Comparison of Money laundering laws in Saudi Arabia and United Kingdom
Criminal offences like bribery and corruption, kidnapping, illegal armament sales, gambling, illicit trade in narcotics, fraud and forgery, human trafficking, terrorist financing and child prostitution are rampant in the world today. The money earned from the mentioned activities are cleaned by the use of the financial systems in order to use it in an economy. The process of cleaning the money is referred to as money laundering (Perkel, 2004). In order to conceal the identity, sources and destination of money; the perpetrators tend to maintain control over the proceeds, and utilize the proceeds in the guise of legitimate business by creating the appearance that large sums of money obtained from crimes, such as drug trafficking or terrorist activities, is perceived like it originated from a legitimate source and cleaned up through the banking system or acquiring of assets in a countries economy (Perkel, 2004).
The purpose of labeling money laundering as an offence mainly is because they gain revenue for criminal activities committed (Levi & Gilmore, 2002). The justification for the establishment of the crime is that it is wrong for persons or an organization to aid unlawful activities in order to benefit from the profits made from these activities or to ease the commission of such crimes by offering financial services to them. Money laundering is a financial crime that is discouraged by laws and most countries have put measures in place to curb these criminal (Unger, Linde, & Edward Elgar Publishing, 2015). The money earned from organized crime is prevented from use to the criminals since its sources are unclear and the laws of the country curb such sources by punishing the offenders or the organizations. Money laundering activities deny a country’s sources of revenue from taxes as well as inhuman business activities, which the affect the work force of the citizens (Anderson, 2012).
In order to intensify determinations to recognize and confront terrorist financing ambiguities and strengthen the implementation of the financial services systems and make sure they are compiled by countries. The commitment to improve by the collaboration and interchange of information between authorities is encouraged by most nations. Consideration should be made as to whether differences are essential in the rules and regulations for opposing terrorist financing and assessing improved application to counter terrorist financing procedures.
Many nations in the world have come up with rules and regulations to curb the vice and the central banks acts as the watchdog. These regulations are referred to as anti-money laundering regulations and they to seek to prevent the income produced from unlawful activities and from being used in the country’s economy. In the new technology in the banking sector, that is the use of cards, internet banking, cyber money create avenues to launder illegitimate money to the economy (Anderson, 2012). Transaction made through these technologies should be monitored and also money used to repay should be investigated to establish the money is from reliable sources (Fasano & Iqbal, 2003). The misuse of financial systems by the use of credit cards, tax evasion, and questionable accounting in legal businesses, makes an economy suffer when trying to transact internationally. The laws and regulations prevailing money laundering often seek to trail the sources of money and to determine whether the money being laundered is being used to finance terrorism activities around the world (Unger, Lind e, & Edward Elgar Publishing, 2015). The research discusses challenges facing individuals in the financial system when reporting money laundering activities.
The primary motivation for the research conducted is that money laundering has tapped into the government through corrupt officials.overnment funds in the form of taxes are being lost through tax evasion and manipulations of digital systems (Fasano & Iqbal, 2003). The problem is that money laundering may eventually collapse or inhibit the growth of the private sector since it yearly accounts for over $600 billion dollars of the world’s Gross Domestic Product (Perkel, 2004). The comparison of the laws in the United Kingdom (UK) and Saudi Arabia is essential to the legal system of Saudi Arabia in enabling the Saudi Arabia government to minimize terrorism activities funded through money laundering. The law stipulates that all money earned should be from genuine sources (Gambling commission government of UK. (2015).
Money Laundering is done in stages before it is fully used as legitimate source of money. These stages are namely: Placement, Layering and Integration
In the placement stage, illegitimate funds enter into the financial system of a country through a bank or other financial institutions such as investing in microfinance institutions by giving them structured investments. This is done by depositing cash to banks, which make it easier to transfer and maneuver the financial system. Money launderers position illegitimate funds by using different techniques, which range from simple cash deposits into bank accounts to using cash to purchase assets. This is done in two stages that are primary deposit and secondary deposit. In primary deposit, one understands the regulation governing the financial system and he deposits the money without drawing his attention to regulatory bureaus. The money is divided into small amounts that are to allow in payments in numerous bank accounts under particular identification and declaration restrictions. In other instances, individuals influence the control system of the organization of the financial segments in terms of acquiring an existing banks or opening a new banks in offshore countries (Parpworth, 2012). Bribing bank officials is used as cover deposit illegal money devoid of attracting contemplations from supervising agency.
In secondary depositing, twisting access of money contribution into the banking system and thus a translation into book money during interconnection of a normal or authorized person transaction. This take place by altering the financial organization, for example incriminated money is transformed into other assets or securities through authorized personnel, who trade with a bank account of a third party, or by means of other person’s names consecutively to open an account or to open a corporation or to acquire an insurance policy. It is also be proficient by advancing the dislodgment of the money laundering into life insurance business, financial service provider and foreign exchange bureau (Masciandaro, 2005).
