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The solutions to money laundering as a crime in the banking sector in Zimbabwe

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1.1 Introduction

The new global economy fuelled by advances in information and communication technology

(ICT) holds potential benefits and opportunities for countries world wide. However, these

opportunities also have their own challenges. Among these challenges include crimes related to

the information economy which is seen as an increasing source of concern within the

international financial community. The proceeds from these crimes are camouflaged to give it a

legal appearance and this process is known as “money laundering”. The seriousness of money

laundering is reflected in the aggregate volume of funds laundered which has been estimated by

the International Monetary Fund (IMF) to be around 2-5 percent of global gross domestic

product.

Giving reference to the Ministry of State Enterprises, Anti-Corruption & Anti-Monopolies

(Zimbabwe), Money Laundering is a global phenomenon that affects all countries in varying

degrees. Although there is no single definition of money laundering most descriptions commonly

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

refer to it as a process by which criminals attempt to conceal the true origin and ownership of the

proceeds of their criminal activities. If undertaken successfully, it allows the criminals to

maintain and control these proceeds and ultimately provide a cover for their source of income.

By its nature money laundering is a hidden activity perpetuated in secrecy.

The Bank Use Promotion and Suppression of Money Laundering Act (Chapter 24:24) No 2/2004

(Zimbabwe), Part 1 section (2) A reference in this Act:

(b) Money laundering or laundering the proceeds of a serious offence means any act, scheme,

arrangement, device, deception or artifice whatsoever by which the true origin of the proceeds of

any serious offence is sought to be hidden or disguised.

According to Tim Hidle (1999; 131), money laundering is the process of turning ill-gotten

money gains into seemingly legitimate cash, passing dirty money through clean places (such as

Switzerland) in order to disguise where it came from or to shield it from the gaze of the tax

inspectors.

The term, money laundering can also be defined as conduct/acts designed in whole or in part to

conceal or disguise the nature, location, source, ownership or control of money (can be currency

or equivalents, eg. checks, electronic transfers, etc.) to avoid a transaction reporting requirement

under state or federal law or to disguise the fact that the money was acquired by illegal means.

Money laundering is the process by which large amounts of illegally obtained money (from drug

trafficking, terrorist activity or other serious crimes) is given the appearance of having originated

from a legitimate source. In US law it is the practice of engaging in financial transactions to

conceal the identity, source, or destination of illegally gained money. In UK law the common

law definition is wider. The act is defined as taking any action with property of any form which

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is either wholly or in part the proceeds of a crime that will disguise the fact that that property is

the proceeds of a crime or obscure the beneficial ownership of said property.

(http://www.laundryman.u-net.com.page2-wisml.html 15/02/10 1950hrs).

The term Money laundering refers to the process of changing the appearance of large amounts of

money obtained from serious crimes, such as drug trafficking, into origination from a legitimate

source. It is a crime in many jurisdictions with varying definitions. It is a key operation of the

underground economy (http://en.wikipedia.org/wiki/money_laundering 15/02/10 2000hrs).

The phrase money laundering is said to risen from the practice of the most infamous money

launderer in the 20th century. The launderer, Al Capone was a dealer in elicit drugs in the 1920s,

and the drug was alcohol during the time of prohibition. He went on to set a number of laundries

for clothes cleaning as legal business which he could pass cash which he had earned from other

illegal businesses that is cleaning the money. It is estimated that 20% of the money that is

moved around the world is secret money.

This form of money is believed to be

Money that arises from individuals who place money in secret bank accounts to avoid tax or

public criticism.

Money from companies and government that wish to have ‘slush funds’ that they can use to pay

for certain services or assistance. They rather not have such kind of payments known about.

Criminal money that is the result of illegal activities for example fraud, drug dealing. The

criminals have to clean this money before the use and this is done through passing it through

clean places like financial institutions.

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

Money laundering and other financial-related crimes have significant economic and social

consequences for nations worldwide. It weakens the financial systems which are the main

players for global financial transactions. This in turn will jeopardize the socioeconomic

development of these nations. For money laundering activities to be carried out, a medium to

launder the illicit funds is required. The preferred medium chosen by money launderers is the

financial institutions due to its efficiency and its low cost in carrying out financial transactions.

To develop a robust economy and sustained standard of living, countries should undertake all

efforts to combat money laundering activities. In this context, good governance is vital for

ensuring the integrity of the financial systems. Countries across the world have developed laws

and regulations to curb money laundering. Anti-money laundering efforts world-wide were

focused on enhancing the resilience of the financial institutions against money laundering and

other related financial crimes.

1.2 Background of the study

In money laundering the fraudster disguises the existence, nature, source, ownership, location

and disposition of property derived from criminal activity. Currency is a popular commodity in

criminal activity; it is fungible—one dollar looks just like another—and further loses its identity

when entering the economic stream.

Zimbabwe Allied Banking Group is being affected by the cases of laundering. There are cases

of a fraudster in Harare ZABG Head Office Samora and Kadoma Branch within the same

institution. There were some employees who were involved in the crime.

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On February 12 2010, ZABG was defrauded USD141 836. The culprit allegedly "suppressed" a

suspense account to conceal funds he allegedly transferred from the bank to his "friends". The

funds where transferred so that they will lose identity and will not draw attention on making

withdrawals. The fraudster opened three forex accounts providing fake identity cards; he then

funded the accounts as a process of cleaning the ill-gotten proceeds. He also deposited some of

the funds in a Redan Petroleum account with Stanbic Bank. The transfer of funds was to conceal

the source and ownership of funds.

In a different scenario, ZABG bank employee at Kadoma branch has been arrested on allegations

of defrauding clients of more than US$3 000.

"Investigations carried out revealed that the accused was allegedly making fraudulent cash

transfers from the bank's clients, and crediting cash into his staff account," said the officer-in-

charge CID Kadoma. He said investigations had so far established that offender allegedly

defrauded clients a total US$3 194 and nothing was recovered. The Herald understands that the

offender allegedly defrauded three identified clients, the first client was defrauded more than

US$2 200 and the second over US$900. The offences are believed to have been committed

between October and December 2009 and it is believed that more clients could have been

prejudiced.

According to the Zimbabwe Independent of Thursday, 18 February 2010, in January 2010:

Investigations at FBC Bank unearth a massive US$1 million fraud at its Mutare branch. The

bank says it has established that it has lost US$500 000. Junior workers defrauded the bank in

collusion with senior managers and most of the suspects have since been arrested. The fraud was

discovered when the bank was carrying out month-end reports for January, and the accounts

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would not balance. The employees made fictitious deposits to three accounts they had opened to

facilitate the fraud and would withdraw the money, then deposit it again into the personal

accounts of accomplices. This unique fraud occurs because both junior and some identified

senior staff were acting in collusion; hence the dual control system was compromised.

