Introduction
In the recent past, there has been an increase in the cases of terrorism financing and money laundry across the world. The international community is experiencing rapid social, political, economic and technological advancements that have enhanced communication and the transportation of money that is used in the financing of terrorist activities. Besides, this development has exposed the financial systems to abuse by organized criminals. The international community has established strategies to curb money laundry and terrorism financing so as to enhance the security of the world. In the past decade, proceeds from money laundry have been used to finance various terrorist activities across the globe (Abdulaziz, 2011).
According to Hamin et al. (2016), money laundry is the transfer or conversion of property or money with the knowledge that the money has been acquired through illegal means. The rationale for this activity is to disguise the illegal origin of the money. Also, money laundry entails aiding people dealing with illicit money to dodge legal consequences their actions.
Terrorist financing and money laundry are closely related. Abdulaziz (2011) reiterates that the techniques used to conceal the applications and sources of terrorist financing are similar to those employed in the money laundry. Whether the origin of terrorist financing is illicit or not, the concealing of the source of the money by the terrorists so as to block detection and to achieve the continuity in financing is a form of money laundry in itself.
The number of crimes and cases of money laundry has been on the increase despite the various interventions by the international community to stop the acts. For instance, terrorism financing and money laundry has been a big challenge t the global peace.Abdulaziz (2011) highlights that the international community developed various measures to combat the vice through the sharing of the intelligence. The adoption of financial regulation set by international advisories has also been of great significance in stopping terrorism financing through money laundry.
A study by Abdulaziz (2011) indicates that money laundering entails passing dirty funds through three critical stages so as to make the money appears clean at the end of the last process. Placement which is the first stage entails the physical penetration of the illicit currency into the financial systems. The illegal money is then deposited into an existing monetary establishment. Layering which is the second stage involves carrying out of several financial transactions so as to disguise the money from their parent source.Hamin et al. (2016) further, opines that integration which is the last stage in the money laundry involves the incorporation of the money from legitimate sources with those obtained through illegitimate means as the funds gain access into the country’s economy. Some of the notable ways of concealing the money and re-entry into the economy include investment in real estate and the purchase of shell organizations.
Terrorist groups all over the world get their finances through illegal activities although the ultimate goal of some of these militia groups may not gain economically from their terrorist activities. According to Abdulaziz (2011), the primary goal of most of the militia groups in the world is to course the government or a population to conduct a particular activity or to refrain from carrying out certain actions in the society. Terrorist groups need financial aid to help them achieve their objective of intimidation the governments and the innocent civilians. Money laundry has been used by the militia groups. Various informal value transfer financial systems like the internet, Hawala and cash couriers have been used to transfer money and the acquisition of properties.
A research by Mugarura (2013) indicates that the initial stage of terrorist financing entails gathering of large sums of money from various illegitimate sources around the world. The second stage of financing entails the utilization of the acquired money to aid and support the execution of innocent civilians ( Abdulaziz,2011).The terrorist gangs use sophisticated methods to transfer money between jurisdictions and various terrorist groups. Most of the terrorist gangs are aided by a group of highly skilled lawyers, accountants, and bankers. This group of professionals helps the terrorist to exploit diverse products in the financial system of a country since they are aware of the legal gaps that can help to conceal the origin of the illicit money. Despite the fact that the money required in the management of an entire terrorist network is enormous, the finances involved in the execution of a single terrorist attack may be quite small ( Hamin et al.,2016).
Abdulaziz (2011) opines there is a strong correlation between money laundry and terrorism financing. This is because most of the terrorist activities are sustained by money obtained from criminal sources. The criminal sources of money provide a consistent supply of funds generated from activities like kidnapping, human trafficking, gambling, smuggling or even drugs. Even though the terrorist usually succeeds in their quest to raise this illegal money, laundering and the transfer of such funds rely primarily on the techniques followed by legitimate sources of money. Mainly, these strategies are often used to cover up the origin of the finances and effectively transfer the money to the preferred states.
A study by Mugarura (2013) indicated that some of the legitimate techniques which the laundered money gets into an economy include contributions into charities, publications, and fundraisings. The terrorist gangs always strive to disguise the source of their funds whether legal or illegal. The main essence of this technique is to enhance the continuous supply of the funds and to make it difficult for the authorities to prosecute acts of terrorism since most of them go undetected.
Most of the terrorist groups have taken advantage of the weak legislations in failed states to aid the transfer of money that finances terrorist activities. This is because the terrorist groups need a reliable financial infrastructure to aid the activities and to hide from the authorities. Money laundry is critical in furthering the terrorist goals. Nonetheless, Abdulaziz (2011) asserts that major difference between terrorism financing and money laundry is that terrorism financing entails the use of both legitimate and illegitimate funds to finance their activities while money laundry primarily deals with funds acquired illegally.
Terrorist financing and money laundry present have various implications for a nation and the citizens. Economically, money laundry leads to economic distortion, socio-economic consequences and the integrity of a country’s financial systems. Launders always distort the economy since their main goal is not to make legitimate profits, rather, concealing and protecting the source of their illicit money. Most of their money is being invested in ineffective sectors of the economy thus making it hard for a country to flourish economically. Also, money laundry tarnishes the reputation of a country’s financial system thus making investors shy away from investing in such an economy. Besides, many people have who works in the financial institutions have lost their jobs due to their involvement in money laundry. The loss of jobs can make an individual to turn to criminal activities and terrorism so as to make the ends meet.
Money laundry and terrorism financing deprive a country of taxes thus leading to a reduction of the revenue. This is because most of the financial transactions by the terror groups are concealed so as to avoid detection by the authorities. The entry of illegal money into an economy seems to glorify criminal acts .Besides, illicit money has an effect on the stability of the markets thereby leading to an increase in the price of commodities (Mugarura, 2013).
Money laundry has been blamed for amplifying corruption. For instance, weak civil servants and politicians in third world countries have for a long time encouraged the money laundry activities in return for bribes and kickbacks from laundered money so as to achieve their political ends.Thes illicit money has been used by some politicians to cause instability in third world countries.
Terrorism financing has a profound effect on humanity and the economy. For instance, the 9/11 terrorist attack in the US caused the loss of over 3000 civilians. Also; the government lost almost 80 billion US dollars during the attack. Thousands of Americans got injuries that alienated them from active participation in the building of the US economy. In addition, the attack caused a widespread physical, psychological and emotional suffering among the victims (Mugarura, 2013).
Conclusion
It is imperative for the global community to collaborate through sharing of information and the establishment of strong legislation that are meant to curb money laundry and financing of terrorism. This is because money laundry plays a significant role in aiding concealing the sources of illegitimate money. Terrorism is an international issue that has caused a lot of lives and political instability in many countries around the world. There is a need to develop workable strategies that will ensure that the world is safe to live.
References
Abdulaziz.A. (2011). Money laundry and terrorism financing: Does the Saudi Arabian financial intelligence unit comply with international standards? Melbourne: Victoria University.
Hamin, Z., Omar, N., & Wan Rosli, W. R. (2016). Airing Dirty Laundry: Reforming the Anti-Money Laundering and Anti-Terrorism Financing Regime in Malaysia. Global Jurist, 16(1). doi:10.1515/gj-2014-0030
Mugarura, N. (2013). An appraisal of United Nations and other money laundering and financing of terrorism counter‐measures. J of Money Laundering Control, 16(3), 249-265. doi:10.1108/jmlc-04-2013-0007
