Posts Tagged ‘accountnats’
Anti Money Laundering Efforts of Tax Authorities Worldwide
October 31, 2011 | Author admin
Money laundering is the process of disguising illegal sources of money so that it looks like it came from legal sources. Methods by which money may be laundered are varied and can range in sophistication. Many regulatory and governmental authorities quote estimates each year for the amount of money laundered, either worldwide or within their national economy.
Regardless of the difficulty in measurement, the amount of money laundered each year is in the billions of US dollars and poses a significant policy concern for governments. As a result, governments and international bodies have undertaken efforts to deter prevent and apprehend money launderers. Financial institutions have likewise undertaken efforts to prevent and detect transactions involving dirty money, both as a result of government requirements and to avoid the reputational risk involved.
Money laundering often occurs in three steps: first, cash is introduced into the financial system by some means called -placement, the second involves carrying out complex financial transactions in order to camouflage the illegal source – layering, and the final step entails acquiring wealth generated from the transactions of the illicit funds – integration. Some of these steps may be omitted, depending on the circumstances; for example, non-cash proceeds that are already in the financial system would have no need for placement.
Anti-money laundering (AML) is a term mainly used in the financial and legal industries to describe the legal controls that require financial institutions and other regulated entities to prevent detect and report money laundering activities. An effective AML program requires a jurisdiction to have criminalized money laundering, given the relevant regulators and police the powers and tools to investigate; be able to share information with other countries as appropriate; and require financial institutions to identify their customers, establish risk-based controls, keep records, and report suspicious activities.
Leaders throughout the international community recognize that anti-money laundering (AML) and counter-terrorist financing (CFT) measures are powerful tools that are effective in the fight against corruption.
The fight against money laundering has been an essential part of the overall struggle to combat the activities of organized crime, and more recently the financing of terrorist activity. It became apparent over the years that banks and other financial institutions have been an important source of information about money laundering and other financial crimes investigated by law enforcement. Concurrently, governments around the world began to recognize the corrosive dangers that unchecked financial crimes posed to their economic and political systems.
FATF
One of the first organized efforts on a world level to address the problem of money laundering is the Financial Action Task Force on Money Laundering (FATF). The FATF was set up by the Group of Seven industrialized countries at its Economic Summit in Paris in July 1989. It is an inter-governmental body whose purpose is the development and promotion of policies, to combat money laundering and terrorist financing, both at national and international levels. Anti-money laundering guidelines came into prominence globally as a result of the formation of the Financial Action Task force (FATF) and the promulgation of an international framework of anti-money laundering standards. These standards began to have more relevance in 2000 and 2001 after FATF began a process to publicly identify countries that were deficient in their anti-money laundering laws and international cooperation, a process colloquially known as name and shame.
It also monitors its members’ progress in implementing necessary measures, reviews money laundering and terrorist financing techniques and counter-measures, and promotes the adoption and implementation of suitable measures worldwide. It also collaborates with other international bodies involved in combating money laundering and the financing of terrorism.
The FATF membership is currently made up of 31 countries and territories and 2 regional organisations. The FATF does not have a tightly defined constitution or an unlimited life span. The Task Force reviews its mission every five years and it will only continue to exist and to perform its function until the member governments agree that this is necessary.
In October 2001 the FATF expanded its mandate to deal with the issue of financing of terrorism, and took the important step of creating the Nine Special Recommendations on Terrorist Financing. These Recommendations contain a set of measures aimed at combating funding of terrorist acts and terrorist organizations, and are complementary to the Forty Recommendations.
These Recommendations set minimum standards for action for countries to implement the detail according to their particular circumstances and constitutional frameworks.
In 2003 FATF issued a revised version of the Recommendations. Major changes to the revised Recommendations include:
- Specifying a minimum list of designated categories of predicate crimes for money laundering;
- Extending several AML requirements to cover financing of terrorism, including suspicious transaction reporting (STR) requirements;
- Introducing risk-based application of customer due diligence (CDD),
- Imposing specific conditions and CDD for business and transactions where third parties are relied upon for completing CDD;
- Extending required AML/CFT measures,
- Including additional key institutional measures,
- Prohibiting shell banks; and
- Improving transparency of legal persons.
FATF’s three primary functions with regard to money laundering are:
- Monitoring members’ progress in implementing anti-money laundering measures.
