Financial Crime Definition: Money Laundering and Terrorist Financing in Ireland
Money laundering is the process of concealing the source of illegally obtained funds by integrating them into the legitimate economy. It involves an underlying crime, such as tax evasion or fraud, followed by acts to conceal, transfer, or convert the proceeds of that crime.
The Money Laundering Process
The money laundering process can be broken down into three stages:
- Placement: The initial stage where illegal funds enter the financial system.
- Layering: The most difficult stage, involving international transactions aimed at distancing the illicit money from its source.
- Integration: The final stage where tainted money is reintegrated into the legitimate economy.
However, it’s important to note that each stage can occur separately or simultaneously, and the offence of money laundering occurs during each individual stage. Furthermore, one misconception is that all three stages are required for money laundering to have occurred, which is not the case.
Terrorist Financing
Terrorist financing involves providing, collecting, or receiving funds with the intent or knowledge that they will be used to carry out an act of terrorism. This can include collecting or receiving funds intending them to be used for the benefit of a terrorist group.
Targeted Financial Sanctions
Targeted financial sanctions are political measures taken to restrict the movement of funds and prevent terrorist financing. These sanctions originate at the supranational level, such as the European Union (EU), or international level, such as the United Nations (UN). Once a person or entity is designated by the UN Sanctions Committees, their funds or assets are frozen without delay.
Key Differences
A key difference between money laundering and terrorist financing is that money laundering requires the funds to be the proceeds of criminal conduct, whereas terrorist financing can involve legitimate or illegitimate sources. The primary consideration when preventing terrorist financing is examining the intended use or destination of the funds rather than its origin.
Importance of AML/CFT Laws
Anti-money laundering (AML) and countering the financing of terrorism (CFT) laws are important because they prevent resources from being diverted away from economically and socially productive uses, thereby affecting a country’s financial system stability. Weak AML and CFT controls can also have reputational consequences for a country’s financial system.
Ireland’s Role
It is crucial that Ireland, as a small open economy with a thriving financial services industry, takes an active role in preventing its financial system from being used for money laundering and terrorist financing purposes. By having robust AML regulatory frameworks and financial firms implementing effective AML systems and controls, Ireland can deter criminals from targeting its financial system, maintain its reputation, and protect its citizens’ safety and security.