During our CEO, Dr Stephen Morse’s presentation at the Law Institute of Victoria online Panel Discussion on Anti-Money Laundering (AML), he discussed about how in today’s globalised world, integrity in financial markets requires a robust a set of procedures and efforts to provide visibility and accountability. In this blog, we will delve into the link between money laundering and modern slavery, demystifying and highlighting the intersection between anti-money laundering (AML) practices, modern slavery risks and nefarious business innovation. This understanding is crucial for developing effective anti-corruption controls with a view to mitigating the proliferation of new forms of exploitation.
Profits Concealment, Investment of Laundered Money and Forced Criminality
Money laundering often serves as a tool to hide the profits generated from illegal activities such as forced labor, child labor, debt bondage, and human trafficking. These activities generate substantial illicit profits that are then laundered and layered to appear legitimate financial ventures. Addressing this issue is vital for disrupting the financial incentives that drive human rights abuses in supply chains.
Laundered money frequently finds its way into various income-generating ventures of a nefarious nature. These include offshore accounts, investment properties, and luxury goods. By disguising the origins of these funds, criminals can invest in ventures that continue to generate income, perpetuating the cycle of exploitation and corruption. Another alarming aspect of money laundering is its role in supporting criminal enterprises that operate through human trafficking. These enterprises, which include sex camps and scamming compounds, are predominantly found in Southeast Asia. The laundered funds enable these operations to flourish, highlighting the need for vigilant oversight and intervention in these regions.
Capital Flows in Money Laundering
Understanding the capital flows involved in money laundering can aid in identifying and disrupting these illegal activities. The process typically involves three key stages: This initial stage involves introducing illicit funds into the financial system. Methods such as cash smuggling, bank deposits, and the use of front businesses are common tactics. These methods obscure the origin of the funds, making them appear legitimate.
Layering involves complex financial maneuvers designed to further disguise the illicit nature of the funds. Techniques such as wire transfers, shell companies, and high-value asset purchases are employed to create a convoluted paper trail. This stage is critical for erasing any connection to the original criminal activities.
In the final stage, laundered funds are fully integrated into the legitimate economy. This is achieved through investments in businesses, loans, and mortgages. By this point, the money appears clean, allowing criminals to enjoy the fruits of their illegal activities without arousing suspicion.
By knowing your customer, businesses can contribute to a fairer and more just global economy. And the integrity in supply chain management requires a comprehensive approach to anti-corruption. By addressing the intersection of AML practices and modern slavery risks, companies can take significant steps toward eliminating human rights abuses from their entire value-chain including financial investments.