The purpose of making these transfers where to conceal the source of the funds to the public. If

he had made the withdrawals straight from above account it was going to quickly draw attention

of the tellers and other staff members within the institution who were not part of the gang.

1.3 Statement of the problem

Money laundering is continuously being committed in the financial sector and involving some of

the employees within the organization. This raises the question whether the employees are

willing and able to prevent money laundering. The researcher is going to analyse whether the

employees are willing and able to prevent money laundering.

1.4 Statement of hypothesis

This study seeks to test the following claim;

There is an ultimate way to resolve money laundering in Zimbabwe.

1.5 Objectives of the study

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

To find the extent to which money laundering can be prevented in the banking sector in

Zimbabwe.

To establish the relationship between corporate governance and employees’ willingness to

prevent money laundering.

To find out if there is any relationship between the level of motivation and the reason for

committing the crime.

To find the ways of educating the public and employees in the financial services about money

laundering law.

To find out on the major challenges in preventing money laundering.

To expose the most used channels and methods of laundering money.

1.6 Significance of the study

The research, if successful, will bring benefits to ZABG and the Zimbabwean economy at large.

The benefits will include the following:

Being in a position to prevent money laundering, ZABG will increase investor confidence. The

investors will know that there funds are safe thereby raising business for ZABG. At the same

time, this will raise confidence in customers to do business with ZABG. This shall not apply to

ZABG alone but the whole industry.

The study will also help ZABG in raising employee ability to report any suspicious transactions

through education and training concerning money laundering. The research will have figured out

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whether the employees are in a position to report any suspicious transactions.

There may be some channels that we do not suspect but being used to clean the dirty money that

is being generated within the country and outside the country but being used here in Zimbabwe.

This means that ZABG will not be used such for such crime and will have a good reputation.

A successful research will help ZABG to direct resource where there is the need. This will come

after identifying the challenges faced in solving money laundering and therefore appropriate

measures are to be taken to overcome them. This will see the resources being directed to the

place at the right time.

There will be increased revenue to the Government. This is true in the sense that all those who

are dodging the payment of taxes will be paying or will not operate at the expense of the

government. The government raises its money from taxes which is the major source. The tax

will be collected in all forms including income tax and duties.

Given that then research is a success, our local manufacturers and providers of services will

perform in a fair environment. Those monies that are cleaned are usually gained with less

expense meaning the services and products supplied are cheaper than those provided in a clean

way.

1.7 Delimitations of the study

The researcher will contact his research within the following delimitations:

The period of the research is ranging from 01 February 2009 to 30 March 2010.

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The target population is the ZABG Retail Banking Division employees in Harare, Kwekwe and

Gweru branches, Corporate Banking and Stock Brokers.

1.8 Limitations

The researcher will also be limited by financial factors as we are using currency that is not ours

and is a scarce resource.

1.9 Research assumptions

This is what the researcher assumes as he gets into the filed during the research period:

All the research questionnaires will be returned to the researcher.

All questionnaires will be answered in honesty.

The conducted population will be willing to participate.

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CHAPTER 2

LITERATURE REVIEW

2.0 Introduction

This chapter serves to provide an overview of money laundering. A number of variables were

looked into during the past researches in an attempt to curd money laundering in different parts

of the world. Different aspects of money laundering will be looked at, and these include the

definition, instruments for money laundering, ways of solving money laundering, challenges

faced in solving money and targeted channels for laundering money.

2.1 Defining money laundering

In its definition, the Ministry of State Enterprises, Anti-Corruption & Anti-Monopolies

(Zimbabwe), Money Laundering is a global phenomenon that affects all countries in varying

degrees. Although there is no single definition of money laundering most descriptions commonly

refer to it as a process by which criminals attempt to conceal the true origin and ownership of the

proceeds of their criminal activities. If undertaken successfully, it allows the criminals to

maintain and control these proceeds and ultimately provide a cover for their source of income.

By its nature money laundering is a hidden activity perpetuated in secrecy.

The Bank Use Promotion and Suppression of Money Laundering Act (Chapter 24:24) No 2/2004

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(Zimbabwe), Part1 section (2) A reference in this Act to⎯

(b) Money laundering or laundering the proceeds of a serious offence means any act, scheme,

arrangement, device, deception or artifice whatsoever by which the true origin of the proceeds of

any serious offence is sought to be hidden or disguised.

Combining the two definitions with that of the Ministry of State Enterprises, Anti-Corruption &

Anti-Monopolies, both definitions have the element of concealing the true origin and ownership

of criminal proceeds.

According to Ping He (2004), Money laundering is a sort of criminal activity trying to conceal

the illegality of proceeds of crime by disguising them as lawful earning. In another definition,

money laundering is the process of turning ill-gotten money gains into seemingly legitimate

cash, passing dirty money through clean places (such as Switzerland) in order to disguise where

it came from or to shield it from the gaze of the tax inspectors (Tim Hidle 1999; 131). The

definitions talk of concealing the prices of criminally gotten proceeds.

The aspect of concealing the origins of money is also stated in this definition as stated by Ping

He (2004) and Tim Hidle (1999; 131). Other definitions include the sources of money or the

crimes committed such as fraud, drug trafficking and smuggling. This is also shown in the

following definition, “Money laundering is the process of changing the appearance of large

amounts of money obtained from serious crimes, such as drug trafficking, into origination from a

legitimate source,” (http://en.wikipedia.org/wiki/money_laundering 15/02/10 2000hrs). Ministry

of State Enterprises, Anti-Corruption & Anti-Monopolies pointed out that Professor Louis de

Koker suggests that the concept of money laundering overlaps with certain common law

offences, for example fraud, forgery and uttering and statutory offences such as corruption and

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exchange control offences.

It does this by involving itself in a wide variety of criminal activities such as bribery, drug

trafficking (Pinner, 1994) embezzlement, fraud, illegal arms sales (Baldwin, 2004), insider

trading, prostitution rings, smuggling, terrorism (Linn, 2005; Baldwin, 2004) and by obscuring

illegal origins of profits by making them appear legitimate.

According to Samah Al Agha, (2007) in Islamic perspective, Although money laundering is a

contemporary crime, over 1,400 years, it has been addressed through many provisions in Quran

and Sunna that contain the conception of money laundering. For example, prophet Mohamed

prohibits any activity funded by money derived from Souht (unlawful trade or ill-gotten

property). He said: “Any activity built from Souht, will be casted into Fire” (Saleh and Saleh,

2006). Furthermore, Prophet Mohamed prohibited the use of money generated from illegal

activities even if it goes to poor people or to charities. He said: “Sadakah comes from theft are

not acceptable.”

