Money laundering is one of the biggest challenges facing financial systems all over the world. Here’s how technology could help out.
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September 11 shook the world as no other terrorist attack ever had. As the US and other developed nations realised that they were not insulated from well-coordinated terror strikes, they looked for ways to attack the networks of the perpetrators planning these crimes. And as money makes the world—even the underworld—go round, the International Monetary Fund (IMF) launched a global endeavour to curb money laundering and thus, snap off terrorists’ links to finance.
The danger of money laundering
The IMF defines money laundering as “a process in which the illicit source of assets obtained or generated by criminal activity is concealed to obscure the link between the funds and the original criminal activity.” Simply put, this implies that ill-gotten money from activities like trading in drugs may be routed to fund other illegal acts, including terrorist attacks. Criminals always look to ‘launder’ funds so as to use them without alerting law enforcement agencies to their source and its links with any underlying crime.
Since different nations have different laws and systems to curb money laundering, criminals seek to transfer funds from one country to another, always looking to take advantage of countries with weak jurisdictions or ineffective controls. The IMF is therefore concerned about countries whose commercial and financial sectors are vulnerable to money laundering, as this may deter foreign direct investment (FDI) in a country, enhance the volatility of its international capital flows, as well as risk the stability of its financial systems.
Prakash Seernani, COO, Synlog, feels that this concern is well-founded. “Money laundering, with an estimated value of over 3 trillion dollars per year, is the world’s third largest business,” he points out. No wonder then that the IMF has emphasised the need to protect the integrity of the international financial system for fund transfers.
The power of IT: RAFTS
Information technology, with its ability to help monitor the billions of financial transactions taking place every day across the world, can play a key role here. But as Seernani observes, an anti-money laundering (AML) tracking solution is only effective if it functions in real-time, as that is the only way to stop suspect transfers.
