Fraud, Money Laundering, and Terrorism Financing Essay

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Introduction

Terrorism stands for the unlawful use of violence and intimidation against the civilian population in pursuit of religious or political goals. After the audacious attack by Al-Qaeda and the destruction of the Twin Towers on 11th of September 2001, terrorism was declared the number one enemy to the peace and stability of the modern world (Masciandaro 11). Despite the world’s best efforts, however, terrorism was not eradicated.

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On the contrary, the appearance of ISIS and various other religious fundamentalist groups in the Middle East and their continuous support is growing. Such growth would not have been possible without monetary support from various parties inside and outside the country. The purpose of this paper is to demonstrate how fraud, corruption, and money laundering could be used to support terrorism.

What is Fraud, Corruption, and Money Laundering?

Fraud is a blanket term utilized to describe various practices of purposeful deception and illegal activities committed to acquire funds and resources illegitimately. Fraud is described by the International Monetary Fund as a fraudulent, coercive, collusive, or obstructive practice utilized to gain an unfair advantage (“Anti-Money”). Fraudulent practices include any actions or omission of required financial information.

Coercion, as the name suggests, involves using physical and financial threats to force other parties into submission. Collusion suggests an illegitimate agreement between two or more parties to partake in illegal activities. Obstructive practices involve displacing, destroying, or modifying information to achieve one’s ends. Fraud exists in all spheres of banking, financing, and commerce. The most common example of fraud is tax evasion.

Corruption is another blanket term used to describe various illegal activities associated with the abuse of power and a lack of professional working ethic (“Anti-Fraud”). The word is typically utilized in conjunction with public or private office position abuse for personal enrichment. Often involves collusion fraud, as in many cases, there is more than one party involved, and the act of corruption is presented as an agreement between two or more parties for unlawful and mutual gain. Bribery is the most common example of corruption.

Money laundering is a process, during which financial resources obtained illegally (dirty money) become legitimate and free to be used in the market (clean money). Money laundering is typically achieved by presenting it as legitimate revenue from legitimate sources (“Anti-Fraud”). False companies and fake identities are frequently used to create the illusion of legitimacy and enable the use of illegal resources by public and private individuals. Typical money laundering practices involve transferring cash physically from one country to another, using dirty money to acquire goods to be resold, and utilizing bank account fraud.

Money Laundering and Terrorism Financing

As it is possible to see, money laundering is not possible without using fraud, corruption, and loopholes in the existing financial laws to successfully conduct operations. Subsequently, the techniques utilized in money laundering are essentially the same as those used to fund terrorism. Many terrorist factions, especially in the Middle East, utilize various illegitimate practices to obtain money.

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These practices include drug trade, slave trade, illegal oil trade, smuggling, and weapons trade (Masciandaro 37). Money laundering enables terrorist organizations to use illegal money to purchase materials and resources they need. One example of money laundering being utilized to support terrorism includes the oil and weapons trade between ISIS and Turkey (Aliu et al. 98).

Conclusions

Fraud, corruption, and money laundering are the tools terrorists use to sustain themselves. Despite wars being fought in the Middle East and other places around the world, terrorism continues to survive. Military action has proven to be largely ineffective in destroying terrorism. Interventions should be aimed at cutting off their financial supplies instead. Without resources, the threat of terrorism will become much less potent than it is now.

Works Cited

Aliu, Mohamet, et al. “A Review of Sources on Terrorist Financing.” Acta Universitatis Danubius Juridica, vol. 13, no. 1, 2017, pp. 97-107.

“Anti-Fraud, Corruption, Money Laundering and Terrorism Financing, and Domiciliation of BSTDB Counterparties Policy.” Black Sea Trade & Development Bank. 2016. Web.

“Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT).” International Monetary Fund. Web.

Masciandaro, Donato, editor. Global Financial Crime: Terrorism, Money Laundering, and Offshore Centers. Routledge, 2017.

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IvyPanda. (2021, May 28). Fraud, Money Laundering, and Terrorism Financing. https://ivypanda.com/essays/fraud-money-laundering-and-terrorism-financing/

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"Fraud, Money Laundering, and Terrorism Financing." IvyPanda, 28 May 2021, ivypanda.com/essays/fraud-money-laundering-and-terrorism-financing/.

References

IvyPanda. (2021) 'Fraud, Money Laundering, and Terrorism Financing'. 28 May.

References

IvyPanda. 2021. "Fraud, Money Laundering, and Terrorism Financing." May 28, 2021. https://ivypanda.com/essays/fraud-money-laundering-and-terrorism-financing/.

1. IvyPanda. "Fraud, Money Laundering, and Terrorism Financing." May 28, 2021. https://ivypanda.com/essays/fraud-money-laundering-and-terrorism-financing/.


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IvyPanda. "Fraud, Money Laundering, and Terrorism Financing." May 28, 2021. https://ivypanda.com/essays/fraud-money-laundering-and-terrorism-financing/.

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