Effects of Money Laundering

Enhanced Assessment on Money Laundering And Terrorism Financing (ML/TF) Risks

Money laundering and terrorism financing are financial crimes with economic effects, and act as a threat to economic and financial stability. There are many negative risks and effects from money laundering and terrorism financing, and governments must put in place anti-money laundering regulations and processes to prevent them as much as possible. However, read more to fully understand the effects of money laundering and how they infiltrate financial systems to affect businesses, economic development and the society.  

How does money laundering affect business?

Banking and financial institutions operate within a framework of high legal, professional and ethical standards. When financial institutions allow funds from criminal activity to easily be processed, it becomes part of the crime network. This has a negative impact on the regulatory authorities and the financial industry. Unchecked money laundering changes the demand for money, risks to bank soundness, contamination effects on legal financial transactions, and increased volatility of international capital flows and exchange rates due to unanticipated cross-border asset transfers. Also, as it rewards corruption and crime, successful money laundering damages the integrity of the entire society and undermines democracy and the rule of the law.

What influence does money laundering have on economic development?

Launderers look for growing economies, as these economies have inadequate anti-money laundering controls and regimes in place. This weakness is exploited by launderers, as they are always looking for new routes to launder their funds. Launderers then move their networks to these countries.

This in turn, will have a negative effect on the integrity of financial institution and foreign direct investments as businesses will turn wary when setting up their business in these growing economies. Without strong anti-money laundering regimes in place, it will be hard to create a business-friendly environment to attract foreign investments to help aid the economic development.

What is the connection with society at large?

If money laundering and terrorism financing are not dealt effectively, there will be negative social and political effects. Organised crime can infiltrate financial institutions, acquire control of large sectors of the economy through investment, or offer bribes to public officials and indeed governments.

The economic and political influence of criminal organisations can weaken the social fabric, collective ethical standards, and ultimately the democratic institutions of society. Laundering enables criminal activity to continue.

Effective anti-money laundering (AML) regulations and processes are essential to countering such criminal activity. Yet due to tighter anti-money laundering regulations in the US and Europe, money laundering activity is moving into the Asia Pacific to avoid detection. This puts pressure on regional financial investigation units, financial institutions and associated stakeholders to improve their AML practices.

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Enhanced Assessment on Money Laundering And Terrorism Financing (ML/TF) Risks is a 2-day training course held from 8 – 9 July 2019 (Kuala Lumpur). In this 2-day workshop, delegates will learn and acquire practical tips and techniques on ML and TF risk assessment. It aims at providing participants with operational knowledge for identifying and assessing ML and TF risks, acquiring information on the latest ML and TF trends, and understanding the best practices in creating strategies. Also, setting up effective risk-based compliance systems that is compliant with both FATF Recommendations and other international best practices.