Samah Al Agha,(2007), However, the scale of prohibitions in Islam is much wider than the scale

of prohibition in any other secular laws. For example, whereas gambling (which means Qimar

and Mysar in Islam) is allowed in too many countries, it is prohibited by Islamic law. In addition,

while Paghy (prostitution) is legal in some jurisdictions, it is illegal in Islamic law, so Islamic

law illegalizes the money that comes from prostitution. Prophet Mohamed explicitly prohibited

taking the money earned by prostitution. There are two scales of prohibitions by Islamic law:

general provisions and specific provisions of prohibitions. This view was also taken from a

biblical point of view where the money is being regarded as evil as it was prohibited from being

taken.

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B Shanmugam et al (2003), money laundering is generally referred to as the process by which

the proceeds of elicit sources of money are brought into legitimate and organised system. The

end result is that the money is illegally gotten. Antony Whitehouse ( 2003) The FSMA goes on

to specify that ‘financial crime’ includes any offence involving handling the proceeds of crime.

2.2 Stages in laundering money

The complete process of it consists of placement stage, layering stage, and integration stage

(Gilmore, 1995). Money laundering is a complicated activity, in which the source and nature of

dirty money are disguised in order to make the money look lawful and then become usable,

transferable, and negotiable. The stages where also stated in the studies of B Shanmugam et al

(2003). They involve breaking the large amounts of cash into less conspicuous amounts and

putting them into the financial system as the placing stage. The money then moves to the next

stage of conversions and movements and then re-entering the legitimate economy

2.3 Forms of laundering

2.3.1 Cash smuggling

In November 1991, the first money-laundering case by smuggling cash in human body was

reported by John F Kennedy International Airport customs authority. A female Ghana

immigrant, under interrogation of customs officers, acknowledged carrying $9,000 in cash, just

under the customs declaration point of $10,000. Nevertheless, customs officers found $24,000

small bank notes packed in some sheets in her luggage, $224,000 in 100 cash rolls hided in

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shampoo bottles, and $53,000 in small bags in her stomach, which was detected by X-ray test

(Dupuis-Danon, 2006, p. 56).

The traditional cash smuggling is still in use, this is supported by Ping He (2004), in the

following quotation, “Cash smuggling is a method of money laundering in which the proceeds of

crime are stealthily moved cross border, and then deposited in banking institution, paid for real

estate or invested to establish companies.” The reason is that the proceeds of crime are mostly

cash, therefore cash smuggling is a simple way for the criminals to evade tracing of the

authorities. This is seconded Ma Yu-Feng (2004) in the study of Taiwan when it was mentioned

that Taiwan is cash oriented and hence makes is difficult to detect money laundering which is an

indication that cash smuggling is still in use. Some studies by Stephen Schneider (2006) showed

that according to police cases, the criminal proceeds are transported from Canada to off-shore

locations in one of three ways and one of the ways is physically smuggling cash. This in it self is

an indication that cash smuggling is one of the vehicles for money laundering.

The Eastern and Southern Africa Anti-Money Laundering Group (2008), also supported the fact

that cash smuggling is one of the major methods used by terrorist financiers, money launderers

and organised criminals to move money derived through illegal means to support their activities.

In cash smuggling operations, couriers will, inter alia, travel by road, through airports or by lake

or sea with loads of cash, often stuffed into boxes, suitcases and concealed compartments in

vehicles and on persons. They went a step ahead and how the cash is carried around the world.

2.3.2 Money laundering through banking institutions

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The most frequently used instrument by money launderers is banking institution. Ping He (2004),

“Financial institutions can provide multiple services, such as deposit, loan, acceptance, discount,

foreign exchange, settlement, and the like.” According to S Vaithilingam and M Nair (2007), In

fact the FATF (2001) report on Money Laundering Typologies identifies online banking and

internet as major money laundering vehicle. Accordingly, Chief Financial Officer (2002) report,

“Technology changes have influenced the operating strategies of many banks and non-banks as

they seek to compete in the increasingly fast-paced and globally interdependent business

environment”.

Alexander (2001) argued that these alternative payment technologies has open breaches that can

be exploited for disguising profits from criminal activities, as money can be channeled through

multiple accounts in a host of different sources. This poses problems relating to traceability of

the individual transactions which requires vast amount of record keeping. Further more, due to

difficulties in traceability, law enforcement intervention occurs only after the event has taken

place (FATF, 1998). Philippsohn (2001) and Vargas and Backhouse (2003) argued that

legislation and regulation implemented to combat money laundering activities needs to deal with

the use of new technology. Stephen Schneider (2006) had police cases which showed that

criminal proceeds are transported from Canada to off-shore locations in ways which include

transporting bank drafts, certified cheques, and other monetary instruments; or through electronic

wire transfers.

Proceeding with the studies, Ping He (2004) also added the principle of banking secrecy that

exists in almost every country. Owing to these characteristics, financial institutions are the most

vulnerable sectors for money launderers. M Toth and I L Gal (2004) also supported the same

view, “…., and in the next few years a very loose interpretation if the banking secrecy provided

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ideal conditions for money launderers.” With the help of financial institutions, wittingly or

unconsciously, criminals transfer capital through transferring accounts or remit funds into other

countries, and eventually cover up or conceal the nature or source of the illegally obtained

proceeds.

2.3.3 Money laundering through insurance institutions

This is vehicle for money laundering in all countries. There is a case from Ping He (2004)’s

studies which goes on as follows:

A drug trafficker purchased a life insurance policy with a value of US$80,000. The policy was

purchased through an agent of a large life insurance company using a cashier's cheque. The

investigation showed that the client had made it known that the funds used to finance the policy

were the proceeds of drug trafficking. In light of this fact, the agent charged significantly higher

commission. Three months following this transaction, the investigation showed that the drug

dealer cashed in this policy (Financial Action Task Force (FATF), 2005). In this case, the money

launderer disguised the illegal origin and nature of his proceeds by buying an insurance policy

with proceeds of drug trafficking and then selling it to cash in. Meanwhile the agent of insurance

company acted as a party to this conspiracy of money laundering.

Explaining the view, Ping He (2004), Money laundering through insurance institutions is to

disguise the origin and nature of illegal proceeds and gains obtained from it by buying, altering

and surrendering insurance policies and filing insurance claim in order to avert the tracing of the

authorities. From the case above we can see how money was laundered through the insurance

institutions. Insurance institutions are also heavily employed by money launderers, the reasons

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for which can be attributed to the characteristics of insurance business and a comparatively weak

interference of legal system in this market. In addition to Ping’s view, Stephen Schneider (2006),

had a case of Canada in which the insurance sector was implicated in almost 65 percent of all

cases, in the vast majority the offender did not explicitly seek out the insurance sector as a

laundering vehicle. Instead, because motor vehicles, homes, companies, and marine vessels were

purchased with the POC, it was often necessary to purchase insurance for these assets. The two

agreed on the use of insurance companies for laundering money.

