Terror financing: paving the ways to corporate ethics in financing - An overview

Despite the considerable media attention being given to the financial meltdown there has been little attention on why this happened. This paper investigates into this matter and takes a very unique point of view. Whenever we talk about this matter we thought of liquidity crunch, sub prime crisis, high fiscal and trade deficit etc but we never think about parallel economy and money laundering. Here are some facts regarding this aspect: the amount of money laundered in the whole world is close to $2.85 trillion per year. As per an estimate of International Monetary Fund the aggregate size of this underground and illegitimate market is between 2 to 5 percent of world's gross domestic product. Criminals become wealthy enough to bribe officials and ensure their continuing profitability. Bribed officials becomes a mere puppet in their hands and act accordingly to their needs. Key media are controlled which prevents any publicity. Terrorist financing, drug trafficking and the black economy are nothing but the pitfalls of this growing menace. This is the biggest industry in the whole world. It is bigger than oil or arms for that matter. Many international money laundering rackets control the whole procedure. In this paper we have presented how parallel economy is affecting various developed and developing countries like U.S.A, U.K, Australia, India, China etc. If you were to conduct a survey in our country asking what is Money Laundering ? The visualization of the Lay man will not be far different than the one shown in this picture. The general guesses from most people would be that it must be something related to drying, washing or may be dry cleaning of the currency notes. This is rather the human tendency about the world's very big crime. To some extent correct but layman don't know much of this world's third largest industry. As per IMF reports the turnover of this industry could be somewhere around $1.5 trillion. However common man does not pay attention because primarily it seems to be a victimless crime. It has none of the issues associated with a vanishing of the money from economy or performance of the government or organizations involved in the same and yet, money laundering can only take place after a predicate crime (such as a Drug trafficking or the stock market frauds) has taken place. If the person on the street is the banker he might throw the three letters "KYC" to express his knowledge. We have also showed that how it is being done and who the main players behind conspiracy are. This paper also prescribes the steps that are needed to be taken by the regulatory bodies to control and regulate this matter. What financial restructuring that are needed to be done. We have also portrayed what are the loopholes that we have in our economy especially in money market and forex market. We have also analyzed and interpreted what are the levels of intensity of anti money laundering laws and what effects they are having in their respective economy. We have suggested in this paper how we can cope with this situation by bringing some technical changes in our financial system, especially when we are talking a lot about corporate ethics in accounting, auditing and finance.