Money laundering is addressed in Article 3.1 of the United Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances of 1988 where it is described as “the conversion or transfer of property, knowing that such property is derived from any offence or offences… for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in such an offence or offences to evade the legal consequences of his actions”.
The detection of money laundering comprises both objective and subjective components. The objective component is simple to prove as it consists of money transfers and other financial transactions. The subjective aspect refers to suspecting whether the launderer knows that money comes from the proceeds of crime.
The process of laundering money consists of the following stages:
In the placement stage, the money launderer introduces dirty money into the financial system. If proceeds from the trafficking of illicit drugs are physical cash, this can be achieved by depositing the cash into a bank account. This stage is considered the most vulnerable for the money launderer as it can be difficult to account for coming into contact with illegal money.
In the layering stage, the money launderer moves the dirty money between different accounts. This can be achieved though money transfers, converting the funds from one type of asset to another using complex transaction schemes. The purpose is to erase the link between the funds and the sale of illicit drugs, thus making it more difficult to expose money laundering.
In the integration stage, dirty money appears to have a legitimate source and origin as the link to the sale of illicit drugs has largely been erased. The money launderer can now use the funds without the risk of being exposed as a criminal.
The three stages described above may not always all be present, or in some instances some stages may be combined into one scheme.
To disrupt and counter the money laundering cycle, Governments need carry out the following:
Legislation
Prevention and detection of suspicious activity
Investigation
Seizure and confiscation of crime proceeds
International cooperation
Early requirements for criminalizing money laundering and introducing anti-money laundering measures appeared in UN conventions on drugs, transnational organized crime and corruption. These requirements were subsequently set out in more detail by the Financial Action Task Force (FATF). UN Security Council Resolutions 1617 (2005) and 2462 (2019) called on all Member States to fully implement FATF Recommendations.
The anti-money laundering framework for Member States is rather complex and includes:
UNODC is mandated by the UN General Assembly to assist Member States to build national anti-money laundering systems.
UNODC, through its Global Programme against Money Laundering, offers Member States policy advice, review of draft legislation, training and assistance on international cooperation. Further details are available here.
This short video provides an overview of money laundering and how Governments can combat and prevent this crime.
International Standards on anti-money laundering and money laundering typologies contains detailed recommendations on how to build a national anti-money laundering system and a list of mandatory requirements established by the Financial Action Task Force (FATF).
