According to the United Nations Office on Drugs and Crime, the estimated amount of money laundered globally in one year is 2 – 5% of global GDP, or $800 billion – $2 trillion in US dollars. But, of course, we can never really know exactly how much damage is being done due to the very nature of money laundering.
Money laundering is defined under the UN Vienna 1988 Convention Article 3.1 as:
“the conversion or transfer of property, knowing that such property is derived from any offense(s), for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in such offense(s) to evade the legal consequences of his actions.”
Essentially, criminals need to launder money if they are going to benefit from their crimes such as drug trafficking, human trafficking, green crime, and any organised crime, corruption, or terrorism.
So, what is the international community doing about fighting money laundering and terrorist financing? The global watchdog that tackles this critical issue is the Financial Action Task Force (FATF), based in Paris. It sets standards (also referred to as ‘recommendations’) which it enforces through country assessments to determine whether the standards are adequately implemented. Over 200 countries and jurisdictions have committed to implementing the standards.
The rise of virtual assets such as cryptocurrencies has brought new challenges for FATF. Consequently, it “has issued global, binding standards to prevent the misuse of virtual assets for money laundering and terrorist financing. The standards ensure that virtual assets are treated fairly, applying the same safeguards as the financial sector”. (refer to www.fatf-gafi.org)
Many countries have implemented anti-money laundering and counter-terrorist financing laws based on the FATF standards. Unfortunately, in my own country of Australia, the laws are lagging considerably behind what FATF would consider being compliant with the standards. However, anti-money laundering must be approached holistically at the macro, global, and micro, grassroots levels.
For instance, many small businesses, including those professional operating services such as legal or accounting services, real estate, credit providers, and so on, can be unwittingly swept up in money laundering activities, which have become so sophisticated that in many cases, you may not even realise it’s happening.
For this reason, it’s critical to know who your customers or clients are. Starting with some essential due diligence and verification can make a big difference. Simple actions like checking a range of identity documents, not providing customers and clients with access to your business bank account, actually meeting customers or clients whether in person or even virtually, doing ongoing due diligence not just at the beginning of an engagement or project. And if you have any suspicions, ensure that you make a timely report to the relevant public authority tasked with anti-money laundering in your domestic jurisdiction.
Remember, money laundering is not a victimless crime, and we all need to do our part in preventing it.