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Naming OriginThe origin of naming “Money Laundering” stems from the widely known Mafia Gangs (MG), in the 1930s. In 1931, Alkaboun, ganger of the gangs was arrested for only one offence could be proved upon him which is evade payment of taxes and trafficking in drugs. After this event, MG recognized the importance of legalizing illegal funds. Therefore, MG started to establish or buy legal business by which they could pass huge proceeds coming their criminal actions. Main activities were establishing or buying mechanical laundries, to legalize suspicious funds. Since then, criminal activities which aim at whitewashing illegal funds sources and making them apparently legal, were called Money Laundering. Stages of Money LaunderingOperations of money laundering have three phases: (1) Coverage: means mixing legal and illegal funds, either banking deposits, government bills, foreign currencies, gold or jewels, or any other assets enjoying legal protection, (2) Whitewash: means separating illegal funds from their source through a set of financial operations, in other words, the nature of those funds are whitewashed by internal and external operations. Thus it will be difficult to recognize the source of illegal funds, (3) Incorporation: where laundered money is pumped again in economy as sound and normal money. So they appear legal during economic circulation, they enjoy legal appearance. Sources of Suspicious FundsSuspicious funds are those which are resulting from activities of illegal sources. Most important are, for example: · Trafficking in drugs.· Illicit arms trafficking.· All kinds of smuggling.· Public funds embezzlement.· Seizing public properties.· Counterfeiting currency.· Counterfeiting public documents and records.· All aspects of terrorism.· Kidnapping.· Theft.· Breach of trust.· Racketeering private money.· Swindle and trickery.· Bribe.· Insider trading and market manipulation.· Illicit gain. Economic Impacts of Money LaunderingMoney laundering affects the performance of whole macro-economic components, especially if it is companied by concealed economy with illegal economic activities. This can be summarized by: · Money launderers do not seek to gain high proceeds from funds to be laundered. They try to make simple investments to legalize their funds and declare their sources.· Money launderers carry out their operations in developing countries in which monitoring is weak, and laws and legislations can be easily violated. Therefore, they transfer funds to those countries where interest rates are low and foreign exchange is stable, leading to misguiding economic indicators. Given the Globalization, transfer of these funds from one economy to another may lead to instability in economy on the international level.· Money laundering threats international, regional and country transparency in stock markets. It, also, threats good reputation in stock markets and corrupts their staff. All these create a climate for bad reputation and weak credibility in markets.· Money laundering may cause re-distribution of income, leading to emerging of new investors with high abilities in saving and investment areas, as well as courage to enter investment areas which are full of risks which may negatively affect senior businessmen and investors, from one hand, and economic development from another hand.· Money laundering suspend public finance policies through tax evasion which negatively affects public finance balance and, thus, existing resources of government to meet its commitments, and its social-economic performance.· Transactions resulting from money laundering may harm legal transactions which through infection e.g. some transactions which include foreign participants, although they are legal, become less attractive due to their relation to money laundering. Generally, confidence and proceeds efficiency decrease due to the widespread of stock market experts’ crimes.· Generally, it can be said that financial movement resulting from money laundering leads, in terms of economy, to the following impacts:- Demand on money does not respond to macro-economic indicators.- Unaccounted changes in foreign exchange and interest rates.- Nonequivalent competence in investment, where bad currency dismisses good currency.- Income re-distribution.- Depreciation of national currency.- Attribution to inflation pressure in economy.- Confusing the country in developing effective plans and programs for economic and social development.- Broadening the scope of corruption and encouraging terrorism. International Principles, Standards and Efforts Aim at Fighting Money Laundering: No doubt that money laundering operations threats financial and banking system stability in countries concerned with this phenomenon as well as global financial and banking system in general. Financial and banking institutions adequacy depends, largely, on reputation, credibility and confidence acquired through years of activities. Involvement of these institutions in money laundering activities makes them subject to risks of mistrusting and bad reputation. Clients and investors will, therefore, give up their deal with such institutions which may be subject to risks befalling on financial and banking system – as well as national economy. Given the danger of money laundering activities and their negative impacts on financial and banking system as well as national economy, many countries recognized these risks early and took many procedures aiming at fighting money laundering. Those procedures formed international principles and standards underpinning efforts of fighting money laundering. They were developed by many international associations and organizations pioneered by FATF. Other countries have become committed to these principles and standards. Countries cooperation is assessed by their compliance with international principles and standards of anti money laundering. Therefore, countries which are identified as non-compliant become subject to penal procedures. These principles and standards are represented by key requirements for fighting money laundering efforts which must be available with each country:- - Developing a comprehensive legal framework to organize anti-money laundering efforts, criminalize money laundering activities and identify relevant penalties, and organize international cooperation and information exchange.- Developing the institutional framework establishing anti-money laundering committee and information collection unit (financial intelligence).- Making instructions to all financial and banking institutions clarifying methods for addressing issues of money laundering and making an internal system for monitoring suspicious funds. Republic of Yemen sought to keep step with international efforts related to anti-money laundering in consistence with international principles and standards. Governments of most Arab countries started to make legislations and laws on anti-money laundering and instructed financial and banking institutions to make necessary arrangements to protect themselves from potential risks of illicit activities. National Efforts for Fighting Terrorism and Money LaunderingThere is an interrelationship between securitystability and development, i.e. no development without security and stability. Security is the key pillar for stability, and stability is one of attractive factors for external investment and financial flows. Terrorism is one of money laundering sources. They are interrelatives and represent the two faces of a coin. GOY pays all its efforts to fight terrorism and money laundering. In this regard, GOY took various arrangements and procedures including: 1. Cabinet Resolution no. 28 for 2000, which approved joining the International Agreement for Fighting Terrorism Financing. 2. Cabinet Resolution no. 62 for 2000, regarding the International Agreement for Fighting Terrorism Financing. The Resolution prescribed formation of a committee comprising Ministry of Legal Affairs, Ministry of Justice, Ministry of Foreign Affairs, Ministry of Interiority and Central Office of Political Security. Later on, Central Bank of Yemen and Chairman of the committee were added. Anti Money Laundering Committee (AMLC) assumed considering international agreements for combating financing terrorism, providing its views and comments on them and preparing responses to inquiries from international organizations regarding fighting terrorism and money laundering. 3. Cabinet Resolution no. 96 for 2000, the approval of Anti Money Laundering Draft Law. 4. On the basis of Cabinet consent to effectuate International Security Council Resolution no. 1373 for freezing of funds which belong to persons and organizations who finance terrorism, CBY issued a leaflet with two lists: one included 16 organizations and the other included 63 persons and organizations. CBY made its instructions, to banks and branches, for freezing of all funds belonging to those mentioned in the lists. After its formulation, AMLC made its secular no. 1 to all banks working in Yemen for taking caution in their daily banking operations, detecting all financial operation they perform with clients and verifying client identities. The circulated note instructed also the information collection unit at CBY to make sure that financial and banking institutes have protective programs against money laundering, and to assist financial institutions in developing systems and rules for internal audit and control to prevent money laundering occurrence. National efforts were toped by law no. 35 for 2003 regarding fighting money laundering. The law included various rules consistent with international principles and standards represented by the 40 Recommendations of FATF and Bazel Committee principles which center on effective banking control and prevent utilizing banks for purposes related to money laundering. International principles and standards were taken into consideration during the preparation of draft law. Parliament discussed the draft law in presence of government representatives. In April 2003, Parliament approved the law. Yemeni Law sought harmony between international principles and standards and national laws obligations. Therefore, the law included balanced rules; it responded to international requirements at reasonable extent and took into consideration Yemeni particularity.
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