Money Laundering and E‐Commerce
| Date | 01 March 2002 |
| Pages | 277-286 |
| DOI | https://doi.org/10.1108/eb026027 |
| Published date | 01 March 2002 |
| Author | Siong Thye Tan |
| Subject Matter | Accounting & finance |
Journal of Financial Crime — Vol. 9 No. 3
Money Laundering and E-Commerce
Siong Thye Tan
The impact of money laundering1 is well encapsu-
lated by the words of Gil Galvao, former President
of the Financial Action Task Force:2
'Money laundering, organised crime, and eco-
nomic crime are often integrally linked, and
criminal organisations will use their profits to infil-
trate or acquire control of legitimate businesses,
and to put legal competitors out of business.
They can also use those profits to bribe individuals
and even governments. Over time, this can ser-
iously weaken the moral and ethical standards of
society and even damage the principles underlying
democracy.'
That is why money laundering should not be taken
lightly. Gone are the days when it was relatively
simple, involving a small number of activities.
Today, money laundering is diverse and widespread.
New technologies and cyberspace offer money
launderers new opportunities and present new
challenges to law enforcement.
The intention of the money laundering process is
to convert illicit cash to a less suspicious form, so
that the true source or ownership is concealed and a
legitimate source is created.3 This process consists of
three stages: placement, layering and integration.
Placement involves the physical disposal of cash
being the proceeds of crime by depositing it with a
financial institution. The second stage of layering
transfers these deposited funds among various
accounts, disguising the origin of the funds through
a series of complex transactions. Finally, integration
shifts these funds to legitimate individuals or front
companies that have tentative links to the criminals.
Only upon integration can the criminals draw
upon the money for legitimate spending or financing
future criminal acts.
The money laundering problem that presents itself
today is also increasingly international in character.
The interconnectivity of the Internet ties computer
users around the globe together in real time so that
information retrieval is no more difficult in Sydney
than in Cape Town. The greater integration of the
world economy, and the removal of barriers to the
free movement of capital, have combined to create
new commercial opportunities. Unfortunately, the
same efficiency and convenience that the global
economy affords to legitimate commerce also
makes the job of laundering criminal proceeds
easier. It is estimated that the total amount of
money laundered in the world averages between 2
and 5 per cent of the world's GDP, which is approxi-
mately US$600bn (S$1.1trn) to US$1.5trn annually.4
Jeffrey Robinson, in his book 'The Laundrymen',5
describes money laundering as 'the world's third
largest business right behind foreign exchange and
oil.
So extensive is its reach, so pervasive and sinister
its influence, that it threatens the very fabric of civi-
lised society and acts like a virus in the bloodstream
of the world economy.'
Using the 'money trail' to identify or assist in the
identification and prosecution of major financial
crime has become a standard method used by law
enforcement agencies. Over the years this strategy
has led to a growing appreciation of the broader
implications for financial markets in these activities.
The International Monetary Fund, in 1996, con-
ducted a study in association with the FATF in
which the effects of large-scale money laundering
on national economies were examined. The research
shows that macro-economic policy makers cannot
but take notice of these illegal activities to warrant
a correct prognosis on the economy. Failure to do
so would result in misdiagnosis and incorrect policy
setting.6
This paper will first look into the main sources of
illegal proceeds before addressing the more com-
monly used methods of money laundering in the
Asia Pacific region. It is critical and necessary to
examine the new operating environment that
law enforcement agencies face today in the light
of the emerging digital economy, namely
e-commerce and its ramifications within the
money laundering framework. Finally, the paper
will discuss some of the specific and general counter
measures that have been undertaken by the Singa-
pore authorities in an effort to clamp down on
money laundering within the context of the
knowledge-based economy.
Journal of Financial Crime
Vol.
9,
No.
3,
2002,
pp.
277-285
© Henry Stewart Publications
ISSN 1359-0790
Page 277
To continue reading
Request your trial