MONEY LAUNDERING

Presented by TUAGIRA MIKE
Email: tuagira09@live.com
Phone: +250788588648
From RWANDA KIGALI

Table of Contents
Introduction1
Background 2
Money laundering methods 3
The elements of Money laundering 4
Patterns and Trends of Money Laundering 5
Characteristics ………………………... …………………………………………………………6
Cultural influence6
Foreground factors……………………………………………… ……………………………….6
Legal issues……………………………….………………………………………………………7
Investigation issues……………………………..………………………………………………...8
Methods of obtaining evidence ………………………..………………………………………...8
Investigation techniques …............................................................................................................9
Challenges…………………………………………………………………………………………9
Policing Strategies……………………………………………………………………………......10
Conclusion…………………………………………….…………………………………………..10
References…………………………………………………………….…………………………..11

I. Introduction
There are various definitions available which describe the phrase ‘Money Laundering’. Article 1 of the draft European Communities (EC) Directive of March 1990 defines it as the process by which large amounts of illegally obtained money (from drug trafficking, terrorist activity or other serious crimes) is given the appearance of having originated from a legitimate source. In Rwanda context, the crime Money Laundering is defined under article 2, paragraph 1 of law no 47/2008 of 09 September 2008 on prevention and penalizing the crime of money laundering and financing terrorism. If it is done successfully, it allows the criminals to maintain control over their proceeds and ultimately to provide a legitimate cover for their source of income. Money laundering plays a fundamental role in facilitating the ambitions of the drug trafficker, the terrorist, the organized criminals, the insider dealer, the tax evader as well as the many others who need to avoid the kind of attention from the authorities that sudden wealth brings from illegal activities. By engaging in this type of activity it is hoped to place the proceeds beyond the reach of any asset penalty laws.
Floriano, Fr. (2007) argued that Money laundering is called what it is because that perfectly describes what takes place illegal, or dirty, money is put through a cycle of transactions, or washed, so that it comes out the other end as legal, or clean money. In other words, the source of illegally obtained funds is obscured through a succession of transfers and deals in order that those same funds can eventually be made to appear as legitimate income. II. Background
Money laundering as a crime only attracted interest in the 1980s, essentially within a drug trafficking context. It was from an increasing awareness of the huge profits generated from this criminal activity and a concern at the massive drug abuse problem in western society which created the momentum for governments to act against the drug dealers by creating legislation that would deprive them of their illicit gains.
Governments also recognized those criminal organizations through the huge profits they earned from drugs, could contaminate and corrupt the structures of the state at all levels. Money laundering is a truly global phenomenon, helped by the International financial community which is a 24 hours a day business. When one financial centre closes business for the day, another one is opening or open for business.

Some theories are developed to describe the origin of money laundering: Theory 1: The term money laundering was used for the first time after Watergate scandal in 1970s: whereby at Watergate hotel Millions of dollars coming from U.S President Richard Nixon supporters were used to pay for the cover-up in an attempt to hide the truth from Congress and the American people. It became clear that the Richard Nixon presidency had been involved in serious exploitation and abuses of power for years during that scandal, five people were arrested by FBI in connection with the scandal and it was towards the presidential re-election and then after that political scandal was termed money laundering and was recognized internationally.
Theory 2: Coined due to the laundering of dirty money in a process of numerous transfer. For example there might be some institutions that earn money in form of coins.
Theory 3: The term Money laundering is said to have originated at the time of famous American gangsters that arose originally out of prohibitions banning of alcoholic drinks. General mechanisms used to disguise the origins of the large amount of money generated by import and sale of alcohol and other rackets such as gambling some of which was illegal.
One of the methods of concealing the source of the money was legal gambling. The major problem that gangsters faced was that the money was in cash, often in small denomination coins. If the coins were put into the bank, the questions would be asked. But the storage of large amount of money in law value coins is storage terrible. So they created business, one of this was slot machines and another was laundries. So it is said that the term money laundering was born. III. Money laundering methods
Money laundering is critical to the effective operation of virtually every form of transnational and organized crime. Anti-money laundering efforts, which are designed to prevent or limit the ability of criminals to use their ill-gotten gains, are both a critical and effective component of anti-crime programs.
Money Laundering generally involves a series of multiple transactions used to disguise the source of financial assets so that those assets may be used without compromising the criminals who are seeking to use them. These transactions typically fall into 3 stages: 1. Placement
McDowell, (2001:1) define placement as the process of placing unlawful proceeds into financial institutions through deposits, wire transfers, or other means. Cash paid into bank (sometimes with staff complicity or mixed with proceeds of legitimate business) and also those cash are used to buy high value goods, property or business assets.

