- It destabilizes political economies.
- It takes control of a government’s economic policy.
- Increases the risk of bank failures.
- Harms a country’s reputation.
- Exposes people to drug trafficking, smuggling and other criminal activities.
- It distorts business decisions.
- Being alert to red flags indicating that the client is seeking to involve them in criminal activity.
- Choosing to abide by the law, their ethical obligations and application professional rules; and
- Discerning legitimate client wishes from transactions and structures intended to conceal or promote criminal activity or thwart law enforcement.
In Part II of the first Schedule of the AML/CFT Act 2012, Legal Barristers and Solicitors are listed as a reporting entity with obligation to conduct business within the requirements of AML/CFT Act 2012.
Passing of funds through legal professional client account.
Also money laundry and terrorist financing methods which involve the services of legal professional are used every day by client with legitimate means. However, this presents a major challenge to the legal professionals in Sierra Leone.
The key criteria used to determine the extent of exposure to money laundering and terrorist financing risk are the degree of full implementation of FATF standards and the extent to which compliance with the international standards are regulated and supervised within the sector.
Within the provisions of the AML/CFT Act, 2012, legal professionals are under obligation to comply with essential AML/CFT compliance pillars including; developing AML/CFT compliance policies and programs, know your customer (KYC) and customer due diligence (CDD), appointment of a designated AML compliance Officer, training of staff, record keeping and reporting of currency and Suspicious Transactions.
Criminal activities, such as drug trafficking, smuggling, human trafficking, corruption and others, tend to generate large amounts of profits for the individuals or groups carrying out the criminal act. However, by using funds from such illicit sources, criminals risk drawing the authorities' attention to the underlying criminal activity and exposing themselves to criminal prosecution. In order to benefit freely from the proceeds of their crime, they must therefore conceal the illicit origin of these funds.
Briefly described, "money laundering" is the process by which proceeds from a criminal activity are disguised to conceal their illicit origin. More precisely, according to the Vienna Convention and the Palermo Convention provisions on money laundering, it may encompass three distinct, alternative actus reas: (i) the conversion or transfer, knowing that such property is the proceeds of crime (ii) the concealment or disguise of the true nature, source, location, disposition, movement or ownership of or rights with respect to property, knowing that such property is the proceeds of crime; and (iii) the acquisition, posession or use of property, knowing, at the time of the receipt, that such property is the proceeds of crime.
The international standard for the fight against money laundering and the financing of terrorism has been established by the Financial Action Task Force (FATF), which is a 33-member organization with primary responsibility for developing a world-wide standard for anti-money laundering and combating the financing of terrorism. The FATF was established by the G-7 Summit in Paris in 1989 and works in close cooperation with other key international organizations, including the IMF, the World Bank , the United Nations , and FATF-style regional bodies .
Terrorist financing involves the solicitation, collection or provision of funds with the intention that they may be used to support terrorist acts or organizations. Funds may stem from both legal and illicit sources. More precisely, according to theInternational Convention for the Suppression of the Financing of Terrorism , a person commits the crime of financing of terrorism "if that person by any means, directly or indirectly, unlawfully and willfully, provides or collects funds with the intention that they should be used or in the knowledge that they are to be used, in full or in part, in order to carry out" an offense within the scope of the Convention.
The primary goal of individuals or entities involved in the financing of terrorism is therefore not necessarily to conceal the sources of the money but to conceal both the financing and the nature of the financed activity.
Money laundering is the process of concealing the illicit origin of proceeds of crimes. Terrorist financing is the collection or the provision of funds for terrorist purposes. In the case of money laundering, the funds are always of illicit origin, whereas in the case of terrorist financing, funds can stem from both legal and illicit sources. The primary goal of individuals or entities involved in the financing of terrorism is therefore not necessarily to conceal the sources of the money but to conceal both the funding activity and the nature of the funded activity.
Similar methods are used for both money laundering and the financing of terrorism. In both cases, the actor makes an illegitimate use of the financial sector. The techniques used to launder money and to finance terrorist activities/terrorism are very similar and in many instances identical. An effective anti-money laundering/counter financing of terrorism framework must therefore address both risk issues: it must prevent, detect and punish illegal funds entering the financial system and the funding of terrorist individuals, organizations and/or activities. Also, AML and CFT strategies converge; they aim at attacking the criminal or terrorist organization through its financial activities, and use the financial trail to identify the various components of the criminal or terrorist network. This implies to put in place mechanisms to read all financial transactions, and to detect suspicious financial transfers.
Both corruption and money laundering are of great concern for the IMF and they are now an integral part of its work because of the numerous disruptive consequences that each has on national and regional economies.
Anti-corruption and anti-money laundering work are linked in numerous ways, and especially in recommendations that promote, in general, transparency, integrity and accountability. Recommendation 6 of the FATF 40+9 Recommendations and Paragraph 7 of the Methodology for Assessing Compliance with the FATF 40+9 Recommendations , are particularly relevant to anti-corruption efforts. The essential connections are:
- Money laundering (ML) schemes make it possible to conceal the unlawful origin of assets. Corruption is a source of ML as it generates large amounts of proceeds to be laundered. Corruption may also enable the commission of a ML offense and hinder its detection, since it can obstruct the effective implementation of a country's judicial, law enforcement and legislative frameworks.
- When countries establish corruption as a predicate offense to a money laundering charge, money laundering arising as a corrupt activity can be more effectively addressed. When authorities are empowered to investigate and prosocute corruption-related money laundering they can trace, seize and confiscate property that is the proceeds of corruption and engage in related international cooperation.
- When corruption is a predicate offense for money laundering, AML preventive measures can also be more effectively leveraged to combat corruption.
The Financial Action Task Force (FATF) Secretariat is currently coordinating a project to draft a paper outlining the links between corruption and money laundering that may facilitate the implementation of international AML/CFT standards.