GAC4003 Financial Services Regulations and Ethics in Oman Assignment - Gulf College, Oman
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Question - Explain and discuss:
- Money laundering. The various forms and methods used for money laundering.
- Terrorism financing. The mechanism of terrorism financing.
- Government regulations. Various decrees and CBO policies that combat money laundering in the Sultanate of Oman.
- Legal penalty. Provisions for the legal penalty for money laundering and terrorism financing.
Answer - Money laundering
Alexander, (2016, p.50) argues that money laundering refers to the action of generating large amount of money through criminal activities. The criminal activities may include actions such as funding by terrorist, drug trafficking among other forms of criminal actions. However, those people who engage in the process of money laundering perceive the fund as legitimate, they do everything to make it look good. The action of money laundering is a form of crime.
Money laundering forms
There are several forms of money laundering in the world. Some of the forms of money laundering include the following:-
a. Real estate laundering
Many individuals invest in real estate business to make profits. However, some of the investors use this source to generate illegal money. The wealthy individuals conceal their identity during the process of buying or selling these estates. The individuals get illegal funds in these property then they deposit the money in foreign bank accounts.
b. Smuggling of cash
This is another method of money laundering. Masciandaro, (2017) argues that it involves stuffing suitcases with cash. These bags do not undergo proper checkups during clearance. However, the action is quite risky. The smugglers bring the money into the country without using ordinary banking networks.
c. Gambling and Casinos
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The gambling machine operators use illegal funds to acquire the casino chips, they then hold the machine for certain significant period of time. During these period they do not engage in gambling activities. After some time they pass the ownership to a third party. The casinos are used to hold large amount of funds. After the transfer of the casino from one country to another, the gamblers use the casinos to transfer credit to a nearby sister property. During transfer of these funds, the original holders of these funds conceal their identity.
It is another opportunity to siphon funds from the public. It involves the use of stock option transactions. The stock exchanges give opportunity to money launderers to transact the stolen money in the market. However, it is difficult to identify them here.
e. Bank capture
It is a situation whereby the money launderer operate a financial institutions. Other people can deposit money in these institutions and transfer it as legally acquired money to other financial institutions.
Money laundering process
Chong & Lopez-De-Silanes, (2015, p.80) concluded that money laundering take various steps to make it complete. The steps include placement, layering and integration. The process of placement involves taking the illegally obtained money to a legitimate financial institution. The layering process involves hiding the origin of the funds by making use of bookkeeping tricks and a series of transactions. The final action is the integration. Integration involves withdrawing the money from a legal financial institution.
Anti-money laundering laws
Hopton, (2016) argues that, even though there exist various forms fraudsters use to acquire illegal funds, many countries have put in place various methods to prevent such actions. Anti-money laundering laws are the set of rules and regulations that intend to curb the criminals from obtaining illegal funds and regarding it as legitimate. Some of the money laundering regulations include the following:-
a. The countries have devised a significant anti-money policies. One of the step is appointing an anti-money laundering officer that has skills concerning the money laundering activities. The officer identifies the activity and reports to other government authorities.
b. The second directive is putting on hold the huge chunks of money transferred in various bank accounts to give time to identify the true beneficiaries of such funds.
c. There are certain limits that one can transfer on cash basis.
d. The government have appointed various government officials to identify the source of the funds that people transfer through the banks especially when the amount transferred exceed some limits.
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Combating money laundering and terrorism financing
Madinger, (2016) argued that terrorism financing is the action of giving out funds to terrorist who later attack the country. The money can be used in training or purchasing firearms used by terrorists. However, the process these terrorism organization use to obtain fund is through a money laundering activity. Consequently, many governments have come up with the laws to combat the money laundering activities. For example the United States have the Patriot Act which gives the government power to monitor all the financial institutions. It is called anti-money laundering powers.
Apart from the above combating mechanism, there are other approaches for anti-money laundering and terrorism financing. One of them include strengthening the transparency rules to ensure that there is no large scale hiding of funds. Secondly, the government need to strengthen the checks on risky third party countries. The fraudsters transfer money to other countries in which other fellow fraudsters withdraw the money as illegal. However, when there is cooperation between the source and the destination country, it is easy to recover the funds. The last step is to ensure that there is cooperation between the national financial intelligence departments.
Apart from anti-money laundering powers, the government have also partnered with other organizations such as the United Nations to come up with terrorist finance tracking program. The program assist in identifying the fraudsters as fast as possible.
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CBO articles with legal proceedings
i. Anybody who engage in money laundering activity shall face the following consequences:
CBO article 88
a. The person may be jailed for a period between six months but not more than 3 years, together with a penalty of at least RO 10,000 but not more than the amount of the value of the money idea of the offence when the individual should have known that money is the main factor in that offence.
b. A jail period that is not less than five years but not more than 10 years together with a penalty of at least RO 50,000 but not more than the equivalent of value of the money idea of the crime at the time the individual become aware or suspects that money is the main factor of the offence.
CBO article 35
ii. Financial institution, non-financial companies, professional and non-profit organization together with entities must avoid opening or maintaining similar bank accounts or accounts under questionable people, numbers or secret information or even attending to those accounts.
Money laundering is an international challenge. It can take many forms. However, following up these cases may be a challenge because the politicians also involve in them, the government need to come up with strong laws to curb the action. In the above assignment it has elaborated the meaning of the money laundering, the process of money laundering together with the CBO articles which provides various ways consequences of engaging in money laundering. However, the implementation of the above articles should be effective to ensure that the government bring to an end money laundering activity.
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