2. Layering
McDowell, (2001:2) argued that this stage is characterized by wire transfers abroad (often using covering companies or funds disguised as earnings of legitimate business), resale of goods/assets. Cash deposited in overseas banking system all over the world. 3. Integration
McDowell, (2001:3) stated that at this stage, false loan repayments or forged invoices used as cover for laundered money, complex web of transfers (both domestic and international) makes tracing original source of funds virtually impossible and income from property or legitimate business assets appears "clean". These mentioned steps in the stages of the process are used depends on the available laundering mechanisms and the requirements of the criminal organizations. These are a small selection of the ways that people clean their "dirty money". IV. The elements of Money laundering
The act of laundering is committed in circumstances where a person is engaged in an arrangement that is by providing a service or product and that arrangement involves the proceeds of crime. These arrangements include a wide variety of business relationships e.g. banking, fiduciary and investment management such as financial institutions which helps the criminal to operate in their umbrella hence an intention element of the crime. Money laundering offences have similar characteristics globally. There are two key elements to a money laundering offence: the necessary act of laundering itself for instance the provision of financial services, a requisite degree of knowledge or suspicion either subjective or objective relating to the source of the funds or the conduct of a client and legal provisions to punish it such as law on prevention and penalizing the crime of money laundering and financing terrorism n°47/2008 of 09/09/2008. V. Patterns and Trends of Money Laundering
As organized crime, money laundering has some patterns and trends like corruption, drug traffic, underground economy, and organized terrorism and shadow economy as a set of economic activities whether in manufacturing by the citizens who want to earn more money beyond the frame of formal economy example bribery, black markets of unusual products, tax evasion etc. VI. Characteristics of the offender, victim and the offence
The basic characteristics of the money laundering leads to the proceedings of crime, which to a large extent also mark the operations of organized and transnational crimes, are its worldwide nature, the flexibility and adaptability of its operations, the use of the latest technological means and specialized assistance, the resourcefulness of its operators and the enormous resources at their dumping (UN report, 1993). In addition, a characteristic that should not be overlooked is the constant pursuit of profits and the expansion into new areas of criminal activity. 1. Characteristics of an offender
In involvement of housing markets, offenders purchase and resale properties to many different area of far beyond. In trying to conceal the financial resources layering, they contribute religion centers and charities, contributing the religion government, banks with international entity. They build sophisticated networks for money transfers and using the electronic transactions.
They establish specialized banks, regional financial credit institutions. They establish unidentified companies in countries where the right of secrecy is guaranteed issuance of forged export-import notes and bills for money transfer. Attending the precious goods exchanges such as oil, gold and jewelry. 2. Characteristics of an offence
Money laundering is an offence which is organized, it is an organized offence which is empowered by electronic devices, it is a cross border offence as they are transnational and their activities are extended to capital markets, its activities are illegal like frauds in government elections and the last but not the list, the experts who are familiar with the mechanism of international money and capital markets are involved because they are able to distinguish the differences in national laws and use them. 3. Characteristics of victims
Private sector, McDowell, (2001:4) says that one of the most serious microeconomic effects of Money laundering is felt in private sector. It impairs the development of the legitimate private sector through the supply of products priced below production cost, making it therefore difficult for legitimate activities to compete. Criminals may also turn enterprises which were initially productive into sterilized ones to launder their funds leading at last to a decrease in the overall productivity of the economy. Furthermore, the laundering of money can also cause unpredictable changes in money demand as well as great instability in international capital flows and exchange rates.
Financial-institutions, According to McDowell, (2001:5), as the financial sector is vital constituent in the financing of the legitimate economy, it can be a low-cost means of transportation for criminals wishing to launder their funds. Consequently, the flow of large sums of laundered funds poured in or out of financial institutions might undermine the stability of financial markets.
In addition, money laundering may damage the status of financial institutions involved in the calculating resulting to a loss in trust and goodwill with stakeholders. In worst case scenarios, money laundering may also result in bank failures and financial crises.
Government Revenue, as it was said by McDowell, (2001:6), Money laundering also reduces tax revenue as it becomes difficult for the government to collect revenue from related transactions which frequently take place in the underground economy. This loss of revenue generally means higher tax rates than would normally be the case if the untaxed proceeds of crime were legitimate.
Socioeconomic costs, The socio-economic effects of money laundering are various because as dirty money generated from criminal activities are laundered into legitimate funds; they are used to expand existing criminal operations and finance new ones. Further to that money laundering may lead to the transfer of economic power from the market, the government and the citizens to criminals, abetting therefore crimes and corruption (McDowell, 2001:5). VII. Cultural influence
FATF (2009) reported that, in reaction to the increasing compliance of financial institutions all over the world with the Financial Action Task Force (FATF) anti-money laundering and counter-terrorist financing standards, criminals have shown adaptability in finding new channels to launder the proceeds of their illegal activities. Simultaneously, the globalization of financial markets and the development of information technology have steadily boosted the criminal economy and have expanded the possibilities for economic crime. In this context, there are growing concerns that various legitimate sectors are at danger of being infected with criminal money.

