Archive for the ‘Wire Transfer’ Category

Money Laundering – is it a common thing?

Monday, March 9th, 2009

1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading ... Loading ...

Money Laundering - by definition means to hide illicit income, or disguise it in a form that it no longer appears to be illegitimate. This can be done in a variety of ways. Money laundering can be as simple as stashing away illicit cash in a big bag, so that apart from the person hiding it, nobody else knows about it.  In the modern world however, criminals tend to lock up their illicit money in foreign banks, with less stringent bank laws, or hide it in the form of investment in a business, or discreetly purchase personal property.

Money laundering is a punishable offence by law. In October 2005, U.S congressman Tom Delay was charged with money laundering, forcing him to step down as House Majority Leader. In U.S the average prison sentence for Money laundering is six years.  In late December 2006, the Chinese authorities uncovered a five billion Yuan (633 million U.S Dollars) money laundering scandal, the country’s biggest ever. Apparently this scandal was only accidently exposed following a probe into false business registrations, raising fears over how money laundering can be easily concealed.

With the rise of global finances, money laundering has become easier than ever. Countries with bank secrecy laws are directly connected with countries with bank-reporting laws, making it easy to carry out anonymous transactions to deposit “dirty” money. Also, with recent technological advances, money can zip through two countries in a flash. Considering that an estimated 700,000 wire transfers occur daily in the United States moving well over $2 trillion, illicit wire transfers are easily hidden.

The advent of internet and electronic cash has made money laundering an easy affair, and extremely difficult to trace. DigiCash, a form of electronic cash introduced by an Amsterdam based company is said to be the most secure form of electronic cash available. It uses a technology called ‘blinding’ which makes it unconditionally untraceable, thus making it a boon for money launderers across the globe. Recently UK authorities busted a gang of international criminals trying to launder £229 million from a City bank by exploiting the high-tech security measures designed to protect money transfers.

That brings us to our next question. Is money laundering only used by individuals to hide their illegitimate money? Recently, the United Nations’ crime and drug watchdog has indicated that “dirty” money  made in the illicit drug trade has been used to bailout large banks in the global financial crisis, since it was the only form of liquid capital available. The amount of money involved in this bailout is said to be hundreds of billions, which could make this the largest money laundering operation in the history of the world.

While it is impossible to ascertain the statistics of money laundering, a frequently cited figure places it to be about 2-5% of the worldwide global economy. With no discreet data available for the statistics these are just mere guesses and the actual figures are estimated to be much higher. Money laundering is a huge problem, and although current money laundering laws apply to cyber laundering, their efficiency is rather limited.

The truth is that although Money laundering may not be a common thing now, technology has created the means and ability to launder money by use of completely untraceable digital currency, and the future may have something different in store for us.

Can you text me 1000 Dollars please?

Wednesday, March 4th, 2009

1 Star2 Stars3 Stars4 Stars5 Stars (No Ratings Yet)
Loading ... Loading ...

Ever since currency evolved, humans have used it to lend to loved ones or friends and families, or make payments. In the earlier days, the only form of lending money used to be meeting the person and handing it over personally, over a cup of tea. As technologies evolved, and people became more and more busy there was a need for money to be transferred or lent easily. Along came cheques, and it was now easy to write a cheque and send it across.

Cheques were convenient to use, but the whole process was slow and time consuming. Banks later introduced Wire Transfers, which were blazingly fast to transfer money. Wire transfers, however required the person to visit the bank and order the bank to transfer money. Then came the Internet , and it was now possible for the sender himself to log on to his bank account and initiate a transfer to the party he wished to send. With the advent of mobile technologies, we were ushered into a wireless age.

Mobile phones have penetrated into every household. In fact studies have revealed that although 5 babies are born every second around the world, 30 new mobile phones are being subscribed to every day. Evolution of mobile phone technologies has meant that it is now possible to send money to your loved ones, or make a payment to that provider located on the other part of the globe, just by pressing a button on your cell phone.

With a lot of people travelling and moving from their homes in search of employment, money transfer has become a lucrative market for mobile phone companies as millions of people send money across. Mobile money transfer has changed lives in various countries. In Kenya, when it was introduced as M-pesa, the technology provided cut – throat completion to existing money transfer agencies, notably the government-owned Postal Corporation, a market leader with a massive network of agencies.

The technology has been a boon to most people living in rural areas, who have to rely financially on relatives in the cities. The mobile transfer technology has replaced the much slower postal money orders, and people in urgent need of financial help are being immensely benefitted by it. A similar technology was introduced in the developing market of Afghanistan, where it was particularly relevant since the large majority of population does not have access to traditional banking services.

Even in developed countries like the US and UK, it is estimated that more than $10bn a year is sent back to countries by migrant workers. Based on World Bank estimates, reducing remittance commission charges by 2-5% could increase the flow of remittances by 50-70%. Mobile phone companies are hence, being increasingly attracted to this lucrative market.

Money transfers suffer the risk of being prone to scams, and wire transfers also suffered from money being send by wire to an unknown person. Apparently, the mobile money transfer service is said to be secure, in the sense that it uses security pin codes, for the transaction. So, the next time you need to make a payment, or transfer a 1000 dollars to your loved ones, why not text it?