With a watch there’s a watch maker from the drugs you can follow the money trail.
The United States and Colombia continue to enjoy a close counternarcotics partnership. Under Plan Colombia, significant U.S. funding, technical assistance, and material support has been provided to Colombian-led counternarcotics programs aimed at interdicting and eradicating drugs at the source as well as expanding the capacity of Colombian military, police, and judicial institutions. North America is home to 40% of the world’s cocaine-using population, and the United States has the largest consumer market for cocaine. An estimated 90%-95% of the cocaine entering the United States is produced in Colombia, and approximately 90% of all U.S.-bound cocaine is transported across the U.S.-Mexico border by Mexican traffickers.
In 2010, total foreign direct investment (FDI) in Colombia was $6.8 billion, a slight decrease from the $7.2 billion in 2009. The Central Bank estimates that FDI in the first quarter of 2011 will be higher than the first quarter of 2010. On average, the United States has been the largest source of new FDI in Colombia, particularly in mining and hydrocarbon projects. The bulk of total new investment in Colombia is in the manufacturing, mining, and energy sectors. The only activities closed to foreign direct investment are defense, national security, and disposal of hazardous wastes.
In 2004, under pressure from the UK, the Cayman Islands agreed in principle to implement the European Union Savings Directive (EUSD), but only after securing some important benefits for the financial services industry in the Cayman Islands. As the Cayman Islands are not subject to EU laws, the implementation of the EUSD is by way of bilateral agreements between each EU member state and the Cayman Islands. The government of the Cayman Islands agreed on a model agreement, which set out how the EUSD would be implemented with the Cayman Islands.
A report published by the International Monetary Fund (IMF), in March 2005, assessing supervision and regulation in the Cayman Islands’ banking, insurance and securities industries, as well as its money laundering regime, recognised the jurisdiction’s comprehensive regulatory and compliance frameworks. “An extensive program of legislative, rule and guideline development has introduced an increasingly effective system of regulation, both formalizing earlier practices and introducing enhanced procedures,” noted IMF assessors. The report further stated that “the supervisory system benefits from a well-developed banking infrastructure with an internationally experienced and qualified workforce as well as experienced lawyers, accountants and auditors,” adding that, “the overall compliance culture within Cayman is very strong, including the compliance culture related to AML (anti-money laundering) obligations.”
On May 4, 2009, United States President Barack Obama declared his intentions to curb the use of financial centres by multinational corporations. In his speech, he singled out the Cayman Islands as a tax shelter. This perhaps referred to Ugland House, a financial institution in the Cayman Islands.
The next day, the Cayman Island Financial Services Association submitted an open letter to the President detailing The Cayman Islands’ role in international finance and its value to the US financial system.
Money laundering Methods:
Money laundering often occurs in three steps: first, cash is introduced into the financial system by some means (“placement”), the second involves carrying out complex financial transactions in order to camouflage the illegal source (“layering”), and the final step entails acquiring wealth generated from the transactions of the illicit funds (“integration”). Some of these steps may be omitted, depending on the circumstances; for example, non-cash proceeds that are already in the financial system would have no need for placement.
Money laundering takes several different forms although most methods can be categorized into one of a few types. These include “bank methods, smurfing, [also known as structuring], currency exchanges, and double-invoicing.”
- Structuring: Often known as “smurfing,” it is a method of placement by which cash is broken into smaller deposits of money, used to defeat suspicion of money laundering and to avoid anti-money laundering reporting requirements. A sub-component of this is to use smaller amounts of cash to purchase bearer instruments, such as money orders, and then ultimately deposit those, again in small amounts.
- Bulk cash smuggling: Physically smuggling cash to another jurisdiction, where it will be deposited in a financial institution, such as an offshore bank, with greater bank secrecy or less rigorous money laundering enforcement.
- Cash-intensive businesses: A business typically involved in receiving cash will use its accounts to deposit both legitimate and criminally derived cash, claiming all of it as legitimate earnings. Often, the business will have no legitimate activity.
- Trade-based laundering: under or over-valuing invoices in order to disguise the movement of money.
- Shell companies and trusts: Trusts and shell companies disguise the true owner of money. Trusts and corporate vehicles, depending on the jurisdiction, need not disclose its true, beneficial, owner.