2.3.4 Money laundering through realty or lottery business

According to his discoveries, Ping He (2004), noted that with the banking institutions,

strengthening their anti-money laundering measures more and more, money launderers have got

to search for new channels, among them are purchasing realty, rare metal, jewel, antique, and so

on. Auction house and lottery are also often used by money launderers, because the people in

these businesses are not ready to combat money laundering, and governments of many countries

have not asked these industries to take the responsibility of anti-money laundering. To add more

value, Stephen Schneider (2006) highlighted that real property was purchased to further the

illegal activities of the criminal organization, in particular the acquisition of homes or rural land

for marijuana cultivation. Findings from Canada, the case study used by Stephen Schneider

showed that legalized gambling, in particular casinos and lotteries, were used to launder funds in

five cases.

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2.3.5 Money laundering through underground banks

A report given by FATF use a special term standing for underground banks, alternative

remittance systems, which described a remittance network out of the governance of the

governmental financial supervision. The service mode of legal banks is an executive structure to

an individual, while that of underground banks is an individual to an individual, which makes

transaction much simpler (Dupuis-Danon, 2006, pp. 174-8). Some companies choose to make

underground transactions because they are briefer and cheaper. The underground banks are much

resorted to by money launderers, though not all underground banks have something to do with

money laundering. In St Lucia, Alternative remittance systems, or underground banks, are

considered to be operating in violation of Banking Law Article 29.

2.3.6 International trade-based money laundering

Ping He (2010) gave a case of money laundering through International trade-based:

A Brazilian company signs a contract to export soybeans to a German company who prepays the

Brazilian company for the shipment. The Brazilian company immediately transfers the funds to a

third party that is unrelated to the transaction. The soybeans that were purchased by the

German company are never shipped (FATF, 2006). In this case, the German company

transferred funds to the Brazilian company as an advance payment for a shipment of soybeans.

Suspicions were raised when it was found that exports of soybeans were inconsistent with the

scale of the company's operations.

Further research by Ping He (2004) showed that money launderers often fake transactions or

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overstate the price of the subject matter in trade based money laundering. In general, the

following features of international trade makes it highly attractive to money launderers: the

tremendous quantity and value of the commodity which gives superior cover to the proceeds of

crimes; the entire chain of international trade comprises many links including freight, insurance,

foreign currency exchange, and so on, and more links give money launderers more chances; the

cross-nation and cross-culture trade involves different legal system and financial mechanism

which confronts anti-money laundering actions with a variety of difficulties like cross-language

communications, information exchange, resources sharing, and application of different anti-

money laundering law.

2.3.7 Money laundering through Shell Company or front company

Shell Company refers to the company that does not have funds or enough funds required by law,

do not have organizational structure or fixed premises for production and operation that is

according to Ping He. Shell Company is fictitious because it has no real operating activities. The

criminal has more control over the company being used, financial institution through which

funds are passed may well view sizeable fluctuations in account activity with less suspicion than

similar activity on a personal account and the links between the criminals and the company can

be concealed by means of company ownership structures. In another study, R. Barry Johnston

(2006), in setting-up offshore shell corporations, the use of third parties including family

members and military officers and other measures aimed at disguising General Pinochet's

ownership the funds.

On another hand, Stephen Schneider (2006), mortgage financing actually came from a shell

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company controlled by the accused (and incorporate by the lawyer), while the mortgage

payments originated from an account in the name of the accused. The chief focus of this move,

then, has been to show that money laundering can be done through shell companies. Mitch Van

der Zahn et al (2007), these transactions also involve a number of complex money laundering

techniques including “smurfing” (avoiding detection by conducting transactions in amounts

under $10,000), front companies, mis-invoicing, shell companies, wire transfers, mirror-image

trading and parallel systems.

2.3.8Money laundering through offshore corporation or offshore financial center

The findings of Ping He (2004), in recent years, the areas such as the Virgin Islands, Bahamas,

and Bermuda have established several economic zones called offshore jurisdictional area with

less strict regulations through legal methods. The corporations which are registered in these

areas, whose investors are not required to go to the areas personally, and whose businesses can

be directly operated anywhere throughout the world are called offshore corporations (Weimin,

2005a, p. 263). These are areas of no rules and businesses operate illegally.

The studies of B Shanmugam et al (2003) in Malaysia showed that the activities of money

laundering were in off-shore areas. The area mentioned is the Labuan have banks which were

opened to cater for and developing the islands.

2.3.9 Money laundering through professionals such as lawyer or accountant

Continuing with the study and the use of cases to explain, Ping in 2006 gave the following case

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with lawyers:

In one country, a prominent attorney performed services for a whole clientele of launderers. A

client with US$80 million, proceeds from an insurance fraud, used the lawyer to transfer the

money to financial institutions in countries where there are few or no anti-laundering

regulations. The attorney opened accounts in various banks under false names of individuals or

corporations. The illegal funds were placed in the form of cash or checks in banks in the country

in question, then wired to different accounts controlled by the attorney. It should be noted that

because of his professional repute the domestic banks never considered it necessary to look

more closely at the nature of the transactions in question.

Ensuing with the researches, Ping He (2004), discovered that criminals have turned to the

expertise of lawyers, accountants, and other professionals to aid them to minimize suspicion

surrounding their criminal activities. Accordingly, Stephen Schneider (2006), in a 2002 report,

the Financial Action Task Force (FATF), an international government agency initiated by the G-

7 Group of Nations to recommend and monitor national money laundering laws, wrote that

lawyers play numerous roles and provide several benefits to those wishing to launder the

Proceeds Of Crime (POC).

Lawyers' trust accounts are used for the placement and layering of funds and through their

specialized expertise, lawyers provide a “gatekeeper” service by creating the corporate vehicles,

trusts, and other legal arrangements that facilitate money laundering. Lawyers also offer the

financial advice that is a required element of complex money laundering schemes. The use of

layers, people regarded as professionals do not raise suspicion. Criminal entrepreneurs have

long been involved in establishing, purchasing, investing in, and selling companies and business

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assets for the purposes of money laundering (Edwards, 1990; New York Times, 1990; Nicaso and

Lamothe, 2000; Quebec Police Commission, 1977; Royal Commission on Customs and Excise

(Canada), 1928; Sher and Marsden, 2003)

2.3.10 Money laundering through electronic money and internet

Referring to Ping He (2004), the development of high technology is a double-sided sword. He

went on to talk about the emergence of electronic money, internet bank, internet casino which

offer criminals wider space to commit money laundering. The features of these new products

and services include increase speed of transmission of digitized information, facilitating the

movement of funds and services transcending distance within and across national boundaries

(Bradley and Steward, 2002) and anonymity (Philippsohn, 2001).

