The Anti-Money Laundering Framework in Jordan

Topics: Money laundering, USA PATRIOT Act, Bank Secrecy Act Pages: 19 (6984 words) Published: September 26, 2008
The Anti-Money Laundering Framework in Jordan: New Laws and Regulations

Bashar H. Malkawi*

I. Introduction

Money laundering is a major problem for Jordan and the international community. Laundering criminally-derived proceeds has become a lucrative and sophisticated business. Money laundering challenges the maintenance of order in Jordan and threatens the integrity and reliability of its financial institutions and commerce. In recognition of this pervasive problem, Jordan passed several laws and regulations. These laws and regulations, some of which are new, include the Law against Narcotic Drugs and Psychotropic Substances of 1988, Provisional Law on Monitoring Insurance Business of 2002, Central Bank Circular on Regulations of Anti-Money Laundering of 2006, and the new Anti-Money laundering Law of 2007. All these laws and regulations aim to decrease the level of financial crimes in Jordan and facilitate the development of a sound economy by attracting legitimate foreign investments. This article focuses on Jordan's adoption of anti-money laundering laws and regulations. Part II provides a brief introduction to money laundering. Part III discusses the history of Jordan's efforts to combat money laundering. In addition, it analyzes the new anti-money laundering law and identifies its weaknesses. Part IV provides an overview of the United States (U.S.) money laundering policies compared with those of Jordan. Part V concludes that while the new Jordanian laws and regulations facilitate attempts by the Jordanian government to curtail money laundering, further reform is necessary. II. Money Laundering: Definition and Process

One goal of every criminal is to get away clean. Money laundering hides the trail of illegal profits and hence aids the getaway. The term 'money laundering' is of recent and debated origin. Whatever the metaphoric source of the term, money laundering is the process by which one conceals the existence, illegal source, or illegal application of income, and disguises that income to make it appear legitimate. Money laundering typically is effectuated through a three-step process: (i) the criminally derived money is "placed" into a legitimate enterprise; (ii) the funds are "layered" through various transactions to obscure the original source; and (iii) the newly laundered funds are "integrated" into the legitimate financial world. These steps may compromise numerous transactions by the launderers and may occur as separate phases, simultaneously, or they may overlap. The first step, placement, is the physical disposal of cash proceeds derived from illegal activity. A typical transaction requires the launderer to move the illicit proceeds from the originating jurisdiction to a bank account. Launderers accomplish this by taking advantage of weaknesses in national regulatory schemes through electronic transfers, smuggling cash abroad, or courier services. The second step, layering, separates illicit proceeds from their source by creating complex layers of financial transactions designed to disguise the audit trail and provide anonymity. The third step, integration, creates apparent legitimacy to criminally derived proceeds. In other words, the integration places the laundered proceeds back into the economy so that they appear as legitimate business profits. For example, the launderer could invest the money in businesses or real estate purchases. III. Current Jordanian Anti-Money Laundering Regime

The impetus behind money laundering cases in Jordan is the liberalization and deregulation of the Jordanian economy brought by market-oriented transformations and privatization. The government has sold off state-owned companies and sharply reduced tariffs. Newly developed free-trade zones, created in partnership with Israeli companies, have allowed Jordan to nearly double its export revenue to $4 billion. Jordan also became the first Arab country to...
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