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Money lanudering and its impact on pakistan economy
Assalamulaikum memebers.
I am requesting particularly Raz, economists,bankers and the other memebers in general to reach me out in one of my assignment which is on : Money lanudering and its impact on pakistan economy Futhermore, i need relevent and to the point stuff as soon as possible.plus wid that do inform me,how it has affected our economy up till now and to which extent,basically i want to know that what are those factors that has influenced our economy(money lanudering).consequently,dear if u have any data wid regard to my topic,so plz send me out via my yahoo email address which is given above in my profile... its my subject assingment and holding 100 marks,therefore, i am lacking relavent data and unable to defend the topic.so hopefully u may help me. Looking for ur unusual support and attention..(Promptly) Friends ur help in any case will be highly obliged.. Wasalam |
#2
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@Jadoon Khan
Two relevant articles: 1.http://www.pide.org.pk/pdf/PDR/1995/Volume4/791-807.pdf 2.http://mpra.ub.uni-muenchen.de/2226/...paper_2226.pdf Regards However one word of caution. As both these articles are based on econometric estimation of data. Therefore it needs very good econometric background to intrerpret results. It is because different econometric specifications, relevant economic variables and use of instrumental variables may change results considerably. If this assignment is for MBA or MA level, then you can provide the stuff. Personally I don't feel much comfortable with those results. Regards Last edited by Andrew Dufresne; Saturday, May 15, 2010 at 07:23 PM. Reason: Merged |
The Following User Says Thank You to New Student For This Useful Post: | ||
jadoon khan (Saturday, May 15, 2010) |
#3
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Part-1
Money Laundering: Money Laundering means the process whereby the identity of “dirty money” representing the proceeds of crime is changed (washed) through apparently legitimate transactions and processes so that money appears to have originated from a legitimate sources. Goals of Money Launderers Need to conceal the true owners and origin of the money Need to maintain control over the money Need to alter the form of money to mask its origin Dirty Money- Proceeds of Crime: Few Examples Money Obtained From Bribery, Corruption Narcotics Kidnapping Theft Fraud and Forgeries Counterfeiting Currency Notes or Bank Notes Terrorism Money Laundering Process: Proceeds of Crime ………… Process of Money Laundering (1. Placement 2. Layering 3. Integration)………………………. Laundered Asset Stages of Money Laundering Placement – Introduction of funds in financial system Layering – Movement of funds to multiple accounts / Series of Financial Transactions Integration – Mixing the funds with legitimate proceeds Stages of Money Laundering 1. Placement: Introduction of cash into financial System Opening of Bank Accounts in the name of relatives, friends, servants, etc. with the intention to hide the actual beneficial ownership of funds to be deposited (Benami Accounts); Purchase of financial instruments in the name of relatives, friends, servants, etc with the intention to hide the actual beneficial ownership (Benami COIs, TCs, Stocks,etc) Purchase of bearer certificates of investment: (Prize Bonds; FEBCs, Dollar Bonds, etc); 2. Layering: Multiple Transactions Making several financial transactions Routing of deposits through multiple number of accounts Involving various financial institutions – Domestic & Abroad with a purpose to camouflage the original source & make it difficult to trail the funds. Funds used to purchase securities from one institution and sold through another Securities purchased from one institution placed as collateral with another institution Disguise the transfer as payment for goods and services 3. Integration: Injection of laundered money into the legitimate economy / Business Acquiring assets e.g., Business, firm, company, shares, securities, real estate; Mingling of Illegitimate proceeds with legitimate proceeds to give the appearance of legitimacy Structuring Cash Deposits: Breaking a large transaction into a number of smaller transactions To avoid AML Reporting Requirements To avoid suspicious of commercial activity Smurfing: Using a number of individuals (smurfs) to deposit the proceeds of crime into the financial system Transactions are usually