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Filchakova N.
Graduate student of Finance department of Rostov State Economics University (RSEU) E-mai [email protected]
FEATURES OF MONEY LAUNDERING: THE ROLE OF BANKING SECTOR.
Keywords: banking,laundering, anti-money, the genesis of money laundering, FATF.
The article defines the role of the banking sector in the development process of laundering the proceeds of crime. Identified the main ways to launder criminal proceeds through credit institutions, noted the need to improve the transparency of financial flow sat the international level. Describes the specifics of the process ofanti-money proceeds of crime, as well as macro-economic factors contributing to the creation of conditions for the genesis of the process of money laundering.
The trend of rapid globalization of the world finance system is becom-ingvery important factor acting on international money flow, the economy level, and social and political situation in different countries around the world. Such an interrelation appeared to be quite crucial for those countries where free market relations are becoming modern.
Consequently, significant capital fluctuations can become as vector of development as a destabilizing factor of the whole financial sphere, minimizing the effort to imply political reforms and this damages social and economical welfare of the citizens.
The problem of legalizing of monetary resources id made by any criminal ways because of the information failure of this economical activ-ityand because of constant development of under law schemes, also it creates a problem for a number of economic spheres.
"Laundering" of money from illegal sources undermines "the foundations of fair business, creating a phenomenon of finance relationships by increasing the risks and costs»(1) (C.V. Maksimov). This statement proves the meaning of significant destabilizing role of legalization of criminal incomes both for individuals and the society.
According to the research Price-waterhouseCoopers(16) "The global overlook of economic crimes for the year 2011", nearly 37% of organizations, operating in Russia in 2011, became the objects of economic crimes including money laundering. The total cost of the crimes was above 100 million dollars.
The process of legalization of criminal incomes has its own features. It consists of economic processes that are accepted by the law but these processes are used in different objective and subjective ways in order to hide the real sources of the resources. Promulgation of the real costs and victims of this criminal activity and reasoning were very difficult to make for some time.
The difficulty of monitoring of negative effect of illegal money laundering became one of the foundations in the discussion about recognizing it as a criminal activity. There are also some countries at the moment that do not recognize it as crime.
It is necessary to state that the process of money laundering is a stable process of shadow activities, where the initiator of the activity creates special conditions using the mechanisms of corruption in order to realize his or her wants.
In this context it is important to point out that macroeconomic factors that form the conditions for the money-laundering genesis. Systematic economic crisis, which creates capital deficit, investment disproportions, enlarging the size of shadow economy.
In this case, introduction of criminal control over a company clashes with a difficulty of adjustment of legal mechanism of financial recourse gathering. In this situation, criminal institutions can become an easy solution of financial difficulties. On the one hand, they invest their financial recourses in companies and control them, but on the other hand the banks use their support when they claim for the loan pay back. Criminal sector physically force the clients to pay back all the loans using illegal methods by hiding over the responsibilities of debt collection. These relationships bring the dependency structure of banking on criminal sector. It is not excluded that the initiator of legalization of criminal income can be the subject of economic activity who has non-sustainable financial position (10).
The credit system is the object of interest of organized criminal institutions interested in money laundering. The possibilities of banking sphere in generation of financial capital, reinvestment and recourse relocation contribute to illegal money flow in economy.
The problems with (laundering) incomes legalization from illegal sources have a complicated and trans-
boundary structure. Therefore, it is possible to solve the problem if only there will be a complex world approach implied.
The world collaboration in this sphere develops in certain ways: conclusion of unilateral and bilateral agreements and co-operation in form of world organizations and participation in conferences.
The governments, that imply the measures against this sphere of criminal activity, came across the understanding that it is needed to adjust the norms allowing prohibition of any actions of illegal activities in the sphere of income legalization, in order to compensate the possible outcomes, destruct the financial foundation of criminal groups and make the society prophylaxis from illegal activities in it.
Considering all previously written, financial institutions and banks especially are intermediaries in capital transition. They have the direct impact on possibility of the capital future use. The particular feature of banking sector can both prevent illegal activities in the sphere of income legalization and contribute to development of the negative economic impact.
Authoring international organizations (IMF, FATF, World Bank, etc.) understand the role of banks. They try to imply the system of measurements concerning the increase of transparency of globalizing financial system and it also reflects the trends and risks in this aspect. IMF points out the future possible risks of the economy offense by any negative outcomes created by the processes of illegal income legalization. (11) It is illustrated on picture 1.
Picture 1. The effects of money, laundered from illegal sources, on legal economy.
The generated criminal income cannot always circulate in criminal sphere. The owners of the capital try to legalize it in order to spend their money. The trend of transferring such capital abroad in order to keep it safe and to secure its future spending becomes more obvious, while the increase of criminal incomes starts entering different spheres of the national economy.
