Current Issues in Offshore Banking: Illegal Financial Transactions

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  • Topic: Economics, Money laundering, Bank
  • Pages : 1 (266 words )
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  • Published : March 5, 2011
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Current issue of offshore banking
Illegal (criminal) financial transactions
Most of the illegal financial transaction in offshoring is related to underground economy activity. The illegal economy includes all sorts of criminal activities, which are in conflict with the legal system. According to Siska (1999), drugs, violence, nightmare, weapon, economy and property is the main field of organized crime. A person in a country A will move the fund abroad by contact underground banker and deposit a certain fund. Underground Banker will send coded messages to his / her foreign correspondent for the credit equivalent deposited sum to foreign bank accounts (Jack, Levi, Naylor and Phill). No money actual fund has to move in the transaction. The transfer process cannot be detected and the transfer can be done by Online-Banking, bond, Cyber money and Electronic Purse (Friedrich, 2007).

Increase the risk of macroeconomic instability
Money-laundering flows will cause macroeconomic instability in a country. Transaction fund in money laundering process are "underground" or in the informal sector of the economy. Illegal money transaction is not appearing in official monetary and financial statistic. This provides wrong information to policymakers who were attempting to manage macroeconomic variables, such as monetary levels, interest rates, inflation, and exchange rates (Quirk, 1996).

Conversion of illegal money

Bartlett, B. L. (may 2002). The Negative Effects of Money Laundering on Economic. Economic Research Report, 23. Blum, J. A., Levi, P. M., Naylor, P. R., & Williams, P. P. ( 2005). FINANCIAL HAVENS BANKING SECRECY AND MONEY LAUNDERING. GLOBAL PROGRAMME AGAINST MONEY LAUNDERING, 1-117. Schneider, F. (2007). Money Laundering. Some Preliminary Empirical Findings, 2.
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