structured Placements at different banks and branches Consolidated into one place International Smuggling of Cash: Physical transportation of large amount of cash across national borders by: Plane Boat human couriers International Smuggling of Cash – Purpose: Avoid anti-money laundering regulations or law enforcement intelligence in one country Move it to countries where there are less AML Controls and Enter into financial system Using the Cover of Legitimate Business A money launderer purchases a legitimate business that has a large turnover of cash. The cash from legitimate business is merged with illegal proceeds before banking the proceeds Using the Cover of Legitimate Business Provides a degree of legitimacy Aids at the stage of integration Factors Identifying the use of legitimate business to launder money Sudden increase in volume of sales for business A comparison of revenue with similar other businesses in the area Wire Transfers Large volume of funds instantly transferred Ability to move funds through several jurisdictions and multiple bank accounts very quickly Limited information on identity of originator / recipient Alternative Remittance System ARS : Alternative Remittance System Financial services operated outside of the mainstream financial sector, to transfer funds between different countries Mostly in Asia and Arabian Gulf Generally assist expatriate workers to repatriate funds to their families Advantages: Cheaper and Faster than the International Banking System Confidence from long established cultural, historical and commercial practices Available outside normal banking business hours No or minimal paper work Advantages: Funds can be received or sent to or from locations where banks do not exist Fees much lower than charged by banks Identity of the customers moving funds is hidden Why Criminals would use ARS? NO KYC No Records Authorities cannot trace No remittance actually takes place but the settlement is achieved through: A remittance Physical cash carrying Trade (invoice manipulation) Settlement through commodities other than cash Hawala / Hundi Originated in South Asia Spread to Europe, Middle East, Africa, America and Almost all regions of Asia Estimated that 50% people in India use it despite prohibition in Law An Indian Broker receives Rupees from Indian Businessman who wishes to Invest in Dubai The Indian broker sends a fax to broker in Dubai instructing him to make payment in Dubai Dubai Broker collects cash from Indian expatriates working in Dubai Dubai Broker sends fax message to Indian Broker instructing him to make payments (family members of expatriates) Difference is settled through a fund transfer, physical movement of cash or gold smuggling. Trade Related Money Laundering International Commercial Transactions and Supporting Documents are used/manipulated to effect false transfer of value Generally used by Import / Export Businesses Why? Avoidance of Currency Controls Transfer of Funds Internationally Government Investment Incentives Most Commonly Used Methods: Over Invoicing Under Invoicing Lawyers and Accountants Involvement in Complex Money Laundering Schemes Strengthening of AML/CFT Controls now require sophisticated schemes to launder money thus professional advice is needed Professional Services offered by Lawyers: Legal Advice Property Transactions Investment Services Trust Formation and Trustee Services Company Formation and Administration Nominee Directors and Shareholders Professional Services Provided by Accountants Financial Advice Tax Advice Structuring Formation of Companies Trustee Services Introduction to Financial Institutions Nominee Directors and Shareholders Professional Services used throughout Money Laundering Cycle Accountants and Lawyers can assist Money Launderers during the Placement, Layering and Integration Stages of Money Laundering Cycle Underlying Offences/ Predicate offences Participation in an organized criminal group and racketeering Terrorism including terrorism financing Trafficking in human beings and migrant smuggling Sexual exploitation including sexual exploitation of the children Illicit trafficking in narcotic drugs and psychotropic substances Illicit arms trafficking Illicit trafficking in stolen and other goods Corruption and bribery Fraud Counterfeiting currency Counterfeiting and piracy of products Environmental crime Murder, grievous bodily injury Kidnapping, illegal restraint and hostage taking Robbery or theft Smuggling Extortion Forgery Piracy Insider