- Reviewing and reporting on laundering trends, techniques and countermeasures.
- Promoting the adoption and implementation of FATF anti-money laundering standards globally.
Moneyval
Moneyval was formerly known as the Select Committee of Experts on the Evaluation of Anti-Money Laundering Measures. Today, it has 27 permanent members, 2 temporary members and 1 active observer. In addition, an important number of countries and organizations have regular observer status.
The aim of MONEYVAL is to ensure that states have effective systems in place to counter money laundering and terrorist financing and to comply with the relevant international standards in these fields.
Moneyval mutually evaluates States against all relevant international standards in the legal, financial and law enforcement sectors.
As of June 2006, Moneyval has become an Associate Member to FATF. This status provides an opportunity for more countries within Moneyval to attend and actively participate in FATF meetings as part of the Council of Europe/Moneyval delegation.
Egmont Group
Separate legislations created specialized governmental agencies as countries around the world developed systems to deal with the problem of money laundering. These entities are now commonly referred to as “Financial Intelligence Units” or “FIUs”.
Recognizing the benefits of a FIU network, in 1995, a group of FIUs at the Egmont Arenberg Palace in Brussels decided to establish an informal group for the stimulation of international co-operation. Now known as the Egmont Group, these FIUs meet regularly to find ways to cooperate in the areas of information exchange, training and sharing of expertise.
There are currently 101 countries with recognized operational FIU units, with others in various stages of development. Countries must go through a formal procedure established by the Egmont Group in order to be recognized as meeting the Egmont Definition of an FIU. The Group as a whole meets once a year. There is no permanent secretariat, and administrative functions are shared on a rotating basis.
Although initially the focus of the Egmont FIU was essentially on money laundering, FIUs also play an important role in the international effort to combat the financing of terrorism.
Egmont approved the following definition of an FIU in 1996, consequently amended in 2004 to reflect the FIU’s role in combating terrorism financing:
A central, national agency responsible for receiving, analyzing and disseminating to the competent authorities, disclosures of financial information: concerning suspected proceeds of crime and potential financing of terrorism, or required by national legislation or regulation, in order to combat money laundering and terrorism financing.
According to the Statement of Purpose of the Egmont Group, the Financial Intelligence Units participating in the Egmont Group resolve to encourage co-operation among and between them in the interest of combating money laundering and terrorism financing.
UAE Financial Trends and Economic Scenario
October 25, 2011 | Author admin
The economic recovery in the United Arab Emirates is gaining strength, supported by a favorable global environment but subject to increased regional uncertainty.
Growth reflects stronger tourism, logistics, and trade in the emirate of Dubai; and large public investment spending in the emirate of Abu Dhabi, including through Government- Related Entities.
Higher oil prices are also contributing to a marked improvement in the fiscal and external positions of the country. Inflation rate at consumer level is expected to remain moderate at 4.5 percent in the country despite a rise in food prices internationally. Property rents continue to decline. Besides, the UAE’s unemployment rate is at low level of 4.2 percent.
However, it must be noted that risks to the country’s economic recovery remain, including from possible economic spillovers of regional events. In particular, the current re- pricing of geopolitical risk in the region could lead to more challenging market conditions, which may put pressure on the entities that need to roll over external borrowing.
Forecasts indicate the UAE real GDP will grow by five per cent this year and a similar rate in 2012, considering the expected growth of six per cent in emerging economies, this rate of growth in the UAE is good. The UAE and Saudi Arabia will be among the countries leading growth in MENA.
Besides high oil prices, growth in the UAE would be fueled by a surge in the tourism sector, citing a 70-80 per cent jump in hotel occupancy in the first few months of 2011. Trade would be another strong growth sector and the current political unrest in MENA would give a strong push to Dubai as a key commercial centre in the world.
A sharp increase in the UAE’s trade sector this year and next year can be expected and the other sectors that will contribute to growth are telecommunications and transport besides in addition to infrastructure and financial services sectors.
The UAE’s GDP, the second largest in the Arab region after the Saudi economy, expanded by around 3.2 per cent in 2010 after shrinking in 2009. Real GDP recorded one of its highest growth rates of 7.4 per cent in 2008.
