Money laundering and Terrorism Financing (ML/TF) are two-much discussed and debated topics in the present world. The undetectable processes involved and the resulting severe consequences to countries have led to many studies and interpretations about ML/TF.
Money Laundering
Money laundering has been interpreted by numerous global institutions in several ways. The UN made an indirect attempt to define money laundering as the transformation of assets earned from offences to legal status by concealing its illicit origin (UNODC, 1988). The Financial Action Task Force (FATF, 2022a) defines money laundering as the conversion of criminal proceeds to conceal their illegal origin. The FATF further states that money laundering could occur in any part of the world mainly in countries with weak anti-money laundering regimes. The European Commission identifies money laundering as a complex process designed to cleanse the unethical activities undertaken to generate funds from illegal sources (EC, 2022). At the same time, Interpol defines money laundering as a method of disguising the origins of illegally earned proceeds to make them appear to have originated from legitimate sources (Interpol, 2022). By taking into consideration the many definitions of money laundering, it can be simply defined as a cumbersome operation of introducing (placement), blending (layering) and using (integration) funds earned from criminal activities with the primary objective of concealing the ultimate owner and source of such funds.
Money laundering as a process (Figure 1) has two main objectives. The first objective is to bring in illegally generated money to the legal financial system. The second objective is to conceal the true source and the generator of such funds.
Even though money laundering is a highly evasive activity, several attempts have been made to quantify the amount of money laundered in the overall economy. The UNODC (2011) estimated the amount of money laundered globally in a year as 2% - 5% of global GDP which is $800 billion - $2 trillion in current US dollars. This estimation has been consistently used to date with slight variations to show the total amount of money laundered annually in the world.
To mitigate the risk of money laundering, countries use various tactics such as developing and enforcing anti-money laundering laws and imposing fines in the case of any violations of such laws (Rafay, 2021a, 2023a). Statistics published about anti-money laundering fines show that fines totaling $2,732,099,008 (approx.) involving 80 institutions were imposed during 2021 (Kyckr, 2021). The total amount of fines imposed was relatively reduced and the number of institutions subject to fines drastically increased from 2020 to 2021. The list of institutions charged with anti-money laundering fines in 2021 comprises several renowned brand names operating in different countries as given in Table 1.
Table 1. | Institution | Country | Fine Value in $ MN (approx.) |
| AmBank | Malaysia | 700 |
| Capital One Bank | USA | 390 |
| National Westminster Bank PLC | UK | 356 |
| Mashreq Bank | USA | 100 |
| HSBC | UK | 85 |
Major factors that have supported the strength and the continuity of the money laundering process include its ability to evolve according to the global trends arising from time to time. One of the latest platforms for executing money laundering is through cryptocurrency. Dyntu and Dykyi (2018) state that the anonymity of the parties involved, easy access and the lack of a proper regulatory framework have encouraged the use of cryptocurrency for money laundering activities. Albrecht et al. (2019) identify the absence of intermediaries in cryptocurrency transactions as a major contributor to the rise in its popularity as a tool of money laundering. They further insist on strict Customer Due Diligence practices to discourage the improper use of cryptocurrency for money laundering. Blending cryptocurrency with money laundering ensures that only the technophiles understand such processes making it more difficult to trace and penalize money laundering.