Financial monitoring realization: theoretical,
legal and practical issues
To carry out the business activity properly depends on a number of
factors. The skillful management, the knowledge of the normative-lawful basis
of entrepreneurship, the practical entourage perception, and the active
response to the changes are among them. However, on conditions of unprotected
business the mentioned positive qualities are leveled. Financial monitoring is
one of the urgent directions of business protection.
The constant financial services control to reveal money laundering
(legalization) of proceeds from crime is the main task of financial monitoring.
At first glance, money laundering is a crime without a victim. The
tenseness of murder, rape, robbery, and any other horror which leaves in the
human mind the heavy infraction of the law are not associated with this crime.
But the fact is that money laundering always occurs after serious crimes
such as robbery, house-breaking, drug and human traffic etc. It is necessary to
remember that legalized «dirty» proceeds are directed to financing new crimes,
particularly, terrorist activity.
Most people are not informed of laundering crime proceeds, and this
factor makes the problem to look like invisible, therefore it is so hard to
combat it.
First of all urgent actions in this area must be the enlightenment
activity which explain to people the real danger of money laundering.
Certainly, the problem of business safety and financial monitoring
realization requires the scientific approach to its solution. For this very
reason the important role to solve this problem must belong to its discussion
on the conferences, the symposia, the round tables, the seminars and other
forms of scientific meeting.
The expression «money laundering» was first used by the newspapers
during the Watergate scandal of 1973, and for the first time in the juridical
and legislative context it appeared in the USA in 1982. Since then it is used
in the entire world.
As penal action, money laundering drew attention in the 80th of ÕÕ century, mainly concerning the drug smuggling.
The governments of the western countries had to recognize that the
criminal organizations and their enormous profits form drug trafficking
business could essentially corrupt the state structures of all levels. It was
decided to create the proper legislative basis to combat this socially
dangerous action.
Today, laundering criminal property became the global issue. Every year
in the world money of more than 500 billion US dollars is laundered.
Money laundering is a process where a great amount of legalized crime
proceeds is presented as it has a true source of origin.
At the end of 60th the first step to counteract this
phenomenon became the recognition by the Congress of the USA of the fact that
cash was the important source for organized crime. Therefore, in 1970 it was
passed the Bank Secrecy Act which intensified combating laundering of proceeds
from crime.
Having analyzed the current anti-legalization legislation of some
countries it is possible to mark out that collaboration of bank and nonbank
institutions with law-enforcement authorities is the general aspect of
combating this crime. Such collaboration supposes that the employees of
financial-credit institutions should detect suspicious agreements and inform
the competent authorities.
In 1995 in the USA the program
«Know Your Customer» was presented. It originated from the Bank Secrecy Act.
This program requires identifying its customers and their activity to protect
the financial institutions from possibility to become the channel of money
laundering.
In 1993 Law of Germany «On Identification of Profits from Serious
Crimes» (in fact, anti-money laundering act) was passed. The law concerns the
structures which ensure legality of cash flow: credit and financial
institutions, insurance companies, post-offices and some private persons (for
example, lawyers and notaries).
In 1998 in Switzerland Anti- Money Laundering Act came into force. It
stipulates for bank and financial intermediaries control increase, at that it
is carried out not only by the national authority but the various professional
organizations. According to the Swiss legislation any depositor or entrepreneur
can be under suspicion, because the law does not contain the level of
suspicious sum.
Most developed countries founded the legislative basis for prosecution
of the individuals guilty of crime proceeds laundering, elaborated the system
of measures for crime proceeds seizure, there are regulated the methods of
combating money laundering, the mechanism of cooperation among national law
enforcement and supervising authorities, and proper demands to limit bank and
commercial secrecy.
The system of counteraction money laundering is based on the following
basic principles:
– The established amount of currency transaction, exceeding of
which all transactions are to be registered by a bank (or any other financial
institution) with the purpose of further check;
– There are elaborated and used the list of signs which determine
whether the currency transaction is related to those that are carried out to
launder money;
– Responsibility of bank or financial institutions employees to
inform law enforcement and supervising authorities;
– One of the executive bodies is authorized to coordinate the
activity of all law enforcement and supervising authorities in the area of
combating money laundering.
Thus, the problem of crime proceeds legalization has general nature and
is connected with the dangerous social phenomena like organized crime,
international terrorism etc. Besides, the globalization of processes in the
world economy increases amount of crimes of transnational scale. That is why
combating these malignant manifestations of the modern world is so important.
Each country has its legislative basis for combating legalization of
illegal proceeds. It is now in Ukraine. In accordance with FATF recommendations
Law of Ukraine «On Prevention and Counteraction of Legalization (Laundering) of
Proceeds from Crime» was passed on November 11, 2002, the normative-legal acts
corresponding to this law were adopted, and the international agreements,
conventions, and directives were ratified by Ukraine.
Financial monitoring must be carried out on the basis of the existent
normative-legal base. The finance analysis of a company is placed at the heart
of financial monitoring.
The current
documentation of an enterprise is studied with the finance analysis of an object.
In the course of this process the dynamics of financial indices during the
accounting period is investigated. In case of need the dynamics of financial
indices for several adjacent accounting periods is studied.
It must be noted that while conducting
the financial transaction through the bank, managers of enterprises try to
avoid giving such financial reporting. In some cases, this reporting contains
only formal information. It is necessary to remember that entities related to
money laundering are, as a rule, extremely mobile, established for a short
period of time with the help of false documents or a man of straw.
From the above-stated we can conclude that, although the analysis of indices
of a financial condition of the enterprise should be used with the complex activity
analysis of a company, to apply it in all cases is inexpedient.
Thus, we need the procedure that would
allow to detect enterprises which activity will be investigated more carefully for
the purpose of revealing money laundering operations, on the basis of the analysis of
movement of funds on bank accounts of clients. This procedure must meet the following requirements:
simplicity, reliability, the possibility of automation, exclusion of human
factor, and flexibility. On the basis of these methods it is necessary to
elaborate the system which will trace the client’s activity automatically.
Under the set conditions this system should automatically inform of the
necessity of the detailed analysis of transactions on accounts or the entity’s
activity on the whole.
Being guided by the experience of
international organizations and the recommendations of local authorities it is
possible to trace the connection between the stages of legalization and the
client’s activity. It will not only make possible to render more valuable
information while monitoring, but also substantially increase the efficiency of
the system of combating crime.