Money laundering and terrorism financing are criminal offences with economic repercussions. As they are global problems, their negative repercussions are manifold: they undermine the stability, transparency and efficiency of a financial system, provoke economic disturbances, jeopardise reform programmes, result in diminished foreign investment and loss of a country’s reputation.
Money laundering is the practice of concealing illegal origin of money or property acquired through the commission of a criminal offence. When profit is generated through a criminal offence, the perpetrator seeks ways to control the funds or other property without attracting the attention of competent authorities and engages in transactions that give the semblance of legitimate business. Money laundering consists of three main phases:
- The first is the so-called “placement” phase, i.e. breaking of the direct link between the funds and the illegal activity instrumental in their obtainment. It involves placing the proceeds of crime in the financial system;
- The second is the “layering” phase, in which the funds that entered the legal financial system are transferred to and from various accounts in order to disguise the audit trail and link with the criminal source;
- The third is the “integration” phase in which the “dirty” money is “legitimised”.
Within the meaning of the Law on the Prevention of Money Laundering and the Financing of Terrorism (RS Official Gazette No 113/2017 – the Law), money laundering means:
- conversion or transfer of property acquired through the commission of a criminal offence;
- concealment or misrepresentation of the true nature, source, location, movement, use, ownership or rights with respect to the property acquired through the commission of a criminal offence;
- acquisition, possession or use of property acquired through the commission of a criminal offence.
Terrorism financing provides funds for terrorist activity. It may involve funds raised from legitimate sources, such as business profit and donations from personal sources or humanitarian organizations, as well as from criminal sources, such as drug trade, the smuggling of weapons and other goods, fraud, kidnapping and extortion.
Within the meaning of the Law, terrorism financing means the providing or collecting of property, or an attempt to do so, with the intention of using it, or in the knowledge that it may be used, in full or in part:
- in order to carry out a terrorist act;
- by terrorists;
- by terrorist organizations.
Terrorism financing means aiding and abetting in the provision or collection of property, regardless of whether a terrorist act was committed or whether property was used for the commission of the terrorist act.