In the layering stage, the funds are transferred into different layers of transactions to separate it from its illegal origin and ambiguous audit trails (Masciandaro, 2005). This stage is used to clean the money by doing legitimate business with other companies or the funds are transferred to offshore bank with the aim of placing it to that economy. In some cases the people involve can present false invoices or payment transactions to the bank in order to clean the money. A legitimation of money transfer is thus proficient by over or under invoicing at international business transactions, by charging suspicious goods or services in way of winding up business operations or by back to back loan business. Commonly, the exploitation of financial derivatives and swaps by the similar tokens take place among money launderers to cloud or hide the original derivation of criminal finances (Boister, 2012).
The integration stage cleans the funds and re-enter it to the economy by means of purchasing of luxury items like private jets and cars. They also tend to invest on possessions such as real estate and insurance. Money laundered can also be used to fund can also be used for illegitimate business like promoting criminal life style. Money is changed and transferred into the authorized economy by way of financial investments such as specific deposits, stocks, or property like direct investment in real estates and corporations that are primarily finalized in nations promising high interest rates and little internal procedures.
The major problem linked to money laundry is the detection and the exposure of the Anti-Money Laundering Act. In addition, other problems related to money laundering or the financing of terrorist activities around the world, and the threat it creates to the economy (Abuza, 2003). There are rules by the international community to restrain these activities which are very severe to the extend some countries are sanctioned and they cannot do business with other foreign countries. These countries suffer economically because the whole world is against their business inform of import, export, tourism, and foreign exchange. Numerous activities are being facilitated all around the globe, leading to the deaths of innocent victims, exploitation of the poor, children exposure to prostitution and drugs and individuals being blackmailed to execute terrorism activities (Anderson, 2012). Worse of all is that the terrorists target everyone irrespective of the age, gender, religion or race. Therefore, there is the need to address the issue of terrorism funding from people investing to the people pushing these businesses on the streets. The legal issue requires immediate focus on crimes of murders, human trafficking, prostitution, and child exploitation being carried out globally (Levi & Reuter, 2006).
Money laundering presents numerous challenges that cannot be handled by a single nation and the world has decided share information in the financial system sector to curb these vices. The primary problem associated with the fight against money laundering is the legal loopholes that may be created by corrupt government officials and overlooking of the rules and regulations put in place (Rivastava, 2013). The central bank of all nations should have anti-money laundering act that is compiled by all financial institution.
The goals of the research are to determine whether the Anti-Money Laundering laws made have loopholes in a nation that may present challenges in curbing money laundering. The research provides more information on the international policies for fighting money laundry and possibly makes suggestions on the measures that can be taken in an incident where a government official has been suspected of money laundry. The research shall offer more input on the challenges and rules put in place to curb money laundry, and learn of the avenues exposing the individuals or organizations involved in money laundering.
The research method used involves the use of comparisons between Saudi Arabia money laundering laws and those of the United Kingdom. The reason we are comparing these two nations is that United Kingdom has strict laws set to money laundering with the help of every citizen taking responsibility in reporting. Their system is very superior because it has been researched and modified over time and the issue of money laundering in Saudi Arabia is recent and it is still yet to get to the level where all the financial institutions and businesses at large comply with the set rule (Levi & Gilmore, 2002). Additionally, I have incorporated the use of several case studies, which are examples of money laundering activities. To begin with, I shall provide several instances of money laundering activities. The research shall illustrate the measures that Saudi Arabia has taken to curb money laundry, following a comparison of laws in Saudi Arabia with the United Kingdom and the international law.
In the international frontier, there are Acts that have been passed to detect, investigating and prosecuting the perpetrators (Abuza, 2003). This organization goes to the extent of making lists of individuals and organizations involved and share it with the international community. Information sharing makes it harder for the individuals to transact which on the other hand discourage criminal activities. Some of these organizations are-
- The Office of Foreign Assets Control (OFAC)
- The Financial Action Task Force(FATF)
- Sanction lists made by different countries
These organizations monitor transactions all over the globe and protect their economies from money laundering activities. Money movements from one country to another are scrutinized before they are accepted.
The first example of a case study involves a motorcycle rider courier services delivery man who receives cash for every delivery made of unknown goods. The goods delivered are of questionable nature because he enters in a shop and he receives payments. The income-generating venture has not been registered with the revenue authority for the past four years of operation (Ferraro, 2008). This means that the courier services have been evading tax payments. The challenge brought out by the case scenario is how the courier services can be easily detected and reported as a money launderer (Parpworth, 2012). To solve the problem, anyone who suspects that any individual is running a private business and is avoiding taxes should report the matter to the revenue authority (Levi & Gilmore, 2002). Any effort to individually seek evidence of tax evasion may amount to tipping off the offender. In this case, it is for authorities to investigate secretly on the source of money that is being collected and ask for business permits to transact. It is evident that the revenue authority is failing on tax collection if people can give someone money without any documentation to support the payment.
