April 2019

Money laundering

Today money laundering has become very common in any society or developing countries.

This method of finance and law transaction became a separate economic element with its methods and approaches imparting legitimacy to a property of any kind obtained by criminal means.

The process itself is the introduction of funds, that obtained by criminal means into the flow of all possible commercial funds, where, due to the imperfection of laws, technologies, and management, it is impossible to determine the true source of income.

The main tools in such operations are the familiar illusory (fictitious) transactions, third parties, offshores, and banking systems that ensure the anonymity and confidentiality to beneficiaries.

In our dynamic time there is a struggle between countries and shadow economy, where various methods for prevention of money laundering in order to avoid taxes are applied.

An important supporter in that war is OECD that imposes initiatives for member countries to make their economies more transparent and resist tax evasion schemes.

Kazakhstan and OECD started to cooperate in 2008.

Implementation of OECD standards into economic practice, approach to these standards contributes to the entry of Kazakhstan into the 30 top developed countries of the world.

In this connection, a law was adopted and measures were taken to implement the OECD recommendations that help counteract authorization (laundering) of criminally obtained income and financing of terrorism.

Why do we need this? let us turn to the assessment of the international organization as Global Financial Integrity (hereinafter, “GFI”), Kazakhstan is in the TOP-12 leading states in the average annual illegal withdrawal of capital in 2000-2009, namely 123, 057 billion dollars was illegally moved abroad.

According to GFI capital outflows, are linked to crime, corruption, tax evasion and other illegal activities. The report stresses that this process is caused to a greater extent by a decline in international trade, foreign direct investment and new foreign loans, rather than illegal government actions.

The Law of the Republic of Kazakhstan dated August 28, 2009 No. 191-IV. “On Counteraction of Legitimization (Laundering) Proceeds of Crime and Financing of Terrorism";” (hereinafter, the “Law”) was one of the tools to combat this problem. According to this Law, employees of banks, stock exchanges, insurance companies and others are obliged to inform to authorized body.

At the same time comparing with the United Kingdom, where there are five laws aimed at combating money laundering and terrorist financing: Terrorism Act 2000, Anti-terrorism, Crime and Security Act 2001, Proceeds of Crime Act 2002, Serious Organized Crime and Police Act 2005 and Money Laundering Regulations 2007. According to Proceeds of Crime Act 2002, money laundering is punishable by up to 14 years in prison and a fine, the amount of which is set by the judge. A bank employee or employee of an investment company is required to report all suspicious transactions. Otherwise, it is punishable by a fine and seven years in prison. If the director of the company has not organized a procedure for tracking suspicious transactions, then he may be awarded two years in prison and a fine.

Also in the United Kingdom system there are no restrictions on the amount of the investigated amounts. Financial transactions may not have the typical features of money laundering, and, nevertheless, British law may consider them as money laundering. In addition, in the United Kingdom it is impossible to open a bank account for one day: the bank checks a new client for about a week.

Banks that do not properly check clients risk not only their reputation, but also their finances. For example, in August 2014, the United States fined the British bank Standard Chartered for not stopping to conduct “suspicious transactions” with Iranian clients.

Thus, work in this direction should be constantly continued on all fronts (legal, economic, etc.) in order to attract investments, improve competitiveness and develop private entrepreneurship.

The law contains a provision on countering money laundering and the financing of terrorism, and also contains descriptive signs for recognizing a transaction as money laundering. It is recommended to pre-check transactions in excess of 3 million for the presence of such signs from the law. In case of difficulty in determining whether a company’s transaction can be recognized as an action for money laundering, our experienced team can help with the analysis and the answer to this question.