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Theory |
Financial crime iscrime committed againstproperty, involving the unlawfulconversion of the ownership ofproperty (belonging to one person) to one's own personal use and benefit. Financial crimes may involvefraud (cheque fraud,credit card fraud,mortgage fraud,medical fraud, corporate fraud,securities fraud (includinginsider trading),bank fraud,insurance fraud,market manipulation, payment (point of sale) fraud,health care fraud);theft;scams or confidence tricks;tax evasion;bribery;sedition;embezzlement;identity theft;money laundering; andforgery andcounterfeiting, including the production ofcounterfeit money andconsumer goods.
Financial crimes may involve additional criminal acts, such ascomputer crime andelder abuse and evenviolent crimes includingrobbery,armed robbery ormurder. Financial crimes may be carried out by individuals,corporations, or byorganized crime groups. Victims may include individuals, corporations, governments, and entire economies.
Law enforcement often classifies larger forms of financial collusion ascriminal syndicates.
The U.S. introduced theForeign Corrupt Practices Act in 1977 to address bribery of foreign officials. This legislation dominated international anti-corruption enforcement until around 2010 when other countries began introducing broader and more robust legislation, notably the United KingdomBribery Act 2010.[1][2] The International Organization for Standardization introduced an international anti-bribery management system standard in 2016.[3] In recent years, cooperation in enforcement action between countries has increased.[4]
For most countries, money laundering andterrorist financing raise significant issues with regard to prevention, detection and prosecution. Sophisticated techniques used to launder money and finance terrorism add to the complexity of these issues. Such sophisticated techniques may involve different types of financial institutions; multiple financial transactions; the use of intermediaries, such as financial advisers, accountants, shell corporations and other service providers; transfers to, through, and from different countries; and the use of different financial instruments and other kinds of value-storing assets. Money laundering is, however, a fundamentally simple concept. It is the process by which proceeds from a criminal activity are disguised to conceal their true origin. Basically, money laundering involves the proceeds of criminally derived property rather than the property itself.Money laundering can be defined in a number of ways, most countries subscribe to the definition adopted by theUnited Nations Convention Against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988) (Vienna Convention) and theUnited Nations Convention Against Transnational Organized Crime (2000) (Palermo Convention):
i. The conversion or transfer of property, knowing that such property is derived from any (drug trafficking) offense or offenses or from an act of participation in such offense or offenses, for the purpose of concealing or disguising the illicit origin of the property or of assisting any person who is involved in the commission of such an offense or offenses to evade the legal consequences of his actions;
ii. The concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of property, knowing that such property is derived from an offense or offenses or from an act of participation in such an offense or offenses, and;
iii. The acquisition, possession or use of property, knowing at the time of receipt that such property was derived from an offense or offenses or from an act of Participation in such offense or offenses.
TheFinancial Action Task Force on Money Laundering (FATF), which is recognized as the international standard setter for Anti-money Laundering (AML) efforts, defines the term "money laundering" briefly as "the processing of criminal proceeds to disguise their illegal origin" in order to "legitimize" the ill-gotten gains of crime.
In 2005, money laundering within the financial industry in the UK was believed to amount to £25bn a year.[5] In 2009, aUnited Nations Office on Drugs and Crime (UNODC) study[6] estimated that criminal proceeds amounted to 3.6% ofglobal GDP, with 2.7% (or US$1.6 trillion) being laundered.[7][8]
The Irish Department of Housing urged ministerDarragh O’Brien to “ask in the strongest terms for the UAE to account for its relationship toDaniel Kinahan” a drug kingpin charged along with his brother, Christopher Kinahan in 2018 by the High Court of controlling and managing the daily drug operations inIreland. The Kinahan brothers are sons of the Kinahan Cartel founder, Christy Kinahan Senior, who smuggled drugs and firearms into theUK,Ireland, and mainlandEurope for a long. For several years, the Kinahan leadership had been residing in Dubai, where Daniel denied his involvement in organized crime by defending himself as a ‘high-profile businessman in the professional boxing industry’. According to Panorama investigation, Daniel has operated in the boxing industry through MTK and simultaneously operated Europe’s biggest money laundering, drug trafficking, and gangland executions networks from Dubai. A spokesperson for minister O’Brien said, “respect for human rights is a cornerstone of Ireland’s foreign policy,” when asked if the minister would raise the concerns regarding Daniel’s presence and operations in Dubai on his visit in March 2022 forSt Patrick’s Day.[9][10]
In 2005, fraud within the financial industry was estimated to cost the UK £14 billion a year.[5]
With the increases in digital transaction volumes fraud and cybersecurity have become increasingly intertwined. Fraud and financial crime patterns have become more digital and faster changing, leveraging the underlying characteristics of the underlying digital payments infrastructures.[1] This caused traditional rule based systems to be ineffective and led the way to machine learning and AI-based fraud detection techniques.
Powered by the emerging generative AI capabilities and technical investments, criminal organizations have ramped up their capabilities in financial crimes and fraud space in recent years. Interpol director recently summarized the challenges as: "We are facing an epidemic in the growth of financial fraud, leading to individuals, often vulnerable people, and companies being defrauded on a massive and global scale."[2]
There are law enforcement agencies whose main enforcement activities focus on criminal violations of their country's tax code and related financial crimes, such as money laundering, currency violations, tax-related identity theft fraud, and terrorist financing. Some of these law enforcement agencies are:
