ISLAMABAD: The Finance Ministry has proposed amendments to the Anti-Money Laundering (AML) Act 2010, in order to further improve it in lines with suggestions of the stakeholders regarding the anti-money laundering efforts and the Combating the Financing of Terrorism (CFT) regime.
A well-placed source at the Finance Ministry told Customs Today on Wednesday that money laundering was a process in which the proceeds of the crime were transformed into ostensibly legitimate money or assets. However, in a number of legal and regulatory systems the term money laundering had become conflated with other forms of financial crime, and sometimes used more generally to include misuse of the financial system, including terrorism financing, tax evasion and evading of international sanctions.
“Similarly, placing ‘filthy’ money in a service company, where it is layered with legitimate income, and then integrated into the flow of money is a common form of money laundering,” the source said, adding that the most anti-money laundering laws openly conflate money laundering – which is concerned with source of funds- with terrorism financing when regulating the financial system.
The source added that the proposed amendments in the AML Act 2010 reflected firm resolve of ministry to strengthen its anti money laundering regime. “These amendments are aimed at streamlining the existing AML law in line with the international standards prescribed by Financial Action Task Force (FATF) and to bring consistency and clarity in the enforcement provisions,” the source observed, saying that these amendments would help the government and concerned quarters to ensure that the proceeds of crimes and property involved in money laundering could be detected, investigated and prosecuted effectively. The source said that main proposals for amendments in AML (Amendment Bill 2014 included, necessary explanations to bring clarity in the application of law, adjustments in the composition of National Executive Committee (NEC) and General Committee (GC) as well as clarity in reporting obligations as per international standards.
Similarly, the source said that other objectives of proposed amendments in AML were to enable clause for consumers due negligence and record keeping as per international standards, procedural changes in the investigative provisions so as to avoid inconsistencies with other applicable law and to remove redundancies and obligation to provide necessary assistance to the authorities in enforcement of AML Act 2010.
“Amendment in criteria for the appointment of public prosecutors, clarifying the provisions relating to international cooperation in the area of money laundering, inclusion of fiscal offences in the purview of AML Act 2010 in the line international standards (as per FATF requirements) and validation of actions by federal government under which government notifications etc were earlier issued were also some of objectives of the proposed amendments in AML Act 2010,” the source added. The source said that capital gained from certain crimes, such as extortion, insider trading, drug trafficking, illegal gambling and tax evasion was dirty money which needed to be cleaned to appear to have derived out from non-criminal activities so that banks and other financial institutions would deal with it without suspicion.
“Money can be laundered by many methods, which vary in complexity and sophistication,” the source said, adding that different countries treated tax evasion or payments in breach of international sanctions as money laundering and the International Monetary Fund IMF estimated that two to five percent of the worldwide global economy involved laundered money in 1996. However, an intergovernmental body set up to combat money laundering the Financial Action Task Force on Money Laundering (FATF) stated that it was absolutely impossible to produce a reliable estimate of the amount of money laundered and therefore the FATF did not publish any figures in this regard.
The source said that money laundering was commonly defined as happening in three steps; introducing cash into the financial system by some means called placement, carrying out complex financial transactions to camouflage the illegal source called layering as well as acquiring wealth generated from the transactions of the illicit funds labeled as integration. “Some of these steps may be omitted, depending on the circumstances; for example, non-cash proceeds that are already in the financial system would have no need for placement” the source observed adding that money laundering took several different forms, which could be categorized into one of a few types including bank methods, surfing known as structuring, currency exchanges, and double-invoicing. “Bulk cash smuggling, cash-intensive businesses, trade-based laundering, round-tripping, bank capture, real estate and fictitious loans are also some forms of money laundering,” the source concluded.