The sporting industry is one of the many sectors that could be attractive for criminals for money laundering purposes and qualities closer consideration given the large scope of monetary transactions and the increase in the number of individuals involved. In order to gets a better understanding of the process of money laundering, of ways in which criminality can be connected with legal economic activities, and how criminal money finds its way into legitimate businesses, (the FATF decided in June 2008) to study on money laundering through the football sector.
As one of the largest sports in the world, football1 was chosen. Both professional and part-time footballs were to be examined. Although the scale of vulnerabilities to money laundering is potentially different, risks in both areas were considered likely to be similar. Vulnerabilities not only occur within clubs but concern also other important stakeholders within the football industry. VIII. Foreground factors, environmental and situational dynamics
Even though money laundering can occur anywhere in the world money launderers choose destinations which have two key factors for instance where there is a low risk of detection due to ineffective anti-money Laundering laws, they also like the areas of failed states that normally have corrupt authorities as well as areas of stable financial system. IX. Legal issues
According to employers’ legal policing obligations, these arise from the Money Laundering regulations in 1993. Money laundering presents an array of substantive and procedural issues. For instance, it is a “derivative offense” largely associated with other forms of criminal conduct. Procedural conflicts also can arise when enforcing a country’s money laundering laws internationally.
In addition, money laundering is a crime that crosses three spheres: national, transnational, and international. The Regulations impose a number of statutory obligations on all financial institutions, for instance; to set up procedures for verifying the identity of clients, to set up record-keeping procedures for evidence of identity and transactions, to set up internal reporting procedures for suspicions.
To train relevant employees in their legal obligations, to train them in the procedures for recognizing and reporting suspicions of money laundering. If employers fail to do this, they are committing an offence, which is punishable by a maximum of 2 years imprisonment, a fine, or both.
In Rwanda context, money laundering was defined by the law no 47/2008 of 09 September 2008 on prevention and penalizing the crime of money laundering and financing terrorism. This law in its article 2, paragraph 1 shows that the concept of money laundering was known in Rwanda as an offence constituted by one of several of acts committed deliberately. Among those policies, we mentioned; the transparency in financial transactions: money transfer (article 6), cash declarations on the borders (article 7); professional secrecy (article 8); special investigation techniques (article 26); international cooperation: cooperation with the states (article 28), purpose of the request of mutual assistance (article 29). X. Investigation issues
During investigation of the crime related to the money laundering, the following investigative measures should be taken into account: investigators should verify on the bank and bank account statement to verify whether such accounts of schemes dealing with money laundering, could have appeared on the banks account.
Review of accounts and bringing together of the records in the accounts and the data in the register of the orders and on the website of self-administration regarding winners in tenders and the companies which obtains the orders give positive results with regards the institution that offer market of tendering.
Retrieve account statements from the companies, account statements of the self-administration as well as annual reports on business activities of the company which belong to the public or private companies. Since it has been found out that, legitimate companies involve in illegitimate activities such as money laundering.
Companies providing accounting services should also be searched on the transaction-related documents on withdrawn money. In addition, development department should register business activities of the companies and reports pertaining to tender procedures should be provided.
Accountants of the companies involved in the criminal scheme but personally did not know about committing a crime should explain the fact that invoices were paid and agreements were available, to the best of their knowledge, and ensure that their share did not render any services to other companies. And also to verify documents including expendure ones whether available or submitted to the accountant office. UNODC, (2005:4) stated that any criminal investigator has to have the authority to investigate fraud such as bank embezzlement or check can investigate money laundering. Investigation of money laundering has to be planned in order to obtain bank and business records. A. Methods of obtaining evidence of money laundering
Sudhir (1996:446) give the methods in which can be used in order to obtain money laundering evidence as follow: 1. Financial interview
In money laundering financial information can be collected to the defendants, witnesses and informants. 2. Search warrant
There are some circumstances under which searches may be made according to the local laws. 3. Surveillance
Surveillance can yield valuable leads and evidence in a money laundering investigation. Surveillance operations should be conducted by trained operatives working in teams. Operatives should be skilled in surveillance techniques, where physical surveillance should be combined with electronic surveillance of the suspect, couriers, assisters and premises, vehicles, luggage, and assets purchased with the proceeds of crime should be trucked electronically.

