Strategic Management to Prevent Money Laundering: The Role of Effective Communication

Strategic Management to Prevent Money Laundering: The Role of Effective Communication

Yurdagül Meral (İstanbul Medipol University, Turkey)
DOI: 10.4018/978-1-5225-9265-5.ch002

Abstract

In this chapter, the SWIFT, which is the financial communication system used by all financial institutions, will be explained. Today, most of the countries and financial institutions take precautions to avoid money-laundering and financial crimes. The SWIFT system will be examined in relation with financial communication, compliance, money laundering, know your customer, and sanctions. Public became aware of the sanctions when HSBC has agreed to pay $1.92 billion dollars to state authorities in 2012 for transfering dollars illegally into US. Banks apply “Know Your Customer” procedures to avoid such risks. In relation with sanctions, precautions of SWIFT system will be defined. SWIFT has started a new application namely KYC Registry which enables to have necessary information about the customers in international trade, through cross borders. The reasons why this applicatiıon must be used, how risk will be mitigated, by sharing information with maximum transparency and SWIFT's new KYC application will be defined.
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Introduction

Globalization has increased integration and interaction between countries and companies located in different countries. Through integration the flow of goods has increased between different countries. In other words, international trade has increased as well. As trade increased, international trade finance, payment of goods, services between countries has increased, which required different currencies of payments to be transfered all over the world. Financial communication has increased as well. Along with the advantages, international trade risks and financial communication volume has also increased. Globalization has triggered money laundering activities through financial systems as well. This led international institutions, state officials and financial officials to take precautions to avoid money laundering, which can be defined as anti-money laundering process.

This paper aims to investigate the financial communication system, which is named as SWIFT system and the anti-money laundering procedure to avoid money laundering risks.

Key Terms in this Chapter

KYC: Know your customer regulation is the most important precaution method of anti-money laundering, banks must know their customer very well, to justify the income and otherthings to avoid money laundering.

Sanctions: FATF lists countries with weak anti-money laundering regimes and identifies jurisdictions to combat moneylaundering and terrorist financing.

AML: Anti-money laundering are the precautions to avoid money laundering.

OFAC: Office of Foreign Assets Control.

De-Risk: Global banks practices of mass exit or termination of correspondent banking services for anti-money laundering purposes.

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