Strong oil prices will ally with an upsurge in tourism, trade and communications to lift the UAE’s economy by nearly five per cent in 2011, sharply higher than the growth rate in 2010.GDP growth will remain at a high level in 2012 and the level is considered as one of the best growth rates in the Middle East and North Africa.
Current Financial Turmoil in Global Context
September 22, 2011 | Author admin
Signs of Recovery
The world is near the bottom of a global recession that is causing widespread business contraction, increases in unemployment, and shrinking government revenues. Although recent data indicate the large industrialized economies may have reached bottom and are beginning to recover, for the most part, unemployment is still rising. Numerous small banks and households still face huge problems in restoring their balance sheets, and unemployment has combined with sub-prime loans to keep home foreclosures at a high rate. Nearly all industrialized countries and many emerging and developing nations have announced economic stimulus and/or financial sector rescue packages. Several countries have resorted to borrowing from the International Monetary Fund as a last resort.
The Weakness of Financial Systems Worldwide
The crisis has exposed fundamental weaknesses in financial systems worldwide, demonstrated how interconnected and interdependent economies are today, and has posed vexing policy dilemmas. The process for coping with the crisis by countries across the globe has been manifest in three basic phases.
The first has been intervention to contain the contagion and restore confidence in the system. This has required extraordinary measures both in scope, cost, and extent o government reach.
The second has been coping with the secondary effects of the crisis, particularly the global recession and flight of capital from countries in emerging markets and elsewhere that have been affected by the crisis.
The third phase of this process is to make changes in the financial system to reduce risk and prevent future crises. In order to give these proposals political backing, world leaders have called for international meetings to address changes in policy, regulations, oversight, and enforcement.
U S Crisis Trickles Down to all Nations
According to the Economist Intelligence Unit, the aggressive measures that governments have taken to counter the financial crisis have not only helped to prevent a more severe downturn but are now setting the stage for a recovery, albeit a weak one. However, the world economy could weaken again once the stimulus wears off, mainly because government debt has increased dramatically in many countries—eliciting rising concerns about the solvency of the state. This has made current levels of stimulus through government spending not quiet sustainable.
The global financial crisis has brought home an important point: the United States is still a major center of the financial world. Regional financial crises (such as the Asian financial crisis, Japan’s banking crisis, or the Latin American debt crisis) can occur without seriously infecting the rest of the global financial system. But when the U.S. financial system stumbles, it may bring major parts of the rest of the world down with it.6 The reason is that the United States is the main guarantor of the international financial system, the provider of dollars widely used as currency reserves and as an international medium of exchange, and a contributor to much of the financial capital that sloshes around the world seeking higher yields. The rest of the world may not appreciate it, but a financial crisis in the United States often takes on a global hue.
Financial System Review
August 4, 2011 | Author admin
Financial systems are a vital component in the delivery of an organizations programs and services. When managed effectively, financial systems improve service quality, enhance productivity and reduce costs.
A financial system is a system used to exercise financial management, control and accountability of an organizations funds or assets. Included are systems used to record, verify, report, generate and/or execute financial transactions, and those used for the management and control of assets, liabilities and assets.
Systems must be put in place to determine methodology to be used in the development of financial systems. The methodology used must be consistent with the company’s information technology.
Organizations must ensure that financial systems have comprehensive controls to prevent and reduce the risk of loss, error, misuse or fraud to an acceptable level. A risk and controls review must be performed and documented for a new financial system, and whenever there are significant modifications to an existing financial system. Qualified, independent and objective parties must carry out the review.
The scope of a risk and controls review depends on the nature and complexity of the financial system. A comprehensive review includes project management, systems development, general controls and application-based controls. Companies that require a financial system to interface with other systems must establish proper and integrated processes to secure financial information.
Financial systems in the corporate world represent the business study department of a company. Large organizations use financial systems to review financial performance. Sometimes, corporate financial system is a conduit to accounting and management. Financial systems goes a step beyond preparing financial information it measures performance and projects forecasts. Various financial activities come under the corporate financial system. Capital structure, profitability measurements, budgets, sales forecasts, cash flow management and financing decisions are just some of them.
The essential purpose of financial systems is to measure the profit generating capability of the company and recommend best finance options for further growth and profitability.
Posted in Financial Services | Tags: accountnats, financial, financial services, financial system review | 
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