- Bank capture: Money launderers or criminals buy a controlling interest in a bank, preferably in a jurisdiction with weak money laundering controls, and then move money through the bank without scrutiny.
- Casinos: An individual will walk in to a casino or a horse race track with cash and buy chips, play for a while and then cash in his chips, for which he will be issued a cheque. The money launderer will then be able to deposit the cheque into his bank account, and claim it as gambling winnings. If the casino is controlled by organized crime and the money launderer works for them, the launderer will lose the illegally obtained money on purpose in the casino and be paid with other funds by the criminal organization.
- Real estate: Real estate may be purchased with illegal proceeds, then sold. The proceeds from the sale appear to outsiders to be legitimate income. Alternatively, the price of the property is manipulated; the seller will agree to a contract that under-represents the value of the property, and will receive criminal proceeds to make up the difference.
- Black salaries: Companies might have unregistered employees without a written contract who are given cash salaries. Black cash might be used to pay them.
Hawala has its origins in classical Islamic law and is mentioned in texts of Islamic jurisprudence as early as the 8th century. Hawala itself later influenced the development of the agency in common law and in civil laws such as the aval in French law and the avallo in Italian law. The words aval and avallo were themselves derived from Hawala. The transfer of debt, which was “not permissible under Roman law but became widely practiced in medieval Europe, especially in commercial transactions”, was due to the large extent of the “trade conducted by the Italian cities with the Muslim world in the Middle Ages.” The agency was also “an institution unknown to Roman law” as no “individual could conclude a binding contract on behalf of another as his agent.” In Roman law, the “contractor himself was considered the party to the contract and it took a second contract between the person who acted on behalf of a principal and the latter in order to transfer the rights and the obligations deriving from the contract to him.” On the other hand, Islamic law and the later common law “had no difficulty in accepting agency as one of its institutions in the field of contracts and of obligations in general.”
Hawala is believed to have arisen in the financing of long-distance trade around the emerging capital trade centers in the early medieval period. In South Asia, it appears to have developed into a fully-fledged money market instrument, which was only gradually replaced by the instruments of the formal banking system in the first half of the 20th century. Today, hawala is probably used mostly for migrant workers’ remittances to their countries of origin.
How Hawala works:
In the most basic variant of the hawala system, money is transferred via a network of hawala brokers, or hawaladars. A customer approaches a hawala broker in one city and gives a sum of money to be transferred to a recipient in another, usually foreign, city. The hawala broker calls another hawala broker in the recipient’s city, gives disposition instructions of the funds (usually minus a small commission), and promises to settle the debt at a later date.
The unique feature of the system is that no promissory instruments are exchanged between the hawala brokers; the transaction takes place entirely on the honor system. As the system does not depend on the legal enforceability of claims, it can operate even in the absence of a legal and juridical environment. Informal records are produced of individual transactions, and a running tally of the amount owed by one broker to another is kept. Settlements of debts between hawala brokers can take a variety of forms, and need not take the form of direct cash transactions.
In addition to commissions, hawala brokers often earn their profits through bypassing official exchange rates. Generally, the funds enter the system in the source country’s currency and leave the system in the recipient country’s currency. As settlements often take place without any foreign exchange transactions, they can be made at other than official exchange rates.
Hawala is attractive to customers because it provides a fast and convenient transfer of funds, usually with a far lower commission than that charged by banks. Its advantages are most pronounced when the receiving country applies distortive exchange rate regulations (as has been the case for many typical receiving countries such as Pakistan or Egypt) or when the banking system in the receiving country is less complex (e.g. due to differences in legal environment in places such as Afghanistan, Yemen, Somalia). Moreover, in some parts of the world it is the only option for legitimate funds transfers, and has even been used by aid organizations in areas where it is the best-functioning institution.
Furthermore, the transfers are usually informal and not effectively regulated by governments, which is a major advantage to customers with tax, currency control, immigration, or other concerns. In some countries however, hawalas are actually regulated by local governments and hawaladars are licensed to perform their money brokering services.
There is only so much to anything once known, you have the tools of understanding who is mining (prospecting) the store. Schools out!
Video uploaded by U Tube user IVIusicVideoCentral