trading and market manipulation Underground Economy : EXEMPLE ç The girlfriend of a narcotics trafficker by whom is discovered 100.000 € dissimulated behind the bath-tub ç the trafficker and his girlfriend concubine pretend to be unaware of the existence of the money. ç The hiring of the apartment is in the name of the girlfriend. She lives on government welfare Purchases of: top-of-the-range vehicles Hi-fi, jewellery, Luxury Clothing, … THE ANSWER: texts concerning the CRIMINAL ASSOCIATION AND THE JUSTIFICATION OF RESOURCES Impacts of Money Laundering Financial crimes oils the wheels of mass scale violent crimes – simple logic says that: - More bank frauds and robberies – depositors? Borrowers? - Corrupt practices in the public sector –bills? –taxes? Macro economic consequences: - Sudden change in money demand - Risk to bank soundness - Contamination effect on legal transactions Volatility of capital flows and hence exchange rates Risks to banks: - Reputation: Negative perception- media- run on bank - Operational: Staff- Systems and Procedures- imminent failure Legal: Court proceedings and hence fines or imprisonment or both Risks for the Financial Sector: - Loss of profitable business - Liquidity problems - Termination of correspondent banking - Investigations- fines- penalties - Asset seizure - Loan losses - Decline in the stock value If Money laundering is curse, why steps were not taken earlier? Part-2 Most Prominent Fines for AML Non-Compliance AmSouth Bank $10,000,000 $40,000,000 RIGGS Bank $25.0 Million $16.0 Million Korea Exchange Bank $1.1 Million ($32 Million – in transactions) Western Union. $11.0 Million Banco Popular de Puerto Rico $20.0 Million Sovereign Bank $700,000 U.S. Trust Company $10,000,000 SARs – Pakistan’s Perspective >Cash based and undocumented Economy > Lack of awareness/ political will > Non-reporting of STRs by FIs. > Protection to reporting institutions/ employees >Compliance Units in FIs- not proactive >Non-utilization of technology >Fear of losing business >Lack of inter-agency coordination Legal Framework concerning AML/CFT Control of Narcotics Substances Act, 1997 National Accountability Ordinance, 1999 Anti-Terrorist Act, 1997 UN (Security Council) Act, 1948 Banking Companies Ordinance, 1962 Foreign Exchange Regulations Act, 1947, Anti-money Laundering Ordinance, 2007 Anti-terrorism Act 1997 Sections 11H to 11K under the Act are about Funding of terrorism Funding of terrorism is a criminal offence under the Act. The offence extends to all aspects like inviting, providing, possessing, using, concealing, removing or transferring money or any other property intended to be used or suspected to be used for terrorism. Besides individuals, the Act creates criminal liability for organizations involved or suspected of involvement in terrorism The Federal Government is empowered to take action against organization including banning, freezing of assets, sealing its offices and seizure of its publications/ literature etc. Forfeiture of assets with or without conviction available Investigation of terrorist financing Federal Investigation Agency (FIA)- specialized Agency for white collar crimes has a Special Investigation Group (SIG) for investigation of terrorist financing. FIA is one of the agencies specifically nominated in AML Ordinance FMU has started sending STRs, prima facie, related to terrorist financing to FIA (SIG) FIA sends feed back and questions to regulators if there is, prima facie, negligence on the part of bank/ company The Federal Government has banned a number of organizations suspected of involvement in funding of terrorism under the Act. The bank accounts of organizations and individuals proscribed under the Act were immediately frozen by SBP Special Anti-Terrorism Courts decide cases under the Act Anti-money Laundering Ordinance, 2007 (AMLO) AMLO promulgated in September, 2007 Criminalizes money laundering vis-à-vis major predicate offences ( 1-10 years with or without fine) Anti-terrorism Act is mentioned in the schedule Property involved in money laundering liable to be confiscated Provides for establishment of independent body- FMU in SBP or any other place NAB, FIA & ANF to act as investigation agencies The Court of Session to take trial of money laundering- appeal before High Court Financial institutions are under reporting obligations – (STR, CTR) Protection to reporting institutions available Bank secrecy relaxed for money laundering investigations Tipping off is an offence Mutual Legal Assistance