Mishkin and Strahan (1999) and Berger (2003), speed, distance and anonymity are the key

factors that are transforming the financial system. However, the new products and services which

include electronic banking and the introduction of e-money technologies have made money

laundering activities even more prevalent (Masciandaro, 1998, 1999; Philippsohn, 2001).

2.4 Target business to prevent laundering

With reference to Ping He (2004), “as a result, since 1980s, many international anti-money

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laundering documents have regarded banking institutions as the base of combat against money

laundering, and emphasized the responsibilities banks shall assume to identify their clients, keep

record and report suspicious transactions. In 2000, 11 major multinational banks including

Chase Manhattan Bank, Society General Bank of France, Union Bank of Switzerland, Hong

Kong and Shanghai Bank, and ABN AMRO Bank resolved to work together to control the

rampantly growing money laundering in the world.

R Alexander in (2004) had the regulations which were specifically addressed to the financial

sector and relevant business was defined as:

Deposit-taking business by banks and building societies.

Wider banking services as set out in the Annex to the EU Second Banking Directive, the

business of credit unions

The business of the National Savings Bank

Investment business as defined in the Financial Services act 1986

Insurance business

2.5 Preventive measures

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2.5.1 Customer identification

World Savings Banks Institute (WSBI, 2009), Members have launched initiatives to

overcome the problems caused by identification requirements: for example South Africa

PostBank , PostBank accepts any valid documents reflecting the customer’s address, for

the identification of clients regulated outside the scope of the entry-level Mzansi accounts.

These are: utility bill; bank statement from another bank, recent lease or rental agreement;

municipal rates & taxes invoice; retail account statement; telephone or cellular, telephone,

account; valid television license; home loan statement from another financial institution;

among other documents.

In S Vaithilingam and M Nair (2007) research, the guidelines provide by the Joint Committee on

the National Crime Authority (2001): included requesting proof of identity to open internet

accounts. From another angle, M Toth and I L Gal (2004) also mentioned hat the legislation of

financial institutions saw 90 percent of Hungray’s savings accounts turning to named accounts

which reduced the level of money laundering. Trifin J R and M Salak (2003: p77) also placed

much emphasis on customer identification on account opening when he indicated that financial

institutions should maintain accounts solely in the name of the account holder and failure to

comply will result in a fine of $5, 000 or imprisonment for up to one year.

Ian Carrington and R B Johnston (2006): also talked of customer identification through know

your customer (KYC);” … know-your-customer (KYC) principles need to be applied on an on-

going basis during the course of a bank-customer relationship.” Johnston also added that banks

are expected to establish and maintain effective Customer Due Diligence (CDD) measures at the

point of establishing a customer relationship. Ma Yu-Feng (2004), in his solutions to money

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laundering also placed emphasis on KYC at the same time tracking the patterns of customer

transactions. To this juncture we can we see that customer identification of significance in

combating money laundering. This is also pre-requisite in Zimbabwe in order for one to have a

bank account to be opened.

B Shanmugam et al (2003) also identified the use KYC as a means for money laundering. The

central Malaysia provided know your customer guidelines in June 1989. The same guidelines

were also revised in December 1993. On the other hand R Alexander (2004), talked of the

requirement for customer identification, often referred to as the ‘know your customer’ rule as

perhaps the most familiar as it is certainly the most discussed. The author highlighted that the

financial institutions must require from the customer ‘satisfactory evidence of his identity.’

2.5.2 Know Your Employee (KYE)

According to Ma Yu-Feng (2004), the employer must know his employee. A number of things

must be considered and investigations must be carried out. This is when an employee is

reluctant to go for a vacation to which he or she is entitled to, an employee leads a lavish lifestyle

that cannot be supported by his or her salary, and when an employee is associated with

unexplained mysterious significant deposits to and or withdrawals from his or her account. The

researcher went further beyond the factors considered by a number of researcher and came up

with a unique idea.

2.5.3 Legislation

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Regulation refers to the means by which any activity, institution, organism of person is guided to

behave in a regular way or to rule (Picciotto, 2002). A well-functioning legal system and

efficient enforcement of laws and regulations are important precursors for a stable financial

sector (Fergusson, 2006). This in turn can lead to effective implementation of international anti-

money laundering programs. In another view, “… if the conduct of a certain economic actor is

not as expected or hoped for, the reason must be sought by analyzing the game rules, formal and

informal, that are represented primarily by the anti-money laundering laws (Masciandaro and

Filotto, 2001).

Backing legislation, Asselin indicated that one of the best ways to counter money laundering

problems would be by creating legislative solutions that are capable of improving the fight

against organized crimes. Two types of solutions were mentioned that is intermediate legislative

measures and laws aimed directly and exclusively at eliminating organized crime. M Toth and I

LGal (2004) also suggested the use of legislation as a means to prevent money laundering when

a committee was set to do everything in Hungray’s power to prevent money laundering and

introduce relevant legislation acceptable to the community and other international forums

operating in the region.

In 2004, the GOZ passed more expansive legislation, the Anti-Money Laundering and Proceeds

of Crime Act (“The Act”) that extended the anti-money laundering law to all serious offenses.

The Act required banks to maintain records sufficient to reconstruct individual transactions for at

least six years. It mandated a prison sentence of up to five years for being involved in money

laundering activities.

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2.5.4 Quality human capital

According to Satha, quality of human capital is vital in the well being of the financial sector and

the socioeconomic development of a country. The author went on to encourage developing

economies to increase the number of skilled workers in the country and should also be able to

retain these valuable human resources in their countries. Developing countries with the aid of the

developed countries should, place high priority on identifying opportunities for mutual

cooperation and resource sharing with developed countries; provide continuous education and

develop appropriate training for financial regulators and employees of financial institutions on

cutting-edge technology, new financial instruments and effective regulations in curbing money

laundering and other financial crimes (Basel Committee, 1997).

2.5.5 Reporting suspicious transactions and record keeping

As the research ensue, S Vaithilingam and M Nair (2007), the FATF (2001) has suggested the

need to have good systems to improve customer identification and record-keeping so as to

facilitate identification and reporting of any suspicious transactions especially in the case of

multiple transactions (FATF recommendation 11). The information is suppose to be kept for a

period ranging from six months to year and should be made available when carrying our criminal

investigations.

Ian Carrington and R B Johnston (2006) supported the fact of reporting suspicious transactions.

Banks though required by there national legislation to keep records on, there objective is to

provide the competent authorities with best quality information possible. The two went on to

argue that reports from banks may not provide meaningful information and reports might not

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arise suspicion. In the view of Stephen Schneider (2006), several countries have already

implemented measures to bring legal professionals under the scope of suspicious and cash

transaction reporting regimes ( Money Laundering Alert, 2002a). In Switzerland, lawyers that

provide financial services are regarded as financial intermediaries and are subject to customer

due diligence and large cash and suspicious transaction reporting obligations.

