Question Tag: Anti-Money Laundering

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  • 6 Marks

AFM – May 2016 – L3 – Q4c – Emerging issues in finance and financial management, Regulatory framework and processes

Describe money laundering and identify risk-based approaches companies can use to combat it.

c) The growth of globalization has created more opportunities for free movement of capital/funds, which has resulted in a global canker called “money laundering.” There have been global efforts from governments and international institutions to combat the menace.

Required:
i) Describe in simple terms the concept of money laundering. (2 marks)
ii) Identify THREE risk-based approaches companies can adopt to combat the risk of money laundering. (4 marks)

i) Concept of Money Laundering

  • Money laundering refers to the process of concealing the origins of illegally obtained money, typically by means of transfers involving foreign banks or legitimate businesses. The goal is to make the proceeds of criminal activities appear to have been derived from a legal source. It is often associated with activities such as drug trafficking, terrorism financing, and organized crime.
    (2 marks)

ii) Risk-Based Approaches to Combat Money Laundering

  1. Identify Relevant Risks
    • Companies should assess the specific risks that are relevant to their business, such as customer behaviors, geographic areas of operation, and the nature of the business. Identifying risks at the onset allows for more targeted anti-money laundering (AML) measures.
      (1 mark)
  2. Conduct Detailed Risk Assessments
    • Companies should carry out detailed risk assessments on customer activities and delivery channels. This involves scrutinizing high-risk areas, such as large cash transactions or dealings with politically exposed persons (PEPs). Risk assessments help in determining the areas where stricter controls are required.
      (1 mark)
  3. Implement Effective Controls
    • After identifying and assessing risks, companies must design and implement robust internal controls. These controls should be aimed at managing and mitigating the identified risks. This could include customer due diligence (CDD) processes, ongoing monitoring of transactions, and reporting suspicious activities.
      (1 mark)
  4. Monitor and Update Controls Regularly
    • Continuous monitoring and updating of risk management controls is essential to keep up with evolving risks. Companies must ensure that their AML processes are effective and adapt to new threats or changes in the regulatory environment.
      (1 mark)
  • 10 Marks

AAA – May 2021 – L3 – Q5a – Current issues | Professional responsibility and liability

Assess the global threat of money laundering and discuss Ghana’s efforts to combat money laundering.

a) Money laundering has become a significant threat to the world’s political and economic order. World leaders are collaborating and cooperating in fighting money laundering. However, criminals are maliciously clever and, in some cases, ahead of law enforcement agencies. Every human being has to contribute to the fight against money laundering.

Required:

i) Assess why money laundering poses a big threat to the world’s political and economic order. (5 marks)

ii) Discuss FIVE (5) ways in which Ghana is contributing towards fighting money laundering globally. (5 marks)

i) Why Money Laundering Poses a Big Threat to the World’s Political and Economic Order:

  • Destabilization of Economies: Money laundering puts large sums of illegal money into the hands of criminals, which can destabilize economies. When these funds are introduced into the economy without a corresponding rise in goods and services, it can lead to hyperinflation. Weak economies, particularly in developing countries, may not be able to absorb such shocks, leading to economic collapse.
  • Undermining Financial Systems: Money launderers often set up fraudulent schemes, such as Ponzi schemes, which entice people to withdraw their savings from legitimate financial institutions and invest in these illegal operations. This can undermine the official financial and banking systems of the countries in which they operate, leading to loss of public confidence in financial institutions.
  • Funding of Terrorism: Money laundering has been identified as a significant source of funds for international terrorist organizations. These funds are used to finance terrorist activities that lead to the destruction of human lives and property, creating political instability and insecurity in affected regions.
  • Political Corruption: Money launderers may use their illicit funds to influence political processes, such as financing coups or corrupting public officials. This can lead to the erosion of democratic institutions and the rule of law, particularly in countries with weak governance structures.
  • Global Financial Crime: Money laundering is a transnational crime that affects multiple countries. It enables criminals to operate across borders, making it difficult for individual countries to combat it effectively. This global threat requires international cooperation and collaboration to address, and failure to do so can lead to significant geopolitical tensions.

ii) Ghana’s Contribution to Fighting Money Laundering Globally:

  1. Legislation and Regulation: Ghana has enacted comprehensive anti-money laundering laws, including the Anti-Money Laundering Act, 2008 (Act 749) and its amendments. These laws provide a legal framework for combating money laundering and financing of terrorism.
  2. Membership in International Bodies: Ghana is a member of the Financial Action Task Force (FATF) and the Inter-Governmental Action Group against Money Laundering in West Africa (GIABA). These memberships ensure that Ghana adheres to international standards and collaborates with other nations in the fight against money laundering.
  3. Establishment of the Financial Intelligence Centre (FIC): Ghana’s FIC is responsible for analyzing financial transactions and identifying suspicious activities related to money laundering and terrorism financing. The FIC works closely with financial institutions and law enforcement agencies to track and report illegal financial activities.
  4. Cross-Border Cooperation: Ghana has entered into treaties and agreements with other countries to facilitate the exchange of information, joint investigations, and the prosecution of money laundering offenses. This international collaboration helps to tackle money laundering on a global scale.
  5. Public Awareness and Training: Ghana has implemented public awareness campaigns and training programs for financial institutions, law enforcement agencies, and the judiciary. These initiatives aim to increase understanding of money laundering risks and strengthen the capacity to detect and prevent such activities.

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