Issue link: https://maltatoday.uberflip.com/i/1376560
maltatoday | SUNDAY • 23 MAY 2021 12 FIAU A SPECIAL REPORT The real cost of money laundering is not only monetary Money laundering can often be seen as a somewhat nebulous, victimless crime that doesn't affect the everyday person. But Financial Intelligence Analysis Unit Guidance and Outreach Manager Dr Clara Borg Bonaci tells David Lindsay about how money laundering not only deprives government coffers of funds that could be used for the betterment of society, it also feeds serious predicate crimes such as the trafficking of drugs and arms, human smuggling and child sexual exploitation – 'horribly destructive crimes that have an immense social cost' Money laundering is often seen as a victimless crime that doesn't necessarily affect the average person on the street. What are the ramifications of such practices on a wider scale? What are the hidden predicate crimes and what are their effects on the economy at large? The truth is that the fight against money laundering and the funding of terrorism can be highly regulatory and involves the implementation of numer- ous laws, which makes it easier for us, and the entities we supervise, to some- times forget or be disconnected from why we are actually doing it. In its simplest form, money laun- dering is the process of placing funds that have been generated illegally into the financial system in such a way that they are disconnected from the crimi- nal activity, so that even the identity of the person who conducted that crime is obfuscated and the funds cannot be immediately connected to the person or the crime. When we speak of criminal activity, we are not necessarily talking about petty theft or shoplifting, we are talk- ing about large sophisticated organised crime groups. The type of activities they carry out for a profit are serious crimes such as drug and arms trafficking, con- tract killing, human smuggling and traf- ficking, and child sexual exploitation. All this is so horribly destructive and it has an immense social cost. By fighting money laundering, we are making it harder for criminals to enjoy the proceeds of their crime. Once it's harder to use these profits, in a way that allows criminals to be separated from their criminal activities, the risk-to-re- ward ratio is skewed, and that acts as a major deterrent. Tax evasion is another predicate of- fence, and is often misunderstood to be more or less a victimless crime. When large businesses do not disclose the full extent of their income, they are cheat- ing the state out of millions of euro in funds that are meant to be used to pro- vide better services for its citizens. As such, we need to realise that tax evasion is something that comes at a real cost to us. Likewise, with corruption and bribery, public funds are not being used to pro- vide the best services and infrastructure for the people. So money laundering has a cost for each and every one of us and we may not see it and we may not necessarily feel the impact directly on a personal level, but it is most certainly there and it is most certainly affecting us. Why, apart from the legal repercussions, should subject persons feel obliged to report suspicious transactions? Suspicious transaction reports, or STRs, are reports that obliged entities have to submit when during the course of conducting transactions or engaging with their clients they detect suspicious or unusual activities. STRs are the main source of information used by the FIAU – and by Financial Intelligence Units in general – to analyse potential money laundering cases. The legal obligation is clear and well known among obliged entities. These entities might not know it or immedi- ately see the effect of their STR, but a report is the spark that would trigger an analysis, that then leads to the in- vestigation and eventual prosecution of criminals and the disruption of criminal organisations. The ripple effect extends beyond Malta and disrupts internation- al criminal activity.