In some studies Ma Yu-Feng (2004), supported the issue of record keeping of transactions and

that any violation that rule should be reported to law enforcement with Ping He (2004) placing

emphasis on the issue of suspicious reporting of transactions and the training of officers so that

they will be able to detect money laundering activities. WSBI members argued that the

obligation for financial institutions to keep records on the identification data obtained through

the CDD procedure, for at least 5 years (Recommendation 105) proves burdensome and not

justified in a majority of cases. On the other had the FATF reviewed the keeping of information

from a period of up to one year to at least 5 years (Recommendation 105)

Much support to report suspicious transactions and record keeping came from other researchers,

“In this vein financial institutions play a central role in the war against money laundering

(Masciandaro, 2005). Recommendation 16 of FAFT requires that “if financial institutions

suspect that funds are connected to criminal activity, they should be permitted or required to

report promptly their suspicious to the competent authorities.”

The reporting of suspicious transactions and record keeping has proved to be of importance in

combating money laundering. B Shanmugam et al (2003), proceeding with the research pin

pointed that the Malaysian Act which incorporates the requirements of prohibition of non-

anonymous accounts or accounts in fictitious names, proper record keeping, reporting suspicious

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and abnormal transactions (including currency transactions) which are above the amount

specified by the Central Bank.

Proving to be of importance, R Alexander also placed emphasis on record keeping. The

researcher indicated the need to keep customer record of identity for a period of up to 5 years.

This is also in line with the FAFT 40 recommendations. He also indicated the keeping of

transactions for money from gabling regardless of how much as long as they suspect that the

gambler is involved in laundering.

2.5.6 Coping with technology

Ma Yu-Feng (2004) encouraged a regular revision of the guidelines for the financial institution

to hammer money laundering. The author went on to say that e-banking should have a cyber

payment system to keep records and assist in tracing money laundering. In order to reduce

money laundering through electronic money, we should control the utilization of this kind of

money, for instance, limiting the function and capacity of smart cards, restricting the transfer

among the holders of electronic money and establishing central data base to trace the

transactions. As to money laundering through internet casino, it is necessary to require Internet

Service Providers (ISPs) to maintain reliable subscriber registers with appropriate identification

information, require ISPs to establish log files with traffic data relating internet-protocol number

to subscriber and to telephone number used in the connection, require that this information be

maintained for a reasonable period and ensure that this information may be made available

internationally in a timely manner when conducting criminal investigations (He, 2008, pp. 214-

16).

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B Shanmugam et al (2003) encouraged the banks to implement a monitoring and reporting

system which identifies potential money laundering activities. This enables the central bank (of

Malaysia) to ensure that despite the development in the Information Communication and

Technology (ICT), the integrity of the financial system is maintained and the abuse of money

laundering is minimised.

In another view, S Vaithilingam and M Nair (2007) has five key factors such as technology,

quality of human capital, efficiency of the legal framework, ethical behavior of firms (corporate

governance) and capacity for innovation in the economy on the pervasiveness of money

laundering in a sample of developed and developing countries. S Vaithilingam and M Nair

(2007), to this extent, the recommendations put forth by FATF should be taken seriously by

developing nations. The FATF (2001) has reported the following suggestions:

require internet service providers (ISPs) to maintain reliable subscriber registers with appropriate

identification information;

require ISPs to establish log files with traffic data relating to internet-protocol number to

subscriber and to telephone number used in the connection;

require that this information be maintained for a reasonable period (six months to a year);

ensure that this information be made available internationally in a timely manner when

conducting criminal investigations; and

to have good systems to improve customer identification and record-keeping so as to facilitate

identification and reporting of any suspicious transactions especially in the case of multiple

transactions (FATF recommendation 11).

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Antony Whitehouse ( 2003) To be able to carry out effective monitoring firms will need to have

client information at their fingertips to determine when something unusual or out of character has

occurred, again this will inevitably mean more use of systems and databases, with the inevitable

increase in costs. This is in support of the idea of keeping information about customers for easy

identification. The operators in the financial sector should have adequate information

concerning there clients.

2.5.7 Education and training

According to Stephen Schneider (2006), in their 2000 and 2001 National Money Laundering

Strategy reports, the US Treasury and Justice Departments called for studies on the appropriate

role of lawyers and accountants as “gatekeepers” (United States). Department of the Treasury

and Department of Justice, 2001). Vienna convention and FATF (2003) among there

recommendations to developing countries included developing or improving training programs

for its law enforcement officers to ensure that they are updated on the changes in the way money

is laundered.

This view was also reinforced by M Toth and I L Gal (2004) when they encouraged the training

of the police force on ways to detect money laundering identify suspicious transactions and file

STRs as necessary and the use of comprehensive programs for the training of staff.

On the job training to employees concerning money laundering was said to be vital in combating

the problem by Ma Yu-Feng (2004). Despite the legislative moves, a pilot study by Jackson

(2001) on attitudes of Western Australian accountants, real estate agents and solicitors to money

laundering training revealed that of the three respondent groups, accountants have the least

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enthusiasm for training and that throughout the professions of accountancy, real estate agency

and law there was a need to bring their knowledge and skills of anti-money laundering up to an

acceptable level

According B Shanmugam et al (2003) the central bank of Malaysia in collaboration with the

institute of Malaysian banks has initiated a series of education and training programmes to the

banking and financial service staff. This is vital for staff such that it will be able to identify and

take necessary action on money laundering activities. Stephen Schneider (2006), and the others

viewed the need for training on the professionals as well as law enforcement officers.

R Alexander (2004), a further requirement is to provide anti-money laundering training to staff.

On this point he agrees with the judgments of B Shanmugam et al (2003) as they also

recommended on the training of banking staff. Alexander indicated that staff are to be trained on

the reporting procedure, current laws and regulations relating to money laundering as well

training in recognising transactions carried out by or, on behalf of, those who are engaged in

money laundering.

To add value to the issue of training and education, Antony Whitehouse (2003), what has been

the immediate impact of the introduction of POCA on financial institutions? Most obviously

there has been a general requirement to train all relevant staff in the changes to the law and, more

importantly for them, their new liabilities under it.

2.5.8 Good corporate governance

Accordingly, S Vaithilingam and M Nair (2007)’s empirical analysis showed that efficient legal

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framework with good corporate governance lower the pervasiveness of money laundering

activities and a high-innovative capacity contribute negatively to the pervasiveness of money

laundering activities. S Vaithilingam and M Nair went on to emphasise that, good governance is

vital for ensuring the integrity of the financial systems. In another research, Ian Carrington and

R B Johnston (2006) cited that in the United States, the Sarbanes Oxley Act has sought to

strengthen significantly the corporate governance framework for commercial entities in general

and the Patriot Act to address vulnerabilities related to the financing of terrorism.