4. Analysis of bank records
Bank accounts used to receive the proceeds of crime must be identified and records of those accounts obtained and analyzed. B. Investigation techniques of money laundering * Consensual monitoring
UNODC, (2005:31) argued that for the purpose of obtaining the evidence money laundering and terrorist financing and tracing proceeds of crime, the judicial authorities may order for a specific period: * Monitoring of bank accounts and other similar accounts * Access to computer systems, networks and servers * The placing under surveillance or interception of communication * The audio or video recording or photographing of acts and behaviors * Interception and seizure of correspondence.
These techniques should be subject to and only be used when there are serious indications that such accounts, telephone lines computer systems, and networks or documents are or may be used by persons suspected of participating in money laundering and financing of terrorism, and subject to compliance with the conditions and guarantees provided by articles. * Undercover operation and controlled delivery
UNDC, says that no punishment may be imposed on officials competent to investigate money laundering and financing of terrorism who, for the purpose of obtaining evidence relating to these offences or the tracing of proceeds of crime, perform acts which might be interpret as elements of money laundering and financing of terrorism in connection with carrying out an undercover operations or a controlled delivery. The designated official shall not induce the suspect to commit any offences.

XI. Challenges

In this particular case there are no specific problems or significant difficulties in the investigation. All the companies-entrepreneurs and the corrupted pubic official took a position of covering each other’s back, and nobody wanted to give testimony or admit guilt. And it happened despite the fact that prosecution made a proposal to terminate the proceeding in exchange for collaboration of the first company/entrepreneur which would agree to help the prosecutor or to apply favorable simplified judicial procedure. Suspicion in money laundering was still unsure. Transactions suspected in money laundering are identified and proved only after the case is sent to in order to give evidence.

