Money Laundering

Definition: Money laundering is the clandestine movement of cash from one region to
another without notifying it to the government authorities with the purpose of
1. evading taxes
2. disguising ill-gotten incomes and
3. converting illegally earned money into legitimate assets.
“Transaction involving proceeds of property derived unlawful activity is called money
laundering” – Dictionary of Criminology
2. History of Money laundering
Historically, money laundering has been around in some form for 2,000 years, when Chinese
merchants cycled money through various businesses and complex financial transactions to
hide the income from government bureaucrats, who sought to garnish the income.
Some historians tie the term "money laundering" more prominently to the early 1900's and
gangsters like Al Capone, who is said to have to bought up laundromats to funnel dirty
money (from activities like bootlegging and prostitution) through the laundromats and mix
the cash with legitimate business income. In that way, Capone and other gangsters were able
to hide the money from law authorities
It wasn't until later in the 20th century when law enforcement tied the terms "money" and
"laundering" together - partly to identify gang members, drug dealers, Mafia kingpins and
other criminal elements who disguised the source of cash earned illegally, and laundered that
cash into legitimate and legal funds.
2. Three steps of money laundering
a) Placement of cash into a foreign bank
b) Performing transactions as layers of cash and then
c) Capitalizing the withdrawn cash into legitimate investments
Causes of Money Laundering
1. Tax Evasion and failure of financial institutions in detecting the laundered cash
2. Weak Financial Regulations provides a way out for money laundering
3. Bribery
4. Corruption
5. Failure of Banks in Detecting
6. Laundered Money
7. Nature of Borders

Anti-Money Laundering Act Pakistan 2010

Between $800 billion and $2 trillion in cash is laundered internationally on an annual basis.
the Foreign Exchange Regulations Bill 2019, under which the exchange of foreign currency
will be controlled. If a person wishes to send or receive $10,000 or more within the country,
permission from the State Bank will have to be sought first.
Money Laundering and its impact on economy
1. Monetary Instability
2. Rise in inflation and interest rate
3. Reduced social sector spending
4. Increase in unemployment
5. FDI volatilization
6. Loss of revenue due to tax evasion
7. E-commerce business chances decrease
8. Increase in currency exchange rate and currency devaluation
9. Privatization of governmental institutes becomes need of the hour
Law tackling money laundering in Pakistan
Anti-money laundering efforts in 1988 by IMF
1. Anti-money laundering act Pakistan 2010
2. Anti-money laundering act Pakistan 2020 amendment
i. Bay-nami account act
Role of Global Financial and other institutions in curbing money laundering
1. Role of International Monetary Fund (Load is proscribed to countries involving in
money laundering, guarantees are seized)
2. Role of World Trade Organization (Trade sanctions are imposed)
3. Role of Financial Action Task Force (punish money launderers as per devised
mechanism)
4. Money laundering and role of Interpol
Interpol plays a dual role in tackling financial crime, combining everyday support to member
countries with organizing targeted operations and joint investigations.
a) Capacity building and training
It is our job to keep our member countries and frontline police officers updated with the latest
sophisticated crime patterns and modus operandi, so we organize capacity building activities
at both national and regional level. These address not only police officers but also
representatives from other law enforcement agencies such as customs and immigration or
public entities including financial intelligence units and judicial bodies.
b) Global Conference on Criminal Finances and Cryptocurrencies
In response to the growing popularity of cryptocurrencies, and the opportunities they offer
criminal groups, INTERPOL, Europol and the Basel Institute on Governance take it in turns
to host a global conference on cryptocurrency-enabled crime, particularly money laundering.
Participants meet annually to share their latest experiences and build upon the public-private
partnerships which are essential to tackle financial crime.
 c) Staying on the ball
Operation SOGA (Soccer Gambling) targets illegal gambling and related money laundering
activities. It is a regular fixture timed to coincide with major international soccer events.
Suspicious bookmakers, punters, and money launderers are identified following painstaking
research and intelligence exchange, and are arrested in a simultaneous crackdown, hitting
criminal syndicates hard.
“Online betting platforms have brought an international dimension to soccer gambling and
are often located in countries with few regulations on sports betting, presenting additional
challenges for police.”
During the 2018 FIFA World Cup over 14,000 locations were raided worldwide, 19,000
people were arrested and USD142 million were recovered.
To date, seven SOGA operations have resulted in more than 30,000 arrests, the seizure of
some USD 57 million in cash and the closure of more than 3,700 illegal gambling dens which
handled almost USD 8 billion worth of bets.

