Money Laundering Impact on Mauritius Economy

cash make clean Impact on Mauritius EconomyThe single-valued function of the study concerned the impact of funds la at a lower place and its do on the local economic and method of make clean proficiency in Mauritius. capital make clean is very vast in nature it consists of various steps, technique and approach of undertaking such un policeful activity. The research analyzes the economic effects of capital make clean in the Mauritian Economic. The research work pass on attempt to examine the cash laundering activities and the usefulness of prevention and sleuthing techniques by local companies. The method that is to be utilise is mainly examine available research papers so that we get a supreme of information. The purpose of this study is to bring home the bacon the general public a blanket(a) idea on money laundering with some existed solutions. The research result be in the main interest of pecuniary institution, Government and cosmopolitan Public.2.0 lit Revi ew2.1 What is Money Laundering?Money laundering is the unconscious process by which money is obtained illegally. Various types of frauds corruption, cooking the books, involve money which has been preceded by several criminal acts. Individual or groups make illegal gains by carrying prohibited these criminal acts and often swindle high amounts.Money laundering makes it possible to genuine ill-gotten gains through and through computer crimes, insider trading, and bribery where these set off immense amounts of shekelss. Money laundering takes stray within all types of profit-motivated crime, such as embezzlement, fraud, misappropriation, corruption, robbery, distribution of narcotic drugs, and trafficking in human beings (kokrim, 2008).2.2 Characteristics of Money LaunderingMoney Laundering consists of a series of various minutes apply to change the get-go of pecuniary assets so as these assets kitty be used without compromising the criminals offences. These transactions involve 3 stages (Billy Steel, Money Laundering Stages of the Process)2.2.1 PlacementThe first stage refers to the physical distribution of financial assets. It is the near dangerous one for the perpetuators as the money from illicit activities atomic number 18 introduces into the financial system. Money laundering is a cash intensive business generating abundant amount of cash from unlawful activities (for example street drug dealing, where payment atomic number 18 made in cash). The proceeds are then place into financial institutions, in the retail economy or deposits out of the untaught. The tether aim of the launder is to deliberately remove the cash from the location of skill and to convert it into other assets so as to prevent detection from authorities.2.2.2 LayeringLayering involves creating difficult layers of financial transaction designed to cover audit tails and provide secrecy. The first attempt is to disguise the origin and ownership of the funds by creating complex layers of transaction. The idea of the transaction is to disassociate the illegal funds to the source of the offence. Layering is the second stage, in which the funds are moved so as to veil or remove both whatsoever link from the crime committed to obtain the money.During the layering process, a number of accounts, financial institutions, companies, funds as well as the use of professionals such as brokers, lawyers and consultants as intermediaries could be involved as this is where the money provide be channeled. Assets that are bought through unlawful funds can be resold locally or overseas and as a result, the assets become more difficult to map out and seize.2.2.3 IntegrationThe final stage consists of the integration of the money in the legitimate economic and financial institution. Integration is the stage whereby takes place the creation of a legitimate basis for the asset origin. The launder make the money wait legally earned and cleaned. At this stage it is ve ry difficult to depict by authorities the difference between legal and illegal wealth. The money is viewed as being legal, and the criminal can use it for any purpose. outlaw(a) money is often removed from its country of origin to be cycled through the international payment system so as to blur any audit trait (Joyce, 2005).There are different modes in which the third stage of money laundering is done. For example, a credit wittiness might be handed out by offshore affirms, casino winning? can be cashed out, capital gains on option, and extraction trading might follow, and real estate sale might nothingness to profit. The proceeds of criminal acts could be generated from organized crime such as drug trafficking, people smuggling, people trafficking, proceeds from robberies or money acquired by embezzlement, tax evasion, fraud, abuse of company structures, insider trading, or corruption.Popular Methods of the launders at this give way of the game isSending fake import export invoices and overvaluing the price of the goods. hence in allows the launders to more the funds from one company or country to another with the invoices serving as source of the capital place with financial companies.A simpler technique is to shift the money (via EFT) to a rightful bank from a bank owned by the launderers, as off the shelf banks are easily purchased in many tax conveyns.The establishment of unspecified company in countries where the right to concealment is stop upd. In such discipline the launderer is in a position to grant loans from banks to undertake certain early legal transaction. In addition launders can claim tax easement on loan repayments and interest on loan so as to increase their profits.Most criminal acts are motivated by profit, argues monetary Intelligence Unit (2008). When substantial profits are generated from crime, perpetrators mystify to coordinate a means to ascertain the assets in such a way that they do not attract attention to them selves or the crime committed. Thus, the money laundering process is crucial in effectuate to enjoy the profit without arousing suspicion.2.3 