Lucio Guente • Senior Manager | Forensics, EY
Money laundering is a global concern that affects countries all over the world, including Mozambique. In Mozambican society, money laundering is a particularly relevant challenge due to various factors, such as economic development, the presence of valuable natural resources and its strategic position on the Indian Ocean coast, which can facilitate international trade and, consequently, money laundering activities.
Various theoretical currents have been put forward on the subject and its concept, each with its own authors and perspectives. Although there is no universally exhausted classification of the ‘currents’ that define money laundering, some main approaches or nuances can be identified that influence understanding and legislation on the subject in the modern world: the Economic approach, the Legal approach, the Criminological approach, the Sociological approach, the Public Policy approach, the Interdisciplinary approach and the Pragmatic approach.
Each of these streams contributes to a richer understanding of money laundering, highlighting different aspects of the problem and suggesting various strategies to combat it. Combining these perspectives is crucial to developing effective policies and robust prevention systems against money laundering.
Despite the diversity of approaches to the issue, there is a convergence towards viewing money laundering as a global problem that affects not only the financial sector, but also various other areas of the economy. In the case of Mozambique, money laundering represents an even more significant challenge, negatively affecting the economy and society. In terms of the economy, it causes distortions in the market, inflates the cost of assets and property and undermines the stability of the financial system, which in turn can damage investor confidence and impede economic growth. Socially, this phenomenon is often associated with criminal activities such as kidnappings, growing drug trafficking, terrorism in Cabo Delgado and rampant corruption, jeopardising the security and well-being of the country’s citizens.
What is money laundering anyway?
A commonly accepted definition of money laundering refers to this social phenomenon as the process by which criminals disguise the illicit origin of funds, making them appear legitimate. This process generally involves three stages: placement, layering and integration, where placement refers to the introduction of illicit funds into the financial system, layering is the process of concealing the origin of the funds through a series of complex transactions and, finally, integration which is the stage where the funds are reintroduced into the economy as if they were of licit origin.
How money laundering manifests itself
Money laundering is a complex and multifaceted challenge that requires a coordinated and sophisticated response from the authorities, financial institutions and other private sector players. Identifying and combating these forms of manifestation is essential to maintaining the integrity of global financial and economic systems.
Money laundering manifests itself in various ways to exploit vulnerabilities
Money laundering can manifest itself in different ways, constantly adapting to exploit vulnerabilities in the financial and regulatory systems, as we discuss below when we address its metamorphoses. Some of the most common ways in which money laundering manifests itself include:
- Setting up front companies and shelf companies
- Structuring or ‘smurfing’;
- Buying high-value assets;
- Electronic and bank transfers;
- Exchange bureaux and remittance services;
- Games of chance;
- International trade;
- Investments in funds and financial products;
- Cryptocurrencies and virtual currencies;
- Use of professional intermediaries;
- Back-to-back loans;
- Money exchange and ‘hawala’.
The metamorphosis of money laundering
The ‘metamorphoses’ of money laundering refer to the various ways in which money laundering methods evolve and adapt in response to changes in the regulatory environment, technological advances and law enforcement measures to combat or prevent it.
These changes are driven by the need for criminals to find new ways of concealing the illicit origin of their funds and integrating them into the formal economy without being detected.
The metamorphoses of money laundering require a dynamic and proactive response from the authorities and financial institutions, which must constantly update their detection and prevention strategies, tools and technologies to keep up with the tactics used by criminals, which are continually evolving as the techniques for combating them evolve.
Some of the ways in which money laundering has metamorphosed include adapting to new regulations, using new technologies, exploiting non-financial sectors, diversifying methods, globalising operations, using professional intermediaries, integrating with other crimes, using virtual and private currencies and adapting to global crises, among others.
How EY has contributed to preventing and combating money laundering
The fight against money laundering is a global concern that requires transparency, adequate regulation and international co-operation. The lack of transparency in financial and corporate systems makes it easier to hide the origin of illicit funds, while regulatory discrepancies between different jurisdictions create loopholes that can be exploited. In addition, insufficient international co-operation between countries and institutions hinders the tracing and recovery of illicit assets, underlining the need for a co-ordinated approach to effectively combat money laundering.
Technology, while offering new tools to combat this crime, such as big data analysis and artificial intelligence, also presents challenges, including the use of cryptocurrencies to move funds illicitly. In addition, corruption and other economic crimes are often at the root of money laundering, requiring efforts to combat these crimes at their source.
EY, with its global expertise in advisory, audit, tax and transactions, plays a crucial role in helping organisations address these challenges by promoting effective regulatory compliance, risk and governance, implementing transaction monitoring technologies, enhanced client due diligence and training employees in anti-money laundering practices. EY also works with companies to develop policies and procedures, define risk classification models, carry out transaction effectiveness tests, detect suspicious transactions supported by artificial intelligence, integrity, due diligence, etc., measures that help detect and prevent suspicious activity, helping to maintain the integrity of the global financial system.
The fight against money laundering is one of the government’s properties
In conclusion, money laundering is a complex phenomenon that manifests itself in different ways and continues to evolve in response to changes in the regulatory environment, technological advances and law enforcement strategies. Understanding this phenomenon is enriched by various theoretical currents that offer varied perspectives on the motivations, methods and impacts of money laundering.
The economic, legal, criminological, sociological, public policy and interdisciplinary approaches highlight different facets of money laundering, from its economic implications to its rooting in organised crime networks and its relationship with issues of social inequality and global governance. The pragmatic approach, in turn, provides valuable knowledge for implementing detection and prevention measures in the day-to-day running of financial institutions and other vulnerable sectors.
The fight against money laundering requires a coordinated response that integrates knowledge and strategies from all these streams. Effective public policies, strict regulations, international co-operation and constant updating of compliance practices are essential to mitigate the risks associated with money laundering. In addition, ongoing education and training of professionals involved in detecting suspicious activity is key to keeping organisations one step ahead of the increasingly sophisticated methods of criminals.
Success in preventing and combating money laundering depends on the ability of societies and governments to adapt quickly to its metamorphoses and to work together to protect the integrity and stability of the world’s financial and economic systems.
In the case of Mozambique, money laundering is a multi-faceted problem that has required a multi-faceted approach to combat it. Collaboration between the government, the financial sector, civil society and the international community has been essential in strengthening the prevention system and ensuring that Mozambique is not seen as a safe haven for criminals looking to launder illicit money. Through continuous efforts and co-operation, Mozambique has made progress in protecting its economy and society from the harmful influences of money laundering.
These efforts are embodied in the measures the country has been taking to remove itself from the Financial Action Task Force (FATF) grey list and strengthen its defences against money laundering. Mozambique has been taking proactive measures, including updating relevant legislation, strengthening financial supervision systems and improving co-operation between institutions. The country is committed to improving the capacity of financial entities to detect and report suspicious activity, promoting transparency in transactions and corporate ownership. These actions aim to meet international standards, but also to establish a safer and more reliable economic environment for Mozambique’s future.