with contracting States AML Ordinance is overriding law Part-3 Overview of AML/CFT Regime in Pakistan Existing Legislative Framework - General Pakistan Penal Code, 1860 (PPC) Main statue creating penal liability in respect of wide range of crimes Provisions for Search, freeze, seizure, arrest, forfeiture, etc Police empowered to investigate and prosecute Pakistan Criminal Procedure Code (Cr.P.C) Basic statute for criminal trials Provides- manner of investigation, search, seizure, conduct of trial, evidence, procedural rights of accused, nature and manner of conviction Qanun-e-Shahadat Order, 1984 (Evidence Act)- Procurement, admissibility and recording of evidence Existing Legislative Framework - Special The control of Narcotics Substances Act, 1997 (CNSA) - Assets derived from narcotics proceeds come under the ambit of ML - Provision to receive STRs from banks - No explicit protection for reporting entities - Provisions for search, seizure, forfeiture, investigation, prosecution, etc - Mutual Legal Assistance / Extradition Anti-Narcotics Force (ANF) is empowered to investigate and prosecute National Accountability Ordinance 1999 (NAO) Assets derived from corruption come under the purview of ML Provision to receive STRs from Banks / FIs - No explicit protection for reporting entities Provisions to call information from financial institutions and other individuals / entities Mutual Legal Assistance Search, seizure, voiding transfer, forfeiture, Investigation, Prosecution, voluntary return, plea bargain, etc NAB is empowered to inquire, investigate and prosecute. Anti-Terrorism Act 1997 (ATA) Criminalizes Terrorist Financing, Fund raising for terrorist activities, etc Proscribes Terrorist Organizations Criminalizes ML from Terrorism Proceeds Provisions for Search, Seizure, Forfeiture, investigation, prosecution, etc FIA is responsible for investigations / prosecutions under ATA SRO Notifications under UN Security Council Resolution Nos 1267, 1333, 1373, 1390, 1455 & 1617 Freezing of Accounts of individuals / entities under SRO Notifications being executed by SBP Approx Rs 622 M or US$ 10.38Million frozen SBP Regulation M-5 for reporting of STRs to SBP Buffer between Banks and Law enforcement agencies No explicit protection for reporting entities Existing Legislative Framework - Shortcomings Limited scope of AML Legislation- ML is a crime viz-a-viz three predicate offences i.e., Narcotics, Corruption and Terrorism Scattered regime of reporting STRs and also limited to few offences No Financial Intelligence Unit No protection on reporting STRs Limited Mutual Legal Assistance Provisions Lack of coordination among Law enforcement agencies for effective implementation of AML/CFT regimes Steps taken by SBP Legal Framework • AML Ordinance 2007 • FMU Regulatory Framework Prudential Regulations Monitoring & Enforcement On-site inspection and off-site surveillance International Obligations UNSC Resolutions- Freezing of accounts Curbing of Informal Value Transfers Formation of Exchange Companies Documentation of Economy Restriction on RTCs – Bearer Instruments Existing Regulatory Framework-SBP SBP is the regulator of Banks, DFIs and Exchange Companies SBP has issued Comprehensive Prudential Regulations / Directives on AML/CFT in line with FATF Recommendations and Best international Practices SBP has the mechanism in place to monitor the activities of entities Off-site Surveillance On-Site Inspection PR M1 – Know Your Customer (KYC) True identity, nature of business, beneficial ownership, due diligence of high-risk customers, etc PR M2 – AML Measures Ongoing monitoring of accounts, attention to complex / out of character transactions, trainings, etc PR M3 – Record Retention Minimum 5 years retention period PR M4- Correspondent Banking Cautious relationship with banks of weak KYC/CDD standards PR M5- Suspicious Transactions with Examples Reporting of STRs to SBP alongwith relevant info PR G-1D- Compliance Officer Appointment of senior level officer as compliance officer Other Measures taken by SBP Establishment of AML/CFT Unit Guidelines for Internal Control Lower Denomination Rupee Travellers Cheques Phasing out of Bearer Instruments Freezing of Bank Accounts Formation of Exchange Companies Liaison with Domestic /Regional / Global Bodies Training of Staff / International Conferences Introduction of Islamic Banking Existing Regulatory Framework-SECP Establishment of AML/CFT Unit Issuance of Prudential Regulation on AML KYC/CDD, True Identity, nature of