Payment card fraud and role of Interpol

We work with police and financial institutions worldwide to tighten the net on payment card
crime.
There are a range of crimes associated with payment cards, payment systems such as point-
of-sale terminals and cash machines (ATMs). The prevalence of online payment has been a
boon to criminals opening up a host of new opportunities.
Crimes range from actual physical attacks on ATMs, for example using explosives, to
sophisticated cyber fraud such as black-box attacks where an un-authorized device sends
commands directly to the ATM cash dispenser.
d) Card-Present and Card-Not-Present fraud
In addition to actual card theft, criminals use various methods to capture data including card
skimming at ATMs or ticket machines, and phishing. People are often unaware that their card
data has been stolen until it is too late. This data may be used to create fake cards or used
subsequently for Card-Not-Present fraud (CNP).
What happens to the data?
Fraudsters use the information to purchase goods in the name of victims or obtain
unauthorized funds from the victims’ accounts. Compromised card data may also put up for
sale on darknet markets. In many cases, the data stolen in one country is used elsewhere
making it harder to trace.
e) Cross-border and multi-sector coordination
International cooperation is required for law enforcement to investigate these crimes, since
the victims often live in a different country to where the subsequent theft/fraud/cash-out
occurs. This is where our capabilities and support come in.
We cooperate with the European Association for Secure Transactions (EAST). Their website
contains the definitions and terminologies of the various types of crimes in this context.
f) Global Airport Action Days
These regular operations aim to intercept travelers who are flying on tickets bought with
compromised credit card data in order to crack down on the criminal organizations behind
them. They are co-organized by Europol, INTERPOL and other international stakeholders.
g) Payment card fraud
We mount a command post, and work round the clock with local police forces, airlines, the
International Air Transport Association (IATA) and payment card companies. Recent
successful operations enabled new modus operandi to be identified where organized crime
networks attempted to gain access to transit areas in airports in order to facilitate illegal
immigration and drug trafficking.
In June 2018, the action day involved 226 airports in 61 countries, 69 airlines and six online
travel agencies; it resulted in 141 arrests.

Money laundering and role of Interpol

Fighting money laundering goes hand in hand with investigating the crimes it is linked to.
Money laundering is concealing or disguising the identity of illegally obtained proceeds so
that they appear to have originated from legitimate sources. It is frequently a component of
other, much more serious, crimes such as drug trafficking, robbery or extortion.
Money laundering is omnipresent and found in areas where it might least be expected, such
as environmental crimes. The advent of cryptocurrency, such as bitcoins, has exacerbated
this phenomenon.
Criminal gangs move illegally obtained funds around the globe using banks, shell companies,
intermediaries and money transmitters, attempting to integrate the illegal funds in legal
businesses and economies. Nowadays, money mules play a key role in this context. These
are people who act as intermediaries for criminal gangs, even when they are not aware of the
fact, they are laundering illegal funds.
h) Going back to the roots
The investigation of money laundering usually goes hand in hand with the investigation of
the original crime generating the proceeds. Financial investigations aim to identify the
origins, flows and whereabouts of illicit income and unmask the networks involved. Illegally
acquired assets can then be frozen or confiscated and the perpetrators of both the original
offences and the subsequent money laundering prosecuted.
 i) Bringing civil society on board
Coordinating a tailored response to such sophisticated phenomena requires close cooperation
with partner organizations. We work with groups such as the Egmont Group body of 159
Financial Intelligence Units, the inter-governmental Financial Action Task Force (FATF) and
the FATF-linked Regional Anti-Money Laundering bodies.
j) Branching out into forestry crimes
There is no shortage of possibilities for channeling illicit funds into criminal enterprises; for
example, illegal logging (Illegal logging is the harvest, transportation, purchase or sale of
timber in violation of laws). Here, police need to go after the financiers, the logging cartels
and the illegal assets. With the support of the German Federal Ministry of Food and
Agriculture, we launched a project on financial investigations related to the forestry sector.
This aims to strengthen the capacity of countries in the Asia-Pacific region to conduct
financial investigations related to forestry crime.
k) Training in West Africa
We have also initiated capacity building initiatives on the investigation of money
laundering for member countries in West Africa to boost their investigative skills and
enhance connectivity.

FATF concerns
i. Transparent and speedy trials (Reforms in judiciary) [Jamat u dawa has been
banned, terrorist has been sentenced]
ii. Make money laundering cognizable offence
Grey list is blessing in disguise because black money is being invested in construction,
Pakistan ranks 46th in money laundering
FBR report 2019
Individuals in Pakistan received gifts of 1.2B Rs. In 2016-2017 from foreign states.

Money laundering and globalization