Money laundering through underground systems and non‐financial institutions
| Date | 01 January 2004 |
| Pages | 9-14 |
| DOI | https://doi.org/10.1108/13685200410809724 |
| Published date | 01 January 2004 |
| Author | Fath El Rahman Abdalla El Sheikh |
| Subject Matter | Accounting & finance |
ANALYSIS
Money Laundering Through Underground Systems
and Non-Financial Institutions
Fath El Rahman Abdalla El Sheikh
INTRODUCTION
The problem of money laundering has attracted the
attention of the international community at all
levels. But the main concern has centred on combat-
ing economically motivated crime by depriving
criminal organisations of their pro®ts and therefore
their ability to reinvest in their established criminal
enterprises. Such trends have encouraged criminals
to launder money.
It is worth mentioning that money laundering has
become a serious danger to the stability of ®nancial
markets and governments and is threatening interna-
tional peace and security by being associated with
international terrorism. This was witnessed by the
deadly 11th September, 2001, attacks on New York
and Washington which shocked the whole world.
This tragic incident has prompted the initiation of
an international campaign to combat terrorism
throughout the world with the support of the UN.
In addition to military operations and security mea-
sures, the campaign also concentrates on tracing the
funds funnelled through ®nancial institutions to
®nance terrorist activities throughout the world. At
present, more than 200 accounts have been frozen
in dierent parts of the world, in response to the
United Nations Security Council Resolutions.
There are many illegal activities that are the main
sources of the dirty money laundered through
underground systems, which are the subject of
this paper. Some of the most notorious illegal activ-
ities, which are considered the main source of
monies to be laundered by these systems, will be
examined here ®rst. Secondly, the techniques used
to launder monies derived from ill-gotten gains
will be surveyed, with a special emphasis on linking
these techniques to ®nancing terrorism. Third, the
measures taken to combat money laundering
through these underground systems with special
reference to some Arab and Islamic countries will
be considered.
ILLEGAL ACTIVITIES
Dirty money is usually derived from economic
crimes or illegal activities such as:
Ð trading in prohibited goods and carrying on
activities in contravention of national laws such
as drug tracking, prostitution and white slave
trade networks;
Ð smuggling of currencies, goods and products
without payment of customs duties or taxes
across international frontiers;
Ð black market trading (generating high incomes
by violating the laws of the state) such as dealing
in foreign currencies in those countries which
have tight restrictions on dealing in foreign
exchanges, selling goods and commodities in
short supply at exorbitant prices;
Ð bribes as a result of administrative and political
corruption;
Ð incomes resulting from tax evasion;
Ð illegal commissions obtained by some indivi-
duals and companies in consideration of facili-
tating deals and transactions related to arms,
capital or investment goods, obtaining of
advanced technology or any sizeable commercial
transactions;
Ð illegal political activities such as espionage activ-
ities in which usually the spy receives regular
income from the party for which he is working
and deposits the funds in a current account in his
name with a foreign bank abroad;
Ð theft or embezzlement of public funds;
Ð collecting money from depositors and transfer-
ring the money abroad and depositing it in
foreign banks without giving the depositors suf-
®cient guarantees Ð in some cases the money
collected will be used to buy real estate which
will be sold to relatives of the launderers who
will transfer the proceeds abroad; this pattern
was practiced widely in Egypt by investment
Page 9
Journal of Money Laundering Control Ð Vol. 7 No. 1
Journalof Money Laundering Control
Vol.7, No. 1, 2003, pp. 9± 14
#HenryStewart Publications
ISSN1368-5201
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