David Chaikin

How effective are suspicious transaction reporting systems

Purpose – A fundamental element of international anti‐money laundering (AML) systems is the requirement that financial institutions file suspicious transaction reports (STRs) with financial intelligence units. Although the Financial Action Task Force (FATF) has established global standards, there is a range of national laws, practices and experiences with STR systems. The purpose of this paper is to assess the effectiveness of national STR systems, by using Switzerland as a case study.Design/methodology/approach – Primary source documentation, complemented by observations at FATF meetings, are relied on to evaluate STR systems.Findings – The FATF ratings of a countrys compliance with international standards are objective, expert driven and consistent in application, but are limited as performance measures in that they ignore the costs of AML and STR measures. The effectiveness of the Swiss STR system is questionable because of serious under reporting of suspicious transactions. The Swiss STR system is ef...

Commercial corruption and money laundering: a preliminary analysis

Purpose – The purpose of this paper is to analyze the relationship between commercial corruption and money laundering. The challenge of corruption in the private sector and its relationship with money laundering are neglected subjects. Corruption and money laundering often occur together with the presence of one reinforcing the other. Corruption generates billions of dollars of funds that will need to be concealed through the money laundering process. At the same time, corruption contributes to money laundering activity through payment of bribes to persons who are responsible for the operation of anti‐money laundering (AML) systems.Design/methodology/approach – Primary legal documentation, such as the United Nations Convention Against Corruption, the Financial Action Task Forces Recommendations on Money Laundering, and National Legislation, as well as Unpublished Government Commissioned Reports, are analysed in order to assess the links between corruption and money laundering.Findings – Commercial corrup...

A Critical Analysis of the Effectiveness of Anti-Money Laundering Measures with Reference to Australia

The global Financial Action Task Force (FATF) anti-money laundering (AML) standards provide a framework for judging national AML laws and policy. Since 2013, international peer review assessments of countries’ AML systems rate effectiveness equally as important as technical compliance. A detailed examination of Australia’s AML record is the focus of this chapter, because Australia is one of the first countries to be assessed under the new criterion of effectiveness. Ironically, Australia’s greatest success in its AML system has been achieved in tax enforcement, relying on mandatory collection of international funds transfer information, which is not part of the requirements of the global standards, and yet it is a relatively costless measure.

Money Laundering and Tax Evasion – The Assisting of the Banking Sector

The principal issue that will be considered in this chapter is how the banking sector facilitates the crimes of money laundering and tax evasion. This will entail asking a series of related questions. Does the assistance of the banking sector in financial crime involve a small number of wayward employees at the periphery of banking? Or are multinational financial institutions willing participants in the systemic evasion of global antifinancial crime standards? In exploring these questions, the theory and practice of money laundering will be explored by focusing on the three stages of the money laundering cycle. The global anti-money laundering standards that apply to the banking sector, and the role of bank secrecy in promoting tax evasion, will be examined through a series of case studies. It will be argued that there is strong empirical evidence that the banking sector is a systemic offender facilitating financial crimes, despite the enactment of international and national antifinancial crime standards and criminal prosecutions of financial institutions.

The Political Risk of Offshore Financial Centres: The Cyprus Bail-Out

This chapter puts forward the idea that investors face a new type of political risk arising out of the increased international regulatory focus on financial crimes, such as money laundering, terrorist financing, foreign bribery, tax evasion, and financial sanctions. This political risk is manifested in the policies of international regulators towards offshore financial centres (OFCs), especially in emerging economies, and includes powerful policy making bodies, such as the Financial Action Task Force (money laundering, terrorist financing) and the Organisation of Economic Co-operation and Development (OECD) (foreign bribery, tax evasion), as well as the International Monetary Fund (IMF), the World Bank, and the Bank for International Settlements (financial stability). Both the G7 and G20 have drawn a link between systemic risk and weak anti-financial crime laws and practices, and have made the assumption that OFCs are more likely to present systemic risks arising from weak anti-financial crime laws.

Transnational Corruption and Conflict Minerals

The global mining business faces a series of interrelated financial crime risks, including transnational corruption, organised crime (OC) and conflict minerals. These legal and reputational risks have become more important because of the new international standards governing corporate behaviour and the rising expectations of governments, investors and civil society.

The Corruption-Money Laundering Nexus

This first chapter is roughly divided into two halves. The first defines corruption and money laundering in separate sections explaining why each issue moved from the margins to the center of the international policy stage in the 1990s. Currently, corruption receives more attention than any other single factor in discussing economic development and political governance, whereas twenty years ago it was largely a nonissue. Four actors in particular are important in explaining this shift: the United States, the Organization for Economic Cooperation and Development (OECD), the World Bank, and Transparency International. More broadly, a growing conviction among economists that corruption lies behind many development failures, and well-publicized examples of spectacular grand corruption in Africa, Eastern Europe, Asia, and elsewhere changed the climate of opinion among the general public and policymakers alike. Money laundering was first seen as a new way of putting pressure on the international illicit drug trade. Led by the United States, the G7 countries established the Financial Action Task Force (FATF), which subsequently defined and diffused a standard package of anti-money laundering (AML) policies worldwide. In doing so, the FATF has enjoyed support from a constellation of other international institutions, ranging from the United Nations to specialized regional AML bodies.