Title Pinigų plovimas ir jo įtaka finansų sistemai /
Translation of Title Money laundering and its influence on a financial system.
Authors Muliuolis, Vytis
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Pages 58
Keywords [eng] money laundering ; money and property acquired in a criminal way ; negative consequences ; offshore financial center
Abstract [eng] The term „money laundering” is said to originate from Mafia ownership of Laundromats in the United States. Gangsters there were earning huge sums in cash from extortion, prostitution, gambling and bootleg liquor. They needed to show a legitimate source for these monies. One of the ways in which they were able to do this was by purchasing outwardly legitimate businesses and to mix their illicit earnings with the legitimate earnings they received from these businesses. Laundromats were chosen by these gangsters because they were cash businesses and this was an undoubted advantage to people like Al Capone (1899 – 1947) who purchased them. There is typical method of money laundering procedures. It divides in three stages: 1. Initial or placement stage of money laundering, the launderer introduces his illegal profits into the financial system; 2. Second – or layering – stage. In this phase, the launderer engages in a series of conversions or movements of the funds to distance them from their source; 3. Third stage – integration – in which the “laundered” funds re-enter the legitimate economy. Generally, money launderers tend to seek out areas in which there is a low risk of detection due to weak or ineffective anti-money laundering programmes. For this reason offshore financial centers are commonly used. Because the objective of money laundering is to get the illegal funds back to the individual who generated them, launderers usually prefer to move funds through areas with stable financial systems. The Financial Action Task Force (FATF) is the organization with primary responsibility for developing a world-wide anti-money laundering framework, in close cooperation with relevant international organizations (International Monetary Fund, Interpol and etc.). Money laundering is analyzed from the point of view of criminal and administrative laws. The laws of Republic of Lithuania which set a penal amenability are discussed. Money laundering prevention measures and international cooperation when solving this matter is reviewed. In Lithuania, money laundering is now criminalized under Article 216 of Penal Code, dealing with “Legislation of money or property acquired in a criminal way”. The mission of the Financial Crime Investigation Service (FCIS) is to reinforce protection of the financial system of the State, ensure the disclosure, investigation and prevention of crimes against and violations of the financial system as well as them related crimes and other irregularities. According to the Law on Prevention of Money Laundering, the Division of Prevention of Money Laundering was established in the FCIS. There are some statistical data about investigated money laundering cases, review of actual problems. Negative consequences. The integrity of the banking and financial services marketplace depends heavily on the perception that it functions within a framework of high legal, professional and ethical standards. A reputation for integrity is the one of the most valuable assets of a financial institution. If funds from criminal activity can be easily processed through a particular institution – either because its employees or directors have been bribed or because the institution turns a blind eye to the criminal nature of such funds – the institution could be drawn into active complicity with criminals and become part of the criminal network itself. Evidence of such complicity will have a damaging effect on the attitudes of other financial intermediaries and of regulatory authorities, as well as ordinary customers. As for the potential negative macroeconomic consequences of unchecked money laundering, the International Monetary Fund has cited inexplicable changes in money demand, prudential risks to bank soundness, contamination effects on legal financial transactions, and increased volatility of international capital flows and exchange rates due to unanticipated cross-border asset transfers. As with the damaged integrity of an individual financial institution, there is a damping effect on foreign direct investment when a country’s commercial and financial sectors are perceived to be subject to the control and influence of organized crime.
Type Master thesis
Language Lithuanian
Publication date 2008