2.5.9 Offering Incentives to banks

Ricardo Azevedo Araujo (2008), proposed the use of incentive-based approach to combat money

laundering. However, even in environments in which the principle of bank secrecy is more

flexible the efficiency of the anti-money laundering regulation based mainly on an incentive

approach has been at doubt. According to this approach, if the conduct of a certain economic

actor is not as expected or hoped for, the reason must be sought by analyzing the game rules,

formal and informal, that are represented primarily by the anti-money laundering laws

(Masciandaro and Filotto, 2001). This approach also shows that the efficiency of the anti-money

laundering regulation may be reached if the ability of screening the bank willingness to

cooperate increases. This effort has been performed by Financial Intelligence Units (FIU)

hereafter, created to concentrate the efforts to combat money laundering.

The same researcher, Ricardo Azevedo Araujo (2008) discovered that the central problem of

anti-money laundering regulation is to design a system of procedures and incentives that induces

the agent, that is, the financial institution, to act effectively with regard to the production of the

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information required by the principal, that is, the competent authority. According to Masciandaro

(2005), over the past years many countries have created specialized agencies to deal with the

money-laundering issue. This author approaches the anti-money laundering regulation by using a

hierarchical principal-agent approach model in which the lawmaker, the FIU hereafter, and the

intermediary must be considered simultaneously. The goal of the lawmaker is to build a legal set-

up that maximizes the incentives to FIU's and intermediaries to disclose promptly relevant

information on suspicious activities of money laundering.

Changing the angle of focus by Ricardo Azevedo Araujo (2008), here, we adopt an incentive-

based approach but with a different focus: the relationship between the agency, that is, the FIU

and the intermediary or financial institution. The aim is to analyze the efficiency of the existing

anti-money laundering regulation by excluding the possibility of the collusion between the FIU

and the intermediary. Let us assume that the financial institution has two possible actions:

“combat” or “not combat” money laundering. This means that some financial institutions may

decide to take the risk of not combating money laundering, a view that is according to an adapted

concept of “legal-criminal economy” developed by Masciandaro (1999) in which banks are

eligible for being involved in legal and illegal activities concomitantly.

2.5.10 Monitoring physical cross-border transportation.

Ping He (2004), in the 2003 revised “Forty FATF Recommendations”, Article 19 provided that,

“Countries should consider Implementing feasible measures to detect or monitor the physical

cross-border transportation of currency and bearer negotiable instruments. The author went on to

say, “smugglers surely would not report the true number of cash they carry, often hidden in some

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altered devices or certain places of their body hard to search.” The issuing of 1,000-Canadian

Dollar (or CAD) banknote has been terminated. And US$500 cash have been withdrawn from

circulation since 1969 (Dupuis-Danon, 2006, p. 55). The removal of large denominations will

make it difficult to carry huge amounts of hard cash.

A report by the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG)

(2008) showed that there was close monitoring of cross-borders. On 8 November 2007, a

Zimbabwean national was arrested at Chirundu Border Post after he was found in possession of,

Zimbabwean currency, Z$209 6000 000 in the pocket of his jacket. The money had not been

declared to ZIMRA officials as required by law. The money was seized and subsequently

forfeited to the State. The accused was prosecuted at Court.

2.5.11 Imposing sanctions on the FIs and fines

Extending the research Ian Carrington and R B Johnston (2006): the year 2004 witnessed

financial regulators imposing harsh sanctions on commercial banks in response to integrity

related failures within these institutions. In 2004, Riggs Bank and Citigroup were subject to

heavy sanctions from regulators in the United States and Japan, respectively. Riggs was subject

to civil money penalties of $25 million and criminal penalties of $16 million. Supporting the

vision, Ma Yu-Feng (2004) in his studies in Taiwan, went on to support this method of

preventing money laundering in his Article when any financial institution that violet the

provisions set in the Article was liable to be punished by a fine between NT$200, 000 and NT$1

million (Article 17).

Placing emphasis on the imposing of sanctions on the FIs and fines, B Shanmugam et al (2003)

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indicated that the Malyasian act has a provision which provides for stiffer penalties to those who

commit the crime. Those found guilty will be liable for a maximum fine of RM5m (US$1.321) or

a maximum imprisonment for 5 years or both. This is the same view that was adopted by Ma

Yu-Feng (2004) in the researches in Taiwan.

Antony Whitehouse ( 2003) later, in August, 2001, there was the FSA’s (still acting as the

Securities and Futures Authority, SFA) unexpected enforcement action against BS/PaineWebber

for failures in money laundering controls, leading to a then noteworthy fine of £350,000 plus an

award of costs. In this way the regulators sent a very strong message that they would take the

issue of money laundering systems and controls seriously even when no instances of money

laundering were identified. This is showing the adoption of a fine a measure to combat money

laundering making it a valuable measure.

2.5.12 Freezing or seizure of proceeds

B Shanmugam et al (2003), once an entity is has been convicted of a money laundering offence,

the Act requires the freeing, seizure and forfeiting of the properties (both movable and

immovable) that have been deemed to be proceeds of such activities. Findings by Ping revealed

the same point of freezing the proceeds. “Allow law enforcement personnel to identify, freeze or

confiscate proceeds from money laundering activities (FATF 7 and 35).”

Antony Whitehouse (2003) one of the main aims of POCA was to secure far more criminal

assets for the Treasury, but will far more seizures and criminal assets be seen to be recovered by

the Asset Recovery Agency? The reality is that the UK has already had the powers to recover

assets in relation to drug offences since 1986 and for all other offences since 1988, so why

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should POCA make a big difference here? n UK money laundering prevention

2.5.13 .General provisions that prohibit the ill-gotten money

These were observed in the Islamic perspective by Samah Al Agha,(2007). There are many

general Quranic provisions regarding prohibiting illicit activities and illegalizing the money

derived from such activities. For example, in the Holy Quran, there is a Quranic verse that says:

“… God will make lawful for them all good things and prohibit for them only the foul…

”(Pickthall, 2005, verse 157). In addition, in An-Nisa Surah there is a Quranic verse says:

O you who believe! Squander not your wealth among yourselves in vanity, except it be a trade

by mutual consent, and kill not one another. Allah is ever merciful to you. Whoever does that

through aggression and injustice, we shall cast him into fire. And that is ever easy for Allah

(Pickthall, 2005, verse 29,30).

