Causes Of Money Lauundering

Business related professionals in the world nowadays would do anything to gain more financial profit illegally to an extent that it is a serious offence punishable by law which is likely known as white-collar crimes. White collar crimes started back in the 15th century but did not rise globally until the late 19th century and early 20th century. Money laundering is a common example given as a white collar crime because it happens in nearly every country in the world. Iran is currently ranked as the highest risked country to be involved in money laundering with an overall score of 8.56 (Basel AML Index, 2014). Money laundering is when the appearance of illegal money often earned by unlawful ways such as smuggling, drug trafficking and health

Why do money launderers do what they do even though it is a serious crime that could cause imprisonment up to seven years? A common cause for this crime is evasion of tax. Evasion of tax is when people, organizations or even corporations are avoiding paying tax liabilities. Tax evaders make use of money laundering to lie about where their money and assets originate from so they can evade taxes. This scheme of tax evaders usually happens beyond the reach of a country’s government in order to hide their identity. Therefore, according to Roland Subashi, tax evasion should be considered as predicate offence of money laundering in the manner that it is a part and parcel of money

In this case, an economy of a country has a great chance of being unstable and distorted. This again involves with money laundering criminals and their unnecessary affairs with investing their illegal funds from sound investment to low quality investment with intention to hide their earnings. Due to this, development of an economy can be disrupted. Additionally, money laundering with its destructive behaviour acts as a threat to the economy as transactions are “underground” or in the informal sector of the economy. As these transactions take place without appearing in official monetary or financial statistics, misleading information given to policy makers ultimately leads to a misappropriation of resources. On top of that, the reputation of a country and its economic association could possibly be contaminated with money laundering. In virtue of bad reputation caused by this illegal act, it extenuates all-around legal opportunities for a country to further growth and once a country’s reputation is tarnished, it takes years to repair (The World Bank Group,