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Proceeds of Crime in Cash Based Economies

Proceeds of Crime in Cash Based Economies. By Humphrey P.B. Moshi University of Dar es Salaam A Presentation at 10 th Pan- American Congress on ML& TF, 29- 30 July 2010, Cartagena de Indias (Columbia). Presentation Outline. Introduction Basic features of a cash-based economy (CBEs)

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Proceeds of Crime in Cash Based Economies

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  1. Proceeds of Crime in Cash Based Economies By Humphrey P.B. Moshi University of Dar es Salaam A Presentation at 10th Pan- AmericanCongress on ML& TF, 29- 30 July 2010, Cartagena de Indias (Columbia)

  2. Presentation Outline • Introduction • Basic features of a cash-based economy (CBEs) • Commonalities between CBEs & IS • Drivers of CBEs • Drivers of informality • Laundering of the proceeds • Tackling vulnerability

  3. Introduction • Money laundering is a worldwide phenomenon. However, its scale and impact differ across countries • Globalization and liberalization have scaled-up vulnerability • Vulnerability is aggravated by transactions in some economies

  4. Basic Features of CBEs • Dominance of cash transactions • Narrow or shallow scope of financial institutions • High levels of informality • High levels of the unbanked

  5. Commonalities CBEs vs IS • Non-transparency of transactions (record keeping and information deficiencies) • Intensity of cash transactions • Interaction with formal sector • High vulnerability for tax invasion • High vulnerability for money laundering

  6. Formal and Informal Sectors –Non Cash Based Economy Formal sector Informal sector

  7. Formal and Informal Sectors in Cash Based Economy Informal sector Formal sector Fusion

  8. Drivers of CBEs • Low levels of financial sector outreach • Low population densities • High levels of poverty, coupled with low savings • Macro-economic instability • Inefficient services of financial institutions • Cumbersome documentation processes • Exorbitant costs of account opening • Adoption of AML systems • Informality factor

  9. Drivers of Informality • Adoption of SAPs • Rural-urban mobility / inequalities • Rising unemployment • Inefficiency of formal institutions • Instability of macro-economic indicators • Inadequate wages and salaries • Tax evasion SSA (41-44%) SLA (40-41%) CLB (39.1%)

  10. Typologies of Laundering of Proceeds • Smuggling and theft of bulk cash • Property acquisition and development • Investment in cash intensive businesses • Purchase of luxury motor vehicles and high value goods • Bulk cash movements and cash couriers • Alternative remittance systems • Corruption

  11. Tackling Vulnerability in CBEs • Awareness raising • Instituting a comprehensive AML regime • Bringing the unbanked on board • Improve the efficiency of financial sector institutions • Revisit the mandate of FIUs • Intensify efforts on KYC • Improve governance: rule of law, transparency and accountability

  12. Thank you

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