CHAPTER 2 CONCEPTS AND MEANING OF THE MONEY LAUNDERING

Transcription

1 CHAPTER 2 CONCEPTS AND MEANING OF THE MONEY LAUNDERING

2 2-1- Basic Concept of Money As we start our discussion of money laundering, it's helpful to begin with a clear understanding of the nature of money itself. In fact, this understanding is essential. Although most of us would not question the existence of money, many would be surprised at how broad its definition has gotten over the past three or four thousand years. Money is a concept. The idea that some object can be assigned a value and used in trade is ancient, but nearly universal. Whether or not money exist in a physical sense is probably, as our attorney friend point out, irrelevant. The inescapable fact is that anywhere you go on this plant, people will be working, fighting, lusting and scheming for money and won't matter to any of them what form the stuff takes. Author H.G. Wells once commented that money "means in a thousand minds a thousand subtly different, roughly similar, system of images, associations, suggestions and impulses". Just about every body has a perspective on money, and it is not surprising that many of these views differ widely, especially in a world of money cultures, which grows increasingly smaller and more closely linked. We can not understand money laundering without having clear understanding of what money is and how it works. If you are like most people, when asked to "show me the money" your first response is usually to hold up the contents of your wallet or purse. For most people, money = cash. If you get technical, though, those contents are really just pieces of paper, metal and plastic. All of these things might be money, but none of them have much value at all, though a credit card makes a good ice scraper in a pinch. ' Madinger, John, "Money Laundering: A Guide for Criminal Investigator", CRC Press, Second Edition, 1999, p. 1.

3 A better definition might be, "anything that is generally acceptable as a means of settling a debt." This leaves the wide open. The notion of money goes back thousands of years, long before paper or printing, so we'll never known who first dreamed up the idea that some object could be assigned a value used in trade. All commerce, now and in that distant time, is based upon exchange originally; trading took the fonn of barter, in which one item is directly exchanged for another. I'll give you my hammer for your goat skin. You give me your cow for my saddle. Bartering is the most basic form of trade, one which enjoys many advantages, and continues to be practiced today. There are a couple of drawbacks, problems that have caused bartering to be largely replaced by the monetary system of exchange. Some of the negative aspects are obvious. First, there's'the fact that there are no assigned values. What if my hammer is worth more than your goat skin? Barter is based upon a "double coincidence". You just happen to have something you need and we're both willing to trade. This works fine when dealing in like kind items, but things start to get a little complicated. If I don't need a goat skin for some meat, I would be willing to trade the hammer. If a market place is available, people can engage in a number of trades, working, talking, getting the best deals they can, eventually winding up with all the things they need and rid of all the things they don't. May be they have come out a little a head, so they can come back next week. The barter process takes time and depends on good will be communication to work. This all works best when everybody stays pretty close to home, but less well when someone travels a long distance only to find that the items he brought to trade are not wanted or needed. Advances in transportation, notably the wheel and sails, made it possible for people to travel farther, increasing their ability to trade, but making barter a riskier proposition. 10

4 Early civilization such as that in Egypt relied heavily on barter as a system of exchange. The Egyptian later used money, making the transition from barter to a cash transaction system. Only one improvement was needed to revolutionize the barter system, this being the innovation of money. Money has almost advantages of barter, with few a drawbacks. As stated above, money is a concept, the idea that some specific item has value and will be accepted in all types of exchange.* Many early coins were made up of previous metal, such as gold, silver or copper, which widely accepted in trade because of their content. Money changers developed a profitable business exchanging foreign coins for local ones. This profession continued for over a thousand years. During the 16 century, European money changers and merchants kept thick books with pictures identifying hundreds of foreign coins. But coins had some problems, too. Early mints were not very sophisticated and their product often looked no better than the counterfeits that were extremely common. Coins could also be clipped or trimmed, some small quantity of gold or silver taken off the edges at each coin and this mints amount then melted down for its content. One of the biggest problems with coins was caused by their success because coins had come to almost universally represent money, they were accepted almost everywhere people went to trade. The invention of paper money is important because it takes money away from its roots and more toward the metaphysical. After all paper has very little, if any, value. With the use of paper, the concept of money got a major boost. Now, money was really a promise to pay or provide something that had real value. In the United States, paper money was originally "backed" by Gold. Gold back represented a promise by the government to redeem the bill for its face value in gold. It said so right on the bill. Later in the 1930s, those same notes become "silver certificates" promising that the bearer could be paid in silver. Still later, the government gave up pretending that (a) everybody in America wanted or was going to demand silver for their paper money and (b) the government really had all that silver stored up somewhere in the first place. Ibid,p.2 11

5 2-2- Concept of the Money Laundering Money laundering can be defined in a number of ways. Money laundering is a process whereby the origin of funds generated by illegal means is concealed,^ Conversion or transfer with knowing that such property is derived from criminal activity. Money laundering generally involves a series of multiple transactions used to disguise the source of financial assets so that these assets may be used without compromising the criminals who are seeking to use the funds. It seems to be a victimless crime. It has none of the drama associated with a robbery or any of the feat that violent crime imprints upon people's psyche and yet, money laundering can only take place after a predicate crime (such as a robbery or house breaking or drug dealing) has taken place. There are various definition available which concept and describe phrase "Money laundering" that in this chapter-! try started from first and most important conventions related to money laundering. Article 3 of United Nations Convention against Illicit Traffic in Narcotic Dmgs and Psychotropic Substances in 1988 (Vienna Convention) define it as: i) The conversion or transfer of property, knowing that such property is derived from any offence or offences established in accordance with sub-paragraph a) of this paragraph, or from an act of participation in such offence or offences, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who involved in the commission of such an offence or offences to evade the consequences of his action; ^ laundering/definition 12

6 ii) The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from an offence or offences established in accordance with sub-paragraph a) of this paragraph or from an act of participation in such an offence or offences. By its terms, the Vienna Convention limits predicate offences to drug trafficking offences. As a consequence, crimes unrelated to drug trafficking, such as, fraud, kidnapping and theft, for example, do not constitute money laundering offences under the Vienna Convention. Over the years, however, the international community has developed the view that predicate offences for money laundering should go well beyond drug trafficking. Thus (EC), FATF* and another international instrument have expanded the Vienna Convention definition of predicate offences to include other serious crimes. For example, the Palermo Convention in Article 6 defines money laundering as^ i) The conversion or transfer of property knowing that such property is proceeds, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of the predicate offence to evade the legal consequences of his actions. ii) The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property, knowing that such property is the proceeds of crime; and subject to this constitutional principles and the basic concepts of its legal system, vvww.fatf"-t>ati-ort;."what is money laundring The Palermo Convention, Article 6, http// 13

7 iii) The acquisition, possession or use of property, knowing at the time of receipt, that such property is the proceeds of crime; by participation in, association or conspiracy to commit, attempts to commit and aiding, abetting, facilitating and counseling the commission of any at the offences established in accordance with this article. In forty recommendations for fighting money laundering FATF specifically incorporates the technical and legal definitions of money laundering set out in the Vienna and Palermo Conventions and lists 20 designed categories of offences that must be included as predicate offences for money laundering. The forty recommendations, Rec-2003_en.pdf 14