Stages of Money Laundering
Vulnerabilities of STANLIB
Money Laundering is the process by which criminals attempt to conceal the true origin and ownership of the proceeds of their criminal activities. The Financial Intelligence Centre Act has been introduced in order to combat these money laundering activities and to impose certain duties on institutions and other persons who might be used for money laundering activites.
The Prevention of Money Laundering
The prevention of money laundering has three dimensions:
- Ethical taking part in the fight against crime.
- Professional & ensuring that STANLIB is not involved in recycling the proceeds of crime that would call into question its reputation, integrity and, if fraud is involved, it's solvency.
- Complying with all legislation and guidelines that impose a series of specific obligations on financial services businesses and their employees.
- Following the introduction of the Financial Intelligence Centre Act in 2001, all accountable institutions have had to enhance their vigilance procedures to prevent criminals from using them to launder their "dirty" money.
It is important that STANLIB and its employees understand and fully comply with these increased responsibilities. The penalties for non-compliance are severe, both for STANLIB and individual employees. Not only could the severity of a penalty stop STANLIB from operating as a business, there are also criminal and disciplinary consequences for employees found guilty of breaching the law.
- What is Money Laundering?
Money laundering is a term used to describe the various methods employed by criminals to hide and disguise the money they make from their crimes.
The term "laundering" is used because criminals need to turn their "dirty & criminal" money into clean funds that they can use without arousing suspicion. Getting it into the financial system means that it becomes harder to trace and confiscate. Drug traffickers, armed robbers, terrorists, burglars and fraudsters all need to launder the proceeds of their crimes.
Stages of Money Laundering
The first step in the laundering process is for criminals to attempt to get the proceeds of their crimes into a bank or other financial sector business, sometimes using a false identity or often using intermediaries. They can then transfer the funds to other accounts, here or abroad, or use them to buy other goods or services.
The criminal proceeds eventually appear to be like any legally earned money and become difficult to trace back to their criminal origin. The criminals can then invest or spend them or, as is often the case, use them to fund more crime. The laundering process is often described as taking place in three stages:-
1. Placement
The means by which funds derived directly from a criminal activity are introduced into the financial system, either directly or through using retail businesses. This can be in the form of large sums of cash.
2. Layering
The aim is to disguise the transaction through a succession of financial transactions with the purpose of erasing, as quickly as possible, all links with its unlawful origin. The funds may be converted into shares, bonds or any other easily negotiable asset or placed into the ownership of a company or a
trustee.
3. Integration
Complex integration schemes place the laundered funds back into the economy through real estate, business assets, securities and equities, in such a way that they re-enter the financial system appearing as normal business funds that have been legitimately earned.
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Vulnerabilities of STANLIB
It is important to realise that money laundering is not just related to cash and is not an activity solely undertaken by individuals. Once the cash or initial funds are placed in the financial system, the subsequent stage of the laundering cycle comprises transmissions, loans, investments, securities, trade finance services, commodities etc.
It is also important to realise that money laundering includes tax fraud and exchange control breaches. All
financial services companies selling offshore products need to recognise that the underlying objective of many structures is tax management and must be satisfied that such funds are not the result of tax fraud or that money invested in these products has left South Africa legitimately. The investment opportunities presented by our various funds make us vulnerable to the various stages of the money laundering process. Back to Top
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