In order to discuss the proposition, to begin with I am presenting the summaries of three important documents:1 Richard K. Gordon’s article2 presents a study on money laundering and measures taken by the world community to counter it. The author has analysed the overall preventive system and the description of preventive measures recommended and enforced by the individual states.3 His major findings state that: Measures and their methodology place responsibilities on private sector whereas the FATF recommendations in this regard are vague and incomprehensible.4 Functions of identity search, availability of necessary financial information and to find out criminals and terrorist are not workable.
The effective area is only making the information available relating to account holders and related persons. FATF recommendations 5 through 13 plus 21 and 225 are difficult to implement by the FIs. Countries are required to share information, analysis of STRs and referral for investigation, he is of the opinion that there is little evidence to support the view that preventive measures have reduced money laundering.6 Conversion of FATF recommendations into domestic law has been vague and unclear thereby reducing the possibilities of success in implementing FATF recommendations.7 Where clarity exists in the law, implementation has been effective, and in this regards, he draws attention towards record keeping requirements, which according to him have been successfully implemented. According to Gordon, the risk based approach requires resources and expertise to gather and interpret information on risk. He criticizes the reporting mechanism which according to him is subjective and dependent on the workforce of financial institutions, and their attitude towards selection and analysis for reporting is poor. The working of FinCEN is not up to mark and the agency does not reveal information relating to money laundering havens and the names of important PEPs to investigators readily available. The feedback system between institutions and agencies is defective. The criminal law enforcement involves public goods; hence, the self help attitude of the financial institutions brings unintended results defeating the purpose of the money laundering regulations.
Link to the full article: click here