The global community has given a priority to fighting money laundering and the financing of terrorism. Some of the objectives of this effort are protecting the integrity and stability of the global financial system; cutting the resources available to terrorists, and making it more difficult for those terrorists who benefit from their criminal activities. The global financial agencies coordinate their members for surveillance functions against money laundering. They also use their financial expertise for integrating global efforts to combat money laundering and the financing of terrorism.
The global financial institutions responded to calls from the international community to expand their activity against money laundering. Concerning the abuse of offshore financial centers, these institutions initiated assessment programs for exploring the means to incorporate surveillance activities.
Political events intensified the efforts and broadened the scope to “combat” the financing of terrorism. The financial agencies assessed the compliance of countries to combat money laundering and financing of terrorism. The preliminary experience of countries is favorably evaluated by the global financial institutions. These institutions are especially concerned about the possible consequences of money laundering and the financing of terrorism on the economies of countries.
The effects include risks to the stability of financial institutions and financial systems in developing countries. Ethiopia has suffered from money laundering and bank robbery by armed political entities engaged in terrorism. Several banks have suffered from increased financial volatility due to armed robbery.
Financial crimes may dampen or even eliminate foreign direct investment (FDI) in developing countries, including Ethiopia. The problem is global; money launderers and terrorist financiers exploit loopholes and differences among national financial systems. They move their funds through jurisdictions with weak or ineffective legal and institutional frameworks.
Global financial institutions are resisting money laundering and the financing of terrorism through various means. They share current and relevant information with collaborating countries by developing common strategies and promoting appropriate standards that keep financial crimes under control. In addition, these institutions share their experiences with other relevant agencies on how to conduct financial evaluations and surveillance.
The international financial institutions assist countries in addressing identified shortcomings in the exercise of financial analyses. The major areas of assistance include the assessment of the strengths and weaknesses of the financial sector. The assessment involves compliance of financial institutions with global recommendations and methodology.
The global financial institutions provide substantial technical assistance to countries such as Ethiopia, in strengthening their legal, regulatory, institutional, and financial supervisory frameworks. These institutions are constantly active in researching and analyzing international experiences in implementing programs and projects related to financial policies. They assist countries in policy and program development as a basis for technical assistance. All these activities are conducted to prevent and control money laundering.
Criminal activities, including human trafficking, smuggling, drug trafficking, exploitation, dishonesty, fraud, bribery, and others tend to generate corrupt practices. Those individuals or groups involved in these dishonest practices and criminal acts accumulate huge illegal proceeds and incomes as they do in Ethiopia. Nevertheless, by using funds from illicit sources, criminal groups in Ethiopia risk attracting the attention of the authorities to the underlying criminal activity and exposing themselves to criminal prosecution.
To benefit freely from the proceeds of their crime, individuals must, therefore, hide the illicit origin of these funds. Hiding the source of these funds is one factor that constitutes the process of “money laundering.” It is the process by which proceeds, profits, or incomes from criminal activity are hidden to conceal the illicit origin.
Studies indicate that money laundering may cover three distinct and alternative areas. The first is the conversion or transfer of the proceeds of crime. The second is the concealment or disguise of the true nature, source, location, disposition, movement, or ownership of property. The third is the acquisition, possession, or use of property, knowing, at the time of the receipt, that such property is the proceeds of crime.
The global standard for the fight against money laundering and the financing of terrorism has been established by international financial institutions. They have the primary responsibility for developing a global standard for combating money laundering and the financing of terrorism. They work in close cooperation with other key and relevant organizations.
For these organizations to be effective in Ethiopia, it is important to study and identify what terrorist financing involves and how it conducts the solicitation, collection, or provision of funds. An investigation is required into what these funds are intended for. They may be used to support terrorist acts or organizations. Funds may stem from “both” legal and illicit sources. A collaborator may commit the crime of financing terrorism if he or she unlawfully and willfully provides or collects funds in order to carry out such an offense. A terrorist may directly or indirectly provide funds with the intention or knowledge of what it will be used for.
