progressive globalisation process and communication revolutions, the scope for
international crimes have amplified and the financial exposure of crime have
become more complicated due to rapid changes in technology. It’s propagation
has enabled international banks in different part of the world to facilitate
the transmission and camouflage the real source of funds.
market has become is directly or indirectly threatened by money laundering.
Banks need to spend heavily through huge
investments in hi-tech software to be able to identify money laundering
It becomes difficult in evaluating AML costs as they are dispersed in various
areas like compliance, risk management and operations. These characteristics
provide dubious estimation of the cost level and influence the assessment of
past and future which also impacts the quality of the information.
For enhanced transaction monitoring and
revision of KYC documentation for existing customers, there is huge investment
in AML activities. Those institutions which fail to report any suspicious
transactions or comply with the regulations are subject to fines and sanctions
imposed by competent authorities, which in worst case may lead to revocation
of banking license.
is possible as negative publicity relating a bank’s business practices and
associations will lead to a loss of confidence in the integrity of the
institution. Hence, customers, depositors and investors might discontinue their
business activities with alleged banks of money laundering and terrorist
financing. Moreover, large laundered money kept as deposit in a bank cannot be considered
as stable source of funding as they are prior to unanticipated withdrawals
through transfers, thus resulting in liquidity shortfall.
is not easy to quantify the cynical effect of money laundering on economic
development as it is quite clear that such activities impair the financial
sector institutions which are fundamental for the economic growth of the
country, minimise productivity in the sector by inciting crime and corruptions
which in turn sluggish economic growth and manipulate the economy’s external
sector international trade and capital flows to the detriment of long-term
It may has
devastating social consequences and poses a threat to the security of any
country as it corrupts market, shifts an unfair economic burden, weakens
universal stability of international financial markets and raises numerous
civil liberty related issues.
Following high integration of capital markets, money laundering may also
unfavourably affect currencies and interest rates as launderers may reintroduce
funds in schemes where they are least likely to be disclosed and reducing risk
of being culpable.