For determining component elements of the crime, the court takes the position that when introducing liability to criminal proceedings for money laundering, lawmakers do not proceed on the basis of classifying any possessions obtained by illegal means as criminal, when actual origin of the possessions remains hidden but on the basis of protecting financial and economic system of the country from manipulations with the property. Thus, in the court practice actions aimed at circulation of property of criminal origin for personal needs, or hidden or unhidden obtaining of property for ultimate use and which is not intended for infliction of harm to financial or economic system are not considered as money laundering.

XII. Policing Strategies

The purpose of organized crime is to make profits. Like any business, the purposes of profit are to enjoy it and re-invest it in future activity. For the organized criminal, however, profit close to the source of the crime represents a particular vulnerability and unless the criminal can effectively distance himself or herself from the crime which is the source of the profit they remain at risk to detection and prosecution.
Therefore, the Financial Action Task Force (FATF) on Money Laundering was recognized and identified certain block points in the money laundering process that the launderer finds difficult to avoid and where he is vulnerable to detection. The primary focus has to be on these areas if the war against the launderer is to proceed successfully through observation of the following:
Entry of cash into the financial system; transfers to and from the financial system; and cross-border flows of cash. The entry of cash into the financial system, known as the placement stage is where the launderer is most vulnerable to detection because of the large amounts of cash involved it is extremely hard to place it into a bank account legitimately. XIII. CONCLUSION
Money laundering is one of organized crime which is transnational, whose main target is to obtain high profit. Money laundering offenders obtain profit through illegal proceeds mainly drug trafficking. The dirty money is cleaned through financial institutions, false credit loans, religion centers through charity donations and capital markets. Money laundering being cross border crime is influenced by cultural and other external factors, hence national and international policing strategies as well as law and regulations have been put in place to combat the offence. Therefore to fight money laundering effectively needs every ones effort and information sharing worldwide.

References * Book * Levi, M. (1987). Regulating Fraud: White Collar Crime and the Criminal Process. London: Tavistock. * MacDowell. J. (2001). The Consequences of Money Laundering and Financial Crimes. USA: Bureau of International Narcotics. * Michel, K. (1988). Money Laundering: The Importance of International Countermeasures. International Monetary Funds. Paris. * New burn, T et al. (2005). Handbook of Criminal Investigation. USA and Canada: Willan Publishing House. * Sudhil, K. At al. (1996). Methods for Obtaining Intelligence for Investigation of Money Laundering. India. * Wright, A. (2006). Organized Crime 2nd Ed. USA and Canada: Willan Publishing House. * Journals: Jonson, J. (2006). Journal of Money Laundering. Control Vol.9 no.1, 2006. * Laws * MINIJUST. Law no N°47/2008 of 09/09/2008. Law on Prevention and Penalizing the Crime of Money Laundering and Financing Terrorism. * UNODC. Model Legislation on Money Laundering and Financial Terrorism. * Electronic http://www.laundryman.u-net.com/page2_wisml.html consulted on 23th April, 2013. http://www.unodc.org/unodc/money-laundering/ consulted on 23th April, 2013. http://www.laundryman.u-net.com/page1_hist.html retrieved on 24th April, 2013. http://clinton4.nara.gov/WH/EOP/NSC/html/documents/iccs-frm.html Visited on 24th April, 2013.

--------------------------------------------
[ 2 ]. http://www.laundryman.u-net.com/page1_hist.html retrieved on 24th April, 2013.
[ 3 ]. http://clinton4.nara.gov/WH/EOP/NSC/html/documents/iccs-frm.html retrieved on 24th April, 2013.
[ 4 ]. Financial Action Task Force (FATF)
[ 5 ]. The United Nations Office on Drugs and Crime (UNODC) is a global leader in the struggle against illicit drugs and international crime, and the lead United Nations entity for delivering legal and technical assistance to prevent terrorism