The transferred funds are re-
assembled in their destination and often "shipped" back to the point
of origin under a new identity. The laundered funds are then
invested in the legitimate economy. It is a simple procedure - yet
an effective one. It results in either no paper trail - or too much
of it. The accounts are invariably liquidated and all traces erased.
Why is it a Problem?
Criminal and tax evading funds are idle and non-productive. Their
injection, however surreptitiously, into the economy transforms them
into a productive (and cheap) source of capital. Why is this
negative?
Because it corrupts government officials, banks and their officers,
contaminates legal sectors of the economy, crowds out legitimate and
foreign capital, makes money supply unpredictable and
uncontrollable, and increases cross-border capital movements,
thereby enhancing the volatility of exchange rates.
A multilateral, co-ordinated, effort (exchange of information,
uniform laws, extra-territorial legal powers) is required to counter
the international dimensions of money laundering. Many countries opt
in because money laundering has also become a domestic political and
economic concern. The United Nations, the Bank for International
Settlements, the OECD's FATF, the EU, the Council of Europe, the
Organisation of American States, all published anti-money laundering
standards.
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