Terrorists are absolutely careful in hiding the origin and use of funds. Money laundering and financing of terrorism have to be secretly linked. The process of concealing the illicit origin of proceeds of crimes is very delicate. Terrorist financing is the collection or the provision of funds for committing crimes. In the case of money laundering, the funds are always of illicit origin, whereas in the case of terrorist financing, funds can secretly stem from both legal and illicit sources.
The primary goal of individuals or entities involved in the financing of terrorism is, therefore, not necessarily to conceal the sources of the money but to hide “both” the funding methods and the nature of the funded activity. Similar methods may be used in both money laundering and the financing of terrorism. In both cases, the actors make illegitimate use of the financial sector.
Studies reveal that the techniques used to launder money and finance terrorist activities are very similar and in many instances identical. An effective preventive measure of money laundering or countering the financing of terrorism must, therefore, address risk issues. The financial agencies must prevent, detect and punish illegal funds entering the financial system and the funding of terrorist individuals, organizations and activities. Also, preventive strategies should converge on attacking the criminal or terrorist organization through the financial trial. These measures help to identify the various components of the criminal or terrorist network. This calls for putting in place mechanisms to follow up on all financial transactions and to detect laundering and corruption.
Both corruption and money laundering are of great concern for global financial institutions. They are becoming an integral part of their responsibility because of the disruptive effects that each has on national and regional economies. Anti-corruption and anti-money laundering activities are interlinked in various ways, especially in promoting transparency, integrity, and accountability.
These help in tracing money launderers that create methods for concealing the unlawful origin of assets. Corruption has become one of the unlawful origins of assets as it generates large amounts of funds to be laundered. It may also hinder the tracing of offenses. Corruption can, therefore, obstruct the effective implementation of judicial acts, law enforcement, and legislative frameworks.
If developing countries declare corruption to be an offense related to money laundering, it may be more effectively controlled. When authorities are empowered to investigate and prosecute corruption-related money laundering, they may control and confiscate property that resulted from corruption. This act renders corruptors to be offenders and restrains them from further actions of venality and dishonesty.
When corruption is an offense related to money laundering, governments may design preventive measures that effectively combat corruption. To reduce the financing of terrorist activities, it is important to identify the links between corruptors and money launderers. In identifying these linkages, the various techniques of money laundering and financing terrorism have to be closely studied. It is well known that these crimes are secretly conducted using various creative methods.
Money laundering and financing of terrorism in any given location and situation are heavily influenced by the financial markets. Accordingly, methods vary from place to place and over time. Moreover, those involved in the fight against money laundering or the financing of terrorism rely on the most up-to-date and reliable information on the types of laundering and terrorism. In Ethiopia, the concerned anti-terrorist agencies must use the information on particular areas and locations to control terrorists.
The agencies observe trends in order to be in a position to devise appropriate and reliable strategies for controlling and addressing the risks, threats, and dangers of money laundering and terrorist financing. They may inform, if necessary, the public at large by publishing reports on the types of terrorist activities on their webpage.
Anti-terrorist agencies need the cooperation of financial institutions and the public that are bound to be negatively affected by terrorists. Many of the methods applied by criminals to launder money or finance terrorism involve the use of the financial system to transfer funds. Financial institutions, in particular banks, are most vulnerable to manipulation for that purpose. In order to protect the financial institutions in Ethiopia, it is critical to have sufficient and adequate control and procedures in place.
These measures may enable them to know the person with whom they are dealing. Adequate due diligence on new and existing customers is a key part of these controls. Though Ethiopian financial institutions, particularly banks, suffered from terrorist robbers, they seem to have gained enough experience in combating anti-terrorist and money laundering agents and their foreign sponsors.
The Ethiopian financial institutions are one of the important guardians of the economy that combat money laundering and financing of terrorism. They should, therefore, be equipped with modern financial instruments and dedicated financial gurus and leaders to defend and promote the economic development of the country.
The Ethiopian Herald BY GETACHEW MINAS