Sunday Times 2
On the trail of money laundering
A hot topic being discussed in the media and by both politicians and members of civil society is “money laundering”. Although most of the people are aware of the meaning of “money laundering”, they may not know how money, both notes and coins, could be laundered.
Money laundering, in the real sense, is about converting illegally amassed wealth into a legal system of money transaction. Figuratively speaking, it is like washing the dirty money through a money laundering process to make it clean.
Wealth is amassed through various illegal activities such as drug trafficking, human smuggling, international arms sales, smuggling of contraband, terrorism and organised crime – kidnapping, extortion, money lending, illegal money exchanging, maintaining underground banking systems, gambling, prostitution, bank heists, fraud and contract killing. These are universally recognised criminal activities.
These illegal activities are lucrative and rake in enormous wealth, which cannot be accounted for, through the legal banking system or a recognised financial system prevailing in a democratic country. The unaccounted-for-wealth which cannot be circulated through the legal process is termed “Black Money”. It will be of no use to the possessor, unless it is made “clean”.
The underground banking system or the “Undial” (the Tamil word for a till) system has been widely used in the transfer of money from Sri Lanka and India because of the ethnic affinity between the inhabitants of the southern part of India and Sri Lanka. Some people of Indian origin doing business in Sri Lanka make use of the undial system to transfer their profit or send money to their kith and kin in India.
Even Sri Lankans who need large sums of money to buy any item in India or engage in smuggling activities use the undial system. They are paid in India in Indian currency the equivalent of the money they gave the undial racketeers in Sri Lanka.
Concealment
Money laundering is the process of concealment of the origin of the income earned through illegal activities and its conversion to other legitimate assets in order to disguise its illegal sources. There are three main steps in money laundering:
01) PLACEMENT – Physically getting the cash into the financial system including the conversion of cash into other types of negotiable instrument such as money orders and cheques.
02) LAYERING – Separating the proceeds from the sources through layers of transactions such as wire transactions.
03) INTEGRATION – Proceeds. Providing an apparent legitimate explanation for the illicitly gained wealth.
In the flow chart of drug trafficking activities, the financiers are the key people who invest and rake in the profit. It is they who heavily engage in money laundering activities as their ill-gotten wealth has to be converted into ‘clean’ money to sustain their lavish living style.
The Money Laundering Bill
Until about 2005, there was no legislation or a bill to investigate and take action against those suspected of financing drug trafficking. In 2005 a bill was passed in Parliament known as “Prevention of Money Laundering Act No.2005″ to prohibit money laundering in Sri Lanka and provide the necessary measures to combat and prevent money laundering. The recent exposure involving some parliamentarians in drug smuggling activities has been widely discussed and publicised.
As mentioned earlier, financiers and drug barons do not possess or traffic in narcotic drugs. So they cannot be arrested and charged with possession or trafficking in drugs under the Poisons and Dangerous Drugs Ordinance (PODDD). They can be taken in only after an in-depth investigation by qualified law enforcement officers. These officers will collect evidence to ascertain whether such individuals are engaged directly or indirectly in any transaction in relation to any property which has been derived or realised directly or indirectly from any unlawful activity or from the proceeds of any unlawful activity.
The investigation has to establish that the suspect has amassed wealth by illegal activities, say drug trafficking. If the suspected person possesses a large amount of wealth both in cash and properties and bank deposits, he has to prove how he had earned that money and whether he had earned that money by any legal business. If it is suspected that such monies are lying in that person’s accounts in banks or other financial institutions, a freezing order could be obtained.
Investigations into money laundering are a long process and could only be handled by trained and experienced police officers. Under the Money Laundering Act all the politicians and other drug smugglers who are benefited from drug trafficking in our country can be brought before the courts. When a person is convicted of an offence of money laundering, he is liable for heavy fine and years of imprisonment. The court convicting such a person may also make order that any moveable or immoveable property of such person derived or realised directly or indirectly from any unlawful activity, be forfeited to the State free from all encumbrances.
(The writer is a retired Deputy Inspector General of Police)