About Money Laundering and Financing of Terrorism

Money laundering and financing of terrorism are global phenomena with negative repercussions on economic, political, security and social aspects of a country. They undermine the stability, transparency and efficiency of a country’s financial system, provoke economic disturbances, jeopardise reform programmes, result in diminished investments and loss of a country’s reputation.

Money laundering is the practice of engaging in financial transactions to conceal the identity, source or destination of illegally gained money. When profit is generated through an illegal activity, the perpetrator seeks ways to control the funds without attracting attention of competent authorities and engages in transactions that are given the semblance of legitimate business. Money laundering usually consists of three phases: placement, layering and integration.
During the placement phase, the funds are deposited into a legitimate financial institution, i.e. the direct link between the funds and the illegal activity instrumental in their obtainment is thus broken.
During the layering phase, the funds are transferred to and from various financial institutions in order to make the initial deposit untraceable.

Finally, during the integration phase, the funds are “legitimised” through a deposit into a legitimate business enterprise.

Financing of terrorism is a specific form of financial crime. It involves seeking, collection or provision of funds for the purpose of using them to finance a terrorist act or organisation.