Money Laundering: A Global Problem

Introduction Money laundering is global problem. Every year, huge amounts of funds are obtained by criminal and criminal organizations through illegal activities such as drugs, racketeering, kidnapping, gambling, procuring women and children, smuggling and armed robbery. These illegal activities are also known as predicate offenses. The money obtained through the illegal offenses need a process called laundering, in order to make appear legitimately obtained and become usable. Money laundering is a number of criminal acts to generate a profit for the individual or group that carries out the act. Criminals usually disguise the sources money, changing the form or moving the funds from the origin to another place that they will attract less

Being a global problem, it has major implications on economy and the financial systems especially through monetary developments by generating market volatility and instability. It now poses a major threat to the credibility of international financial institutions and financial system of countries that are integrated into the international financial system, exposing them risk. Money laundering has an adverse impact on the socio-economic development and the political stability of a country. It creates shell organizations leading to unfair business practices that distort competition. The global money laundering was estimated to more than 2.0 to 2.5 trillion US$ annually or about 5-6% of world GDP in 2006 Agarwal &

One such definition is that money laundering is the conversion or transfer of property, knowing that such property is derived from serious crime, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in committing such an offence or offences to evade the legal consequences of his action and the concealment or disguise of the true nature, source, location, disposition, movement. IFAC (2004) defines money laundering as the funneling of cash or other funds generated from illegal activities through financial institutions and businesses to conceal the source of funds more commonly known as the white washing process. It is a process whereby the true ownership of the illicit funds are changed so that the proceeds appear to come from a legitimate source. The phrase money laundering first originated from United States where Mafia attempted to launder illegal money via cash intensive washing saloons in the 30's mostly controlled by the criminal organizations (Schneider 2010). The term "money Laundering" was again used in the Watergate Scandal in the year 1973 therefore the term does not have original legal but a colloquial paraphrase describing the process of transforming illegal into legal asset Ertl (2004). Lal (2003) on the other hand asserts money laundering as conversion or transfer of property, knowing that such property