UNMIK/PR/1229
This seminar is very timely, as it addresses one of the major problems of Kosovo. I would like it to focus on the practical issues of money laundering, as Kosovo is still in the process of establishing a modern financial system and as steps for addressing this highly complex and sophisticated crime within the legal system have only just begun.
Many of the Kosovan participants in this seminar may not as yet have become familiar with the details of the money laundering mechanism. Even internationally, the recognition of money laundering as a criminal enterprise dates back only a couple of decades. We are still trying to understand the true dimensions of the problem.
To fight crime efficiently, one must know how criminals think and act. To be able to devise effective counter measures, it is important to understand how money laundering works. In very simple terms, we can say that it is the process by which money coming from criminal activities is put through a cycle of transactions, or washed, so that it comes out at the other end as legal or clean money. In other words, the source of illegally obtained funds is obscured through a succession of transfers and deals.
How do we counter this laundering? We counter it by making the movement of money more visible. What do we achieve by this? We achieve two things – first, the original source of the earning is exposed; and second, the true ownership of the assets is known. By so doing we hit at the core of organised criminal operations. I call it the ‘core’ because the primary purpose of organised crime is to make profits. But profit close to the source of crime is particularly vulnerable to detection and prosecution. The criminal therefore undertakes transactions to distance the profit from the crime in a way that he still maintains control over the money. The purpose of money laundering policy is to prevent the criminal from using that money and to trace back the money to the activities with which it was linked. So we close down the options for using illegal money or at least raise the risk level for such operations. We thus make organised crime a high-risk-low-gain enterprise.
It is not just organised crime that we are concerned about. Corruption is also an associated phenomenon. The huge profit earned from organised crime has the potential to contaminate and corrupt the structures of the state at all levels. Corrupt officials also need to convert their proceeds into legal tender through laundering channels.
Terrorism is another major concern. It is well known how money laundering channels are being used the world over to finance global terrorism. In fact when we talk about money laundering we are looking at the whole range of drug traffickers, terrorists, organised criminals, insider dealers, tax evaders, corrupt officials and many others who need to avoid the kind of attention from the authorities that illegally acquired wealth brings.
The phenomenon is not limited to money transactions alone. Property deals are also a significant aspect of money laundering. Prevention therefore involves multiple agencies such as banks, financial institutions, government organisations concerned with property transactions, private parties like attorneys and non-governmental organisations, even political parties. A culture of accountability and compliance must be built in such agencies. Police and the justice system analyse reports of violations and help in detection and prosecution of the crime.
In the developed economies, criminals have an immense range of already established and fast evolving financial and technological tools to further their illegal operations. In Kosovo, the economy and financial market is still at the incipient stage of development. The international presence here must ensure that Kosovo benefits from experiences in other parts of the world so that adequate checks against money laundering are built into the fundamentals of the financial and legal systems even as these systems are being established.
The promulgation of the anti-money laundering regulation in February this year is a vital part of the legal framework directed against organised crime and corruption. The regulation imposes a number of statutory obligations on banks and financial institutions to verify the identity of clients, keep proper records and to recognise and report suspicions of money laundering. Similar obligations are also laid down for NGOs, political parties, registered candidates, attorneys, certified accountants, licensed auditors and other business organisations.
This month we set up the Financial Information Centre within the Police and Justice Pillar. The Financial Information Centre will receive and analyse the required reports, ensure compliance, and cooperate with its foreign counterparts and law enforcement agencies in tracing illicit money outside and inside of Kosovo. In addition, the Centre will collect and maintain a database of all information that is relevant to money laundering activities or the financing of terrorist activities and will make recommendations to the appropriate authorities regarding legislation and other measures that may be taken to combat such illegal activities.
This is so far as detection is concerned. But having detected the crime, we must also have the capability to successfully prosecute it. For the judges and prosecutors of Kosovo who are attending this seminar, it is vitally important to understand this complex phenomenon and the comprehensive provisions made in the anti-money laundering regulation to address the crime.
Money laundering funnels large amounts of illegal money into the economy behind the façade of legitimate business. It damages the economy and the rule of law, not only because it hides the proceeds of crime, but because it scares away foreign investors from Kosovo.
As Kosovo develops its economy, it must ensure that this is not overtaken by a parallel economy driven by criminal enterprises. This will be a necessary pre-requisite also in the way to eventual integration with the European Union. As legal systems in other countries tighten control over money laundering operations, terrorists and organised criminals will be looking for softer routes to channel their funds. Kosovo must make sure that its defences are secure.
I congratulate the Kosovo Judicial Institute, the US Department of Justice and the Council of Europe for organising this seminar on an issue which is of such concern for the future of Kosovo. I am sure that this seminar will be useful, fruitful and will help us in our major endeavour: to establish the rule of law in Kosovo.
Thank you.