What are the ways to prevent money laundering? Recently in New York City federal authorities announced a series of large-scale financial investigations and seizures that were carried out as a result of information supplied by financial institutions to criminal investigators. Included in these investigations were not only the assets of millions of Americans, but also of companies and individuals throughout the world. Many people speculate that these large-scale investigations and seizures were carried out as a means of cracking down on the activities of criminals who use their wealth or business relationships to launder their money for personal gain.
Money laundering is a serious crime with significant penalties. Recently in Washington D.C. U.S. Attorney General Elliot Spitzer described financial crimes as “a blight on society”. According to Spitzer, “No one should be immune from personal accountability because of conduct that may reflect badly on others… neither should a large institution escape the consequences of its actions”. To comply with U.S. law and regulations, financial institutions are frequently required to perform a number of different tests and reports to determine whether a potential transaction should be considered for approval.
The failure of financial institutions to take these steps does not mean that they are somehow flouting the law or are somehow less guilty than others who are also engaging in money laundering. However, these same institutions often have fewer resources available to them when faced with multiple criminal investigations and civil enforcement actions. It is likely that a financial institution would become more vulnerable to laundering if a large number of criminal cases were initiated against it or if it was required to divert resources away from core business activities. In addition, many large financial institutions are internationally focused on reducing their offshore banking activities. In some cases, an institution may even be subjected to U.S. legal actions under the Foreign Corrupt Practices Act (FCPA).
How are these examples of money laundering handled by your local or international law enforcement agency? When we think about how to prevent money laundering, one of the most commonalities between enforcement efforts across the country is that they all share a common goal: To deter money laundering through the use of financial instruments. For example, when law enforcement personnel to investigate suspected money laundering, they are very unlikely to focus on a specific transaction. Instead, these agents investigate large-scale money flows and financial institutions. If they do uncover suspicious activities, they will usually work with Federal Bureau of Investigation (FBI) agents to determine whether any crimes had been committed.
In the United States, law enforcement agencies share information on possible criminal activity by organized criminals through a system known as Operation Flush. This system has been effective in reducing the amount of financial fraud and other criminal activity by foreign nationals. Unfortunately, financial fraud still occurs at an increasing rate in the United States. To address this problem, Operation Flush has been implemented in several cities to target the criminals who conduct financial scams through banks. Other financial measures have also been implemented by the government in an effort to reduce money laundering through banks.
One of the ways to prevent money laundering through financial transactions is to require that financial institutions provide stronger financial security to their customers before providing them with access to credit. The Department of Treasury, for example, recently held a public forum to discuss the importance of strengthening the laws that apply to banks. In the forum, officials revealed a proposed bill that would require financial institutions to perform a three-pronged test before giving a customer a monetary loan. Specifically, the bill would require the institution to determine if the customer does not have the means to pay back the loan. It would also require that the customer provide documented evidence that he or she will be able to pay the loan back.
Preventing money laundering through financial institutions is only one component of the overall solution to combating financial crime. Another important step in the prevention of money laundering is the implementation of anti-money laundering programs within the United States and throughout the world. For instance, the U.S. government recently designated eighteen financial entities as the global contact for detecting and stopping any type of financial fraud. These entities are the Federal Bureau of Investigation, the Office of the Comptroller of the Currency, the Consumer Financial Protection Bureau, the Office of Thrift Supervision, and the Federal Reserve Board.
In addition to requiring financial institutions to implement anti-money laundering programs, other measures have been taken to combat money laundering. For example, the U.S. government continues to aggressively pursue foreign investors and corporations that are involved in the fraudulent activity of money laundering. In addition, the Justice Department recently announced the creation of the National Money Laundering Strategy, which is a standard protocol for identifying and prosecuting criminal money laundering cases. Law enforcement officials note that the ultimate goal of these strategies is to strengthen the U.S. economy and prevent individuals from taking advantage of innocent victims.