In the United Kingdom, the gambling business work on the instructions that have developed from previous investigations into Anti-Money Laundering and social responsibility inadequacies in Casinos and other licensed gambling activities on the internet. In the Kingdom of Saudi Arabia, gambling and betting are illegal and no laws governing this business. The government which strictly follows the Islamic law, they do not support casinos, bingo halls, poker rooms and online gambling (Husein & Burns 2015). The UK rules are meant to critically evaluate the effectiveness and efficiency of their rules and processes used to prevent gambling to be a venue to support crime or jeopardy more formal supervisory action. The most important messages for the gambling business is relate to monitoring whether appropriate and peril sensitive rules and processes relating to the avoidable money laundering and ensuring that people are not abused or affected by gambling are being followed effectively.
It is also used to certify that people responsible to achieve the peril of money laundering by compelling a range of procedures, including a considering where the cash a client is gambling with comes from and making sure that money laundering perils concerning to established customers are monitored efficiently on an ongoing basis. The continuous monitoring ensuring that, where there is a suspicion that a customer may be committing money laundering offences, the operators take an appropriate range of actions, including both making an appropriate disclosure to law enforcement agencies and reviewing whether to continue with the business relationship with the customer in question. Giving the public awareness through campaigns against money laundering, the public have become more conversant and they have a clear understanding on how to manage the risk of “tipping off” customers, effective record keeping and misdirected confidence in the effective implementation of policies and procedures.
In another case study is one involving Supermodel Ayyan Ali, who was accused of being part of a money laundering conspiracy in a case of registration and funding of Non-Governmental Organizations (NGO’s). The NGO’s are used as buffers to move money from one organization to another. Currently, it is important to clarify the source of financing for both local and foreign NGO’s to avoid funding of terrorism activities through NGO’s and promote safety. This kind of business is complicated because the declared business activity is noble and charitable yet the real business is dangerous to community and the economy where it thrives.
The Saudi Arabian Kingdom has laws specifically aimed to eradicate money laundry through charitable organizations. These laws include not permitting cash withdrawals are from the charitable organization’s bank accounts that are not duly authorized and supported (Boister, 2012). This rule also tests all cheques and drafts issued are for legitimate beneficiaries and deposits in a bank account come from legal businesses or individuals as donations. Also, No overseas fund transfers are allowed from these bank accounts, and the selection of fit and good Board Members of the charitable institution is required (Saudi Arabian Monetary Agency, 2004). The kingdom has also introduced accountability measures to the NGO’s activities when making payments they should produce invoices as a supporting document.
The United Kingdom established the bribery act in the year 2010 to guide the Non-Governmental organizations from fraudulent and unscrupulous activities. The Anti-Bribery Principles and Guidance for NGOs in the United Kingdom is a self-explanatory document that ensures that the NGOs are not used to launder money for selfish interests (Levi & Reuter, 2006). A person who has an impression that a non-governmental organization is functioning under false pretense, has a responsibility to immediately report these developments to local authority involved. Agreement with money laundering commitments is one of the ultimate challenges for lawyers in the United Kingdom nowadays. In the recent past, Law Society has dedication in assisting lawyers to encounter those commitments and deliver a stout defense against money launderers trying to misuse our law practice services. The UK reviewed the Anti-Money Laundering laws in their administrative system as a response to the alleged variations across the various institutions. The action strategy will look to discourse areas in a stronger public-private sector trust; reinforcement the law implementation response; growing the UK FIU’s international influence and enlightening the efficiency of the regulatory regime.
Reporting on money laundering in the United Kingdom and the kingdom of Saudi Arabia remains a challenge, especially where professionals and the whole community are involved. The laws do not adequately mitigate against potential laundering activities for the NGOs. However, the Saudi Arabian Kingdom instituted laws that govern against the funding of terrorism activities through NGOs. The United Kingdom may borrow from the Saudi Kingdom to also safeguard the people of England or other foreigners from laundering threats through their NGOs. However, jurisdiction regarding compliance with the law requirements may be a challenging issue to bypass if laws are not locally established. Supreme courts have shared the financial privacy rights on a number of occasions where by there were attempts to restore financial information rights to the person. Over two centuries of constitution attrition, it seems that a person’s right to financial confidentiality is inadequate. The issues involved in cyberspace is whether financial discretion rights are so restricted that the local authorities could observer a digital money user’s financial dealings in a detailed manner. In the effect, execution of these measures is completely anonymous digital money is worthless.
From the research results, money laundering or the monetary resources of structured crime are exceptionally difficult to confront. It is divergent nearly contrarily in every nation and the measures taken beside it are dissimilar and vary from state to state, and it is not so all vibrant what actual money laundering or the financial resources of structured crime are. To combat against money laundering or financial earnings of structured crime is exceptionally difficult, as we have no proficient and powerful international establishments, which can efficiently contest against structured crime and money laundering. Hence, this paper should be used as an attempt to shed light on money laundering or the financial earnings of structured crime, highlighting ways used to launder money and to offer better practical approaches to this issue.
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 Husein, A., & Burns, J. G. (2015). Choice of Forum in Contracts with Saudi Arabian Counterparties: An Analysis of the DIFC Common Law Courts from a Saudi Arabian Perspective. The International Lawyer, 48(3).
Saudi Arabian Monetary Agency. (2004). A Report on Initiatives And Actions Taken by Saudi Arabia To Combat Terrorist Financing And Money Laundering. Retrieved February 4, 2016, from Saudi Arabian Monetary Agency: