Fighting Against Money Laundering

• Author: M. Zali - A. Maulidi
• Position: University of Madura (Madura, Jawa Timur, Indonesia)
• Pages: 40-63

BRICS LAW JOURNAL Volume V (2018) Issue 3

FIGHTInG aGaInST MonEY LaunDERInG

MOH ZALI,

University of Madura (Madura, Jawa Timur, Indonesia)

ACH MAULIDI,

University of Edinburgh (Edinburgh, United Kingdom)

DOI: 10.21684/2412-2343-2018-5-3-40-63

This paper argues for the formation of a new deterrence concept which is useful for

banks and state policymakers to ght against elite money laundering. The paper oers

insights to enhance our understanding of the nexus of corruption, local business and

money laundering scandals. These insights are synthesised from contemporary thinking

and current research ndings by adopting conspiracy theory. The evidence shows that

fraud schemes involving corruption syndicates have become intractable, either because

of inuence peddling or high-prole people implicated in corruption scandals, making

it d icult f or anti -corruption provisio ns to be i mplemented. Therefore, it is clear ly

necessary to provide a cautionary note and to consider the analysis of structural forces

that reveal the logic of criminal forms and conduct. The pap er also points out that the

establishment of money laundering laws and the creation of anti-money laundering

agencies (strict law enforcement) can eec tively deter predatory activities of nancial

intermediaries in facilitating money laundering practices. In an aggregative analysis of

the underlying economic model of crime, the ndings of the study provide signicant

support for a number of the postulates of the conspiracy theory of crime. These include

the deterrence eect in respect of perpetrators such as unscrupulous local business sta,

corrupters and launderers.

Keywords: deterrence concept; money laundering; corruption; law enforcement.

Recommended citation: Moh Zali & Ach Maulidi, Fighting Against Money Laundering,

5(3) BRICS Law Journal 40–63 (2018).

MOH ZALI, AC H MAULIDI 41

Table of Contents

Introduction

1. Background of the Study

1.1. Shell Companies

2. Literature Review

2.1. Money Laundering

2.2. The Case of Money Laundering and Local Businesses

2.2.1. The Challenge of Money Laundry Deterrence

2.3. Corruption: Additional Element of Money Laundering

2.4. Framework in Preventing Money Laundering

2.4.1. The Need for IT Controls of an Organisation

2.4.2. The Eectiveness of Law Enforcement Agencies’ Approach to Money

Laundering Control

2.4.3. Severity of Punishment

2.4.4. Customer Due Diligence (CDD)

2.5. Roles of Tax Examiners and Forensic Auditors

Conclusion

Introduction

Money laundering is a method employed by criminals to disguise the origin of ill-

gotten gains with the intent of enjoying their “cleansed” money without interference

from predatory underworld rivals or law enforcement agencies. The nature of the

relationship between the recent emergence of networks of corruption and the

related problem of money laundering is little understood at present.1 For example,

Mugarura suggests that the dynamics of corruption make it a global issue given that

many foreign banks may be (and may already have been) used to transmit the illicit

proceeds of corruption for safe custody abroad.2 The epistemological diculties are

the sort of evidence one uses to account for the structuring of criminal behaviour;

the range of criminal behaviour that comes under the umbrella of any group of

criminals; how far up the political chain one reaches in one’s delineation of who

the organised criminals are (in Indonesia, for example); and how valid the evidence

is upon which one relies. Therefore, we propose a framework for banks and state

policymakers (governments) that bridges the security, control and governance

aspects of banking and information technology (IT) as well as law enforcement to

1 Mark P. Hampton & Michael Levi, Fast Spinning into Oblivion? Recent Developments in Money-Laundering

Policies and Oshore Finance Centres, 20(3) Third World Quarterly 645 (1999).

2 Norman Mugarura, The Eect of Corruption Factor in Harnessing Global Anti-Money Laundering Regimes,

13(3) Journal of Money Laundering Control 272 (2010).