Problem statement2.3.1 Banking Secrecy A major drawback of money launderingBanking secrecy is a professional obligation, meaning that financial institutions shall not come upon a customers financial information and they even have the right to dare any third partys enquiries in order to protect the customers wellbeing. Secrecy laws have served to safeguard individuals from financial failure in countries plagued by unsteadiness, fragile capital and run-away inflation rate. Wealthy someones and political agents are also protected by allowing them to hide their possessions to avoid the risk of persecution (Savona, E.U, 1997).In some countries, for example in Switzerland, the revelation of secret banking information is punishable by law, whether it is intentional or unintentional (Corrado, M.G, 1988).In the world we are presently living, nobo dy can deny the fact that banking secrecy is the most significant weapon for money launderers. Some countries like Hong Kong, Switzerland, Panama are even known as notorious banking secrecy heavens. These jurisdictions really make the crime of money laundering more severe and out of control. For instance in Hong Kong, a in the buff regulation was introduced in 2000 which requires banks to report suspicious transactions. This resulted in 6,100 suspicious transactions being reported in 2000 and 95% of them were from banks (www.hongkong.org/press/ny-021400.htm, 15th Aug 2001)2.4 Combating Money Laundering The Lifting of Banking SecrecyDespite being an important part of individual privacy, banking secrecy has to be lifted in some cases as it is as important to fight against money laundering in order to guarantee a protected and safe society. The lifting of bank secrecy has already been substantiate in the most vital international documents. Each party should make the court or other authority to order that financial or business reports should be made accessible or be seized under the 1988 Vienna UN Convention, the 1990 Strasbourg Convention and the 2000 Palermo US Convention special(prenominal)ally (United Nations Convention Against illicit Traffic in Narcotic Drugs and Psychotropic Substances, Art.5(3), 1990 Council of Europe Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime, Art.4(1), United Nations Convention against Transnational unionized Crime, Art.12(6)).The FATF recommended that financial institutions should concentrate on all unusual or large transactions, which have no evident economic or lawful purpose. much(prenominal) transactions should be examined, written and be made available to supervisors, auditors and law enforcement agencies. If financial institutions doubt that proceeds come from a criminal activity, they are required to account for their suspicions to the expert authorities without delay (The FATF Re commendations on Money Laundering, 1996 Art 14, 15).These measures are innovative, modern and extremely different from the conventional banking system. In early times, the relationship between financial institutions and customers were founded on trust and self-assertion neither the banker asked questions nor the customers made disclosures. The situation has now changed. Along with that, the way of thinking and attitude of bank directors, staff and that of focal point authorities have changed (Galvao G, 1997).3.0 research Methodology3.1 Aims and Objective of the researchThe aim of the research is to identify rise of banking secrecy and their effectiveness in combating money laundering. Cases of money laundering in Mauritius go away be studied and analysed. Key principles from the anti-money laundering act and from regulations impose by bank regulators (e.g. Financial Services Commission and the Bank of Mauritius) get out be outlined. The study will then research on the measur es taken by banks to fight against potential cases of money laundering in order to guarantee a protected and safe banking service. The lifting of bank secrecy has already been embodied in the most vital international documents. The objectives of this research are to3.2 Research MethodA survey with a self-administered questionnaire will be the data collection technique used. The questionnaires will be sent to the precedential managers, executives and branch managers of the identified banks in Mauritius. Visits to the company/meeting with the relevant person will be carried out where necessary to ensure maximum reception and that questionnaire is being filled up by the addressee.Also, secondary data will be taken from company websites, reports and financial statement to supplement research.3.3 statistical Analysis of dataAfter the questionnaire, the response will be comment as data so as to make use of specific statistical technique. Thus SPSS statistical package will be used to a nalyze data for the findings of the research.3.4 Benefits of the ResearchThe research will be expert toCompaniesGovernmentFuture Research Dissertations3.4.1 CompaniesCombating money laundering will have a positive impact on companiesThrough integrated management of financial crime operational efficiencies will improveThe risk of corruption, indistinguishability crime and other criminal crimes will reduced considerably rock-bottom financial risk, reputational risk and legal riskBad debts and fraud losses due to customer comprehensiveness3.4.2 GovernmentMoney laundering has a negative effect on the economy, such as loss of control on the economical policy, economic distortion and instability. Moreover, government loss tax as tax collection becomes more complicated and confusing. Therefore, the research will help to reduce these drawbacks.3.4.3 Further ResearchResearch will swear out other researchers to make further research in the topic.Ghantt Chart tax/activityMarAprMayJunJulAug SepOctChoose topicLiterature searchDeveloping frameworkDesign questionnaireSurveyData introduceAnalysisWriting upSubmitBudget AnalysisExpendituresRsConsultants and contracts1400 move400Supplies and materials400Communications (Telephone, postage, etc.)150Equipment (Purchase)700Other (Equipment rental, etc.)400 join3450