account, conduct of account in line with ethical standards, monitoring of accounts, etc No payment or receipt in cash beyond Rs 50,000/- Appointment of Compliance Officer Bar on Physical settlement of Shares Proposed Legislative Framework Draft AML Bill criminalizes ML as an offence as per international standards covering all serious offences excluding fiscal offences as predicate offences Establishment of high powered National Executive Committee and General Committee to combat ML Establishment of Financial Monitoring Unit in SBP Explicit Protection to reporting entities Investigative Powers for IOs Mutual Legal Assistance Provisions Offences triable by Special Courts Benefits of New Legislation Meets International Standards / requirements Compliance to UN Resolution 1617 and FATF Recs Compliance to APG Evaluation, CTC Reports, etc Establishment of FMU in SBP would ensure its professional management besides general superintendence Cognizance of ML offence Safe, Sound & Secured Financial System Eligibility for Membership to Egmont Group Increased Intelligence sharing with larger group of countries Increased International Cooperation through MLA Helpful in recovery of laundered assets stashed abroad. Part-4 Financial Monitoring Unit (FMU) Receive STRs & CTRs from FIs Analyse the reports and call information from other agencies Refer those transactions needing investigation to LEAs Create & maintain databases and acquire analytical software and computer equipment Cooperate with other FIUs and foreign authorities to share and request information / documents Freeze property for 15 days Future Measures Capacity building of SIG and trainings in financial investigation Enhanced cooperation and strengthening of FMU Amendments in AMLO to include “terrorist financing” for reporting as well as other purposes on the analogy of money laundering Capacity building and latest trainings at regulatory level to ensure banks and exchange companies are not used for terrorist financing Signing of Convention on Suppression of Financing of Terrorism under consideration Mutual legal assistance and enhanced overseas cooperation Note: Please rearrange material in proper sequence where ever you feel room for improvement. I have clubbed this material from my various sources so there is possibility of overlapping points. I think this material is enough for a Masters level assignment. Based on this material and some statistical figures from the links provided by New Student you can construct a great piece of presentation. Utilize New Student’s links for general comment on economy and get help from this posted material for specific concepts and concrete measures. Moreover; do update some data from recently promulgated AML ordinance. Now it is your function to go through current AML ordinance and insert relevant material in the assignment. Regards
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"Tumhary nafs ki qeemat Janat hay isy Janat say kam qeemat pey na bechna." "Jiyo to istarh ky log tum sy milny ko tarsy; maro to istrah k log tumharee mot par royain" Last edited by Princess Royal; Saturday, May 15, 2010 at 05:05 PM. |
The Following 5 Users Say Thank You to Raz For This Useful Post: | ||
Assad1 (Friday, July 31, 2015), fluent_20 (Saturday, May 15, 2010), jadoon khan (Saturday, May 15, 2010), New Student (Saturday, May 15, 2010), RMKamran (Sunday, April 28, 2019) |
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thanks
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@newstudent No problem sir,infact i know the the level of ur articles so i will try to hit and extract the relevent stuff for myself from the mine,coz some thing is better than nothing,so hopefully ur stuff will provide some fuel to ignite my engine of brian. Once again i am very thankful. @Raz I am also very thankful to u sir in faith,coz u really gave me a big hug and sir ur stuff will inshallah fulfill my need and requirements to a greater extent.u r always comimg first in rendering ur valuable support to me. May Allah help u and fulfill ur desires and wishes. Wasalamuliakum Regards
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There are extraordinary people in very ordinary look. and most of the time ordinary people do extra ordinary things. Last edited by Andrew Dufresne; Saturday, May 15, 2010 at 07:24 PM. Reason: Quote |
The Following User Says Thank You to jadoon khan For This Useful Post: | ||
Raz (Saturday, May 15, 2010) |
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