Part 1 - AL-Tax

International Taxation Handbookbody, in 1989. The FATF’s purpose is to examine money-laundering techniques andtrends, and to develop and promote, both at national and international levels, measuresto combat money laundering and terrorist financing (FATF, 2006a). The FATFmakes recommendations regarding anti-money-laundering measures and monitorsits 31 member countries with respect to their progress in implementing those measures.It also encourages other countries to take similar measures and, through thepublication of its list of noncooperative countries, has had considerable success inhaving such measures adopted by tax havens, emerging markets, and less developedcountries.Many countries have also set up specialized financial intelligence units (forexample, the US Financial Crimes Enforcement Network and FINTRAC in Canada).These units, as part of the Egmont Group established in 1995, exchange financialintelligence amongst themselves and cooperate to combat money laundering andterrorist financing. The units will also refer financial intelligence to theirnational authorities for appropriate enforcement actions to be taken.13.3 DirectionsIndividuals may seek to hide their financial gains from their governments becauseof the illegal activities they are involved in or because they wish to avoid payingtaxes. The basic components of money laundering are straightforward, althoughthe actual means by which those components are given effect may be very complex.Nonetheless, the steps involved leave paper trails (however disguised) thatcan be followed for many years.For example, the transfer of the legitimate profits of an individual or corporationto an offshore jurisdiction is legal, but what is illegal is the concealment ofthe revenues gained from the placement of those profits offshore. The transferof illegally obtained funds to an offshore jurisdiction so as to avoid identifyingthe source of the funds and permit the reuse of those funds as if they were legitimateprofits is likewise illegal. In many cases, it is not only the undeclared profitsthat an individual will not wish to declare to the tax authorities, but theindividual will also want to hide the illicit act or acts that generated the funds tobe laundered.There are three basic steps in money laundering (Savla, 2001; Trehan, 2004;See also United Nations Office on Drugs and Crime, www.unodc.org):●Placement. The first step involves placing the funds to be laundered(whether hot, gray, or dirty money) in the financial system.316