Money Laundering Act and Its Implications in Bangladesh

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of the Money Laundering Act, 2012 and its application in our country.

Chapter-2

Money Laundering

Definition:

Money Laundering is the process by which one conceals the existence, illegal source or illegal application of income, and then disguises that income to make it appear legitimate. That is the money-launderer who is converting one’s dirty money to clean money.

Definition of Money Laundering as per section 2(k) of Money Laundering Prevention Act, 2012

Four categories of activities have been defined as money laundering in the present Act, namely:

(a) Transfer, conversion, remitting abroad or bring from abroad to Bangladesh the proceeds or properties acquired through commission of a predicate offence, for the purpose of concealing or disguising the illicit origin of the money or property.

(b) Illegal remitting abroad of money or properties acquired/earned through legal or illegal means.

(c) To conduct, or attempt to conduct a financial transaction with an intent to avoid reporting requirements.

(d) To do or attempt to do such activities so that the illegitimate source of the fund or property can be concealed or disguised or knowingly assist to perform or conspire to perform such activities.

In brief, four categories of activities that are defined as money laundering in the new Act are:

(a) Transfer, conversion, remitting to and from Bangladesh involving proceeds of a predicate offence.

(b) Illegal remitting abroad of legally/illegally earned money/property.

(c) Transaction to avoid reporting requirements.

(d) To assist such activities.

Why Money Laundering is done?

Criminals engage in money laundering for three main reasons:

First, money represents the lifeblood of the organization that engages in criminal conduct for financial gain because it covers operating expenses, replenishes inventories, purchases the services of corrupt officials to escape detection and further the interests of the illegal enterprise, and pays for an extravagant lifestyle. To spend money in these ways, criminals must make the money they derived illegally appear legitimate.

Second, a trail of money from an offense to criminals can become incriminating evidence. Criminals must obscure or hide the source of their wealth or alternatively disguise ownership or control to ensure that illicit proceeds are not used to prosecute them.

Third, the proceeds from crime often become the target of investigation and seizure. To shield ill-gotten gains from suspicion and protect them from seizure, criminals must conceal their existence or, alternatively, make them look legitimate.

Kinds of Criminals Launder money

Situations depend on country to country. In Bangladesh, mainly the following categories of persons are associated with money laundering –

a. Public officials who receive bribes;

b. Businessmen to finance smuggling, under-invoicing, over-invoicing;

c. Human traffickers;

d. Migrants to transfer assets;

e. Drug dealers and terrorist financers.

Stages of Money Laundering

Despite the variety of methods employed, the laundering is not a single act but a process accomplished in 3 basic stages which may comprise numerous transactions by the launderers that could alert a financial institution to criminal activity:

Placement -the physical disposal of the initial proceeds derived from illegal activity.

Layering- separating illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity.

Integration- the provision of apparent legitimacy to wealth Derived criminally. If the layering process has succeeded, integration schemes place the laundered proceeds back into the economy in such a way that they’re enter the financial system appearing as normal business funds.

Why we must combat Money Laundering?

 Money laundering has potentially devastating economic, security, and social consequences. Money laundering is a process vital to making crime worthwhile. It provides the fuel for drug dealers, smugglers, terrorists, illegal arms dealers, corrupt public officials, and others to operate and expand their criminal enterprises.

 Money laundering diminishes government tax revenue and therefore indirectly harms honest taxpayers. It also makes government tax collection more difficult. This loss of revenue generally means higher tax rates than would normally be the case if the untaxed proceeds of crime were legitimate. We also pay more taxes for public works expenditures inflated by corruption.

 Money laundering distorts asset and commodity prices and leads to misallocation of resources. For financial institutions it can lead to an unstable liability base and to unsound asset structures thereby creating risks of monetary instability and even systemic crises.

 One of the most serious microeconomic effects of money laundering is felt in the private sector. Money launderers often use front companies, which comingle the proceeds of illicit activity with legitimate funds, to hide the ill-gotten gains.

 Among its other negative socioeconomic effects, money laundering transfers economic power from the market, government, and citizens to criminals. Furthermore, the sheer magnitude of the economic power that accrues to criminals from money laundering has a corrupting effect on all elements of society.

 The social and political costs of laundered money are also serious as laundered money may be used to corrupt national institutions. Bribing of officials and governments undermines the moral fabric in society, and, by weakening collective ethical standards, corrupts our democratic institutions. When money laundering goes unchecked, it encourages the underlying criminal activity from which such money is generated.

 Nations cannot afford to have