The mechanism of money legalization through the loan providing organizations can be implied via the certain instruments (7):
-Creation of bank account in order to keep there the illegal capital;
-Transfer of money via bank accounts in Russia and via fictitious contracts;
-Collection of money in banks from the fictitious accounts (cashing);
-Transfer of money to bank accounts abroad based on fictitious deals;
-Conclusion of a contract with the aim of getting the money back by the mean of illegal ways.
The exclusive role of the banking sector in the system of combating money laundering is reflected in the example of Afghanistan. In August 2010, the Government of Afghanistan has decided to change the management of the Bank of Kabul, which is the owner of the largest network and is used to pay civil servants.
The reason for this decision was the disclosure of events related to the issuance of interest-free loans to bank insiders and those with political connections and their subsequent illegal investing in overseas property, it was a direct money laundering through the bank structure. The investigation by the authorities of Afghanistan conducted that the embezzlement at the bank exceeded 900 million U.S. dollars, accounting for 5% of the state's GDP and 50% of its national budget. Moreover, the involvement of the Bank of Kabul in the process of legalization of criminal incomes triggered an outflow of deposits: investors withdrew their investments worth more than U.S. $ 200
million. Such a run threatened instability both for the financial and social system of the country. For 2012, the Central Bank of Afghanistan has spent nearly $ 1 billion to provide emergency assistance to the banking sector, which is a huge expense, not only in the scale of Afghanistan. (5)
In this regard, given the role of financial stability on a national scale, the priority remains to be establishing of an effective mechanism for the regulation and oversight by state regulators for transparency of banking activities, including the strengthening of information exchange on the designated problem.
The world trends formed the institutional transformation of banks into intellectual centers of collection, analysis and information rating about the financial operations that took their place, in order to figure out the illegal schemes aimed on legalization of incomes and monitoring of the potential risks.
According to the information from Russian Central Bank, the scale of fictitious financial operations, which go through banking system equals to 1.5-2 trillion rubles per year. It also equals to 7-10% of Russian GDP. The losses of consolidated budget are 500-800 milliard rubles per year (7).
In this case, it is important to create an institutional foundation within the legal framework, which would create a»point of reference»for the subsequent stages of institutional changes in order to comply with the transparency of financial flows. There is a letter from the Bank of Russia 13.07.2005 N 99- T about "The methodological recommendations on development of internal control by credit institutions in order to
prevent legalization (laundering) of money that was madeillegally and terrorism funding»mechanism of programs completion in order to prevent legalization of criminal incomes was regulated. Also, a list of criteria and indicators of unusual transactions requiring special attention from the banks in the implementation of operations in order to improve the transparency of the bank as a whole was introduced (4). Along with the changing conditions of the financial system, the emergence of various situa-tional features, as well as introducing new financial products, the given list undergoes regular updates.
Thus, the banking sector as part of the global financial system is subject to the implementation of illegal schemes aimed at money laundering made by the means of illegal sources. The spread of these schemes is in direct proportion to the size of the shadow economy, since the inefficiency of the institutional elements of the counteraction system create an important basis for the formation of destructive social and economic relations.
BIBLIOGRAPHIC LIST
1. Directive of the Council of Eu-rope»On prevention of the use of the financial system in order to Money Laundering»(10 June 1991) / A. Vish-nevsky Banking Law of the European Union / AA Vishnevsky. - Mos-cow:»the Statute", 2000. - 388p.
2. Federal Law № 115- FZ of 07.08.2001 »On counteraction to legalization (laundering) of proceeds from crime and terrorist financing»/ / The reference system»Consultant Plus"
3.The direction of the President of the Russian Federation of 13.06.2012 N 808.»Issues of the Federal Service
for Financial Monitoring»/ / the reference system»Consultant Plus"
4. Letter from the Bank of Russia 13.07.2005 N 99- T»On the methodological recommendations on the development of credit institutions internal control rules for prevention of legalization (laundering) of proceeds from crime and terrorist financing»/ / The reference system»Consultant Plus"
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10.Kiselev, IA Dirty Money [Text] / IA Kiselev. - Moscow: Publishing House»Science», 2009. - 152 p. - ISBN978- 5-9516-0432 -3.
11. The role of organizations in against the legalization (laundering) of proceeds from crime and terrorist financing : a manual - M: ITMCFM, 2011. - P. 27
13. Website Rosfinmonitoring // www.fedsfm.ru
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16. The Global Economic Crime Survey 2011. //
Http:www.pwc.com/gx/en/economic-crime-survey/index.html
