it is a global phenomenon on a far wider scale involving some very scary organisations indeed. Often the process of washing vast wodges of currency is intermingled with commercial operations, known as trade based money laundering, and is on the increase as it is a major source of funding for terrorist organisations.
The Lebanese Canadian Bank case is an example. In this case the Lebanese Canadian Bank and other financial institutions transferred at least $329 million to the United States to buy cars subsequently sent to West Africa. It was established that the Lebanese Canadian Bank played a key role in laundering the proceeds of those car sales and profits from narcotics trafficking, enabling the money to arrive back in Lebanon to be used by Hezbollah, which is classed in the USA as a terrorist organisation.