To explain; God allows Muslim people to have or to do good and lawful as regards things, deeds,

beliefs, persons, foods. And prohibits them as unlawful Al-Khabaith (i.e. all evil and unlawful as

regards things, deeds, beliefs, persons and foods. For example, in relation to corruption and

bribery, there is a general Quranic provision says: And eat not up your property among

yourselves in vanity, not seek by it to gain the hearing of judges that you may knowingly devour

a portion of the property of others wrongfully (Pickthall, 2005, verse 188).

2.6 Challenges in preventing money laundering

2.6.1 Privacy

Privacy is in both the financial institutions and in the law and accounting firms. These keep

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information that will be useful to the detection of money laundering. Findings in the research,

Ping H (2004), realised professional secrecy that exists in almost all countries is giving a

challenge in solving money laundering. The secrecy exist in financial institutions as well as law

firms.

The use of internet has also brought about privacy because in this case it is difficult to implement

customer identification and record transactions. This has also been facilitated by the easy to

access internet and contact between customer and institution is personalized. Tadesse (2006), for

example, suggests banking crises are less likely to occur in countries with greater regulated

disclosures and transparency. This indicates the impact of privacy in the financial institutions.

2.6.2 Failure to record names in transactions

According to Ping He (2004), money launderers aim at some features of insurance market:

various insurance products, some of which can be bought by simply paying cash and some of

which can be sold without recording the buyer's name, so giving cover to money launderers;

despite insurance companies' requirement to identify their clients, there is no similar regulations

for insurance agents, who are the ones contacting and negotiating with clients; strict regulations

have been imposed upon insurance companies but not re-insurers which have enormous turnover

each year (Dupuis-Danon, 2006, p. 170). Second, interference of legal system in anti-money

laundering is weaker in non-banking financial institutions including insurance companies than in

banking institutions. Naturally, money launderers turned from banks to easier games, like

insurers.

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2.6.3 Operating environment

According to Ping He (2004), different jurisdictions have different languages, culture, legal

systems, and taxation systems, criminals can fully take advantage of these differences while the

investigation into money laundering undoubtedly meets lots of obstacles which also include

secrecy. There is also high degree of freedom especially in the offshore businesses. It has strict

confidential system.

In many places, offshore corporation does not need to disclosure the information of its

shareholders, equity ratio, earnings and so on to the public. On the other had, Ian Carrington and

R B Johnston (2006): one of the key challenges will be implementing standards worldwide

across continents and countries that are at very different stages of economic development. These

factors make it difficult to trace and prevent money laundering activities.

2.6.4 Customer Due Diligence (CDD) requirements

For WSBI members, the main financial inclusion challenge linked to the implementation of the

AML/CFT rules is the Customer Due Diligence requirements (CDD), as stated in FATF

Recommendation 53. In a number of developing countries, the way people are identified (name,

address etc) makes full compliance with the Recommendation requirement a burdensome

and costly process.

Those financially vulnerable people, who form a significant part of the (potential) clientele of

obligation to get information on the occupation of the clients and on the use of the funds

leads to a heavy procedure for each of the transactions;

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obligation to get information on the occupation of the clients and on the use of the funds

leads to a heavy procedure for each of the transactions;

lack of proper identification documents (ID, Passport);

lack of official proof of income and residence address. For instance, self-employed rural

farmers would not be able to produce proof of income while poor living in rural areas and

informal accommodations will not be able to justify their residence address;

lack of appreciation by the unbanked of the need to supply the compliance information;

customers do have the requisite documentation, but due to the lack of information they do

not have them on their person when going to the bank to open accounts and would necessarily

not be served. These prospective customers might be coming from places quite distant from the

branches, and would obviously find it costly in terms of time and money to go back to the bank

to open accounts.

Some WSBI member banks may also face reputation risks resulting into a commercial

challenge, since these CDD requirements are conflicting with their mandate to serve

unbanked and under-banked people.

A case was drawn from the Lesotho Post Bank:

The impact of the introduction of AML/CFT requirements was measured by the sales

comparison between the years 2005, when the bank started operating, and 2008, when the

CDD/KYC process was implemented: LPB sales have been on an upward trend pre-KYC

implementation, but dropped dramatically in 2008 when KYC was implemented. Sales decline

could have been caused by economic pressures such as increased cost of living, but this decline

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

would have been gradual and not sudden. Overall, the savings book’s new accounts recorded an

average of 1,006 customers per month for 2008, as opposed to 1,700 average numbers of

customers per month in 2007. Obviously the most vulnerable people are often those who lack the

prescribed documents and too stringent requirements often turn them down from embracing

formal banking services.

2.6.5 Conflicting interests

In the simplified version of the “capture theory” of regulation (Stigler, 1971), a unified group of

producers maximizes the wellbeing of its members at the expense of politically unorganized

consumers. On the other hand, Peltzman's (1976) more general theory of regulation, regulators

balance the interests of producers and consumers so that neither group gains all of the benefits of

regulatory intervention, except when one of them is politically impotent and the model reduces

to one of Stiglerian capture.

Other students of economic and social regulation recognized, however, that the firms within an

industry often have competing interests with respect to the outcomes of regulatory processes.

The heterogeneous-firm model of regulation suggests that imposing the same regulatory

standards on all of an industry's members can make the more efficient firms better off. Buchanan

and Tullock (1975) were the first economists to construct such a theory of regulation (Tollison,

1991).

Ping He posed a question, “which is more important, banking secrecy or the fight against money

laundering? This question rose from the fact that the requirement of banks and financial

institutions to perform with due diligence in the course of business, such as customer

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

identification, recording keeping and suspicious transactions, the provisions set challenges the

issue of banking secrecy.

2.6.6 Technological changes

Ping He (2004) had the view that internet money laundering is so complicated that it is difficult

to decide where it occurs. Ping had the questions like, Does it take place where the launderer is

located, where the server is located or where the accounts are held? And also it is quite confusing

to determine which authority has jurisdiction to investigate and prosecute the transnational

crime. In another research, S Vaithilingam and M Nair (2007) found the fact that the FATF

(2001) report on Money Laundering Typologies identifies online banking and internet as major

money laundering vehicle. According to the Chief Financial Officer (2002) report, “Technology

changes have influenced the operating strategies of many banks and non-banks as they seek to

compete in the increasingly fast-paced and globally interdependent business that can be exploited

for disguising profits from criminal activities, as money can be quickly moved within the

environment”.

Alexander (2001) argued that these alternative payment technologies have open breaches

channeled through multiple accounts in a host of different sources. This poses problems relating

to traceability of the individual transactions which requires vast amount of record keeping.

Further, due to difficulties in traceability, law enforcement intervention occurs only after the

event has taken place (FATF, 1998). Philippsohn (2001) and Vargas and Backhouse (2003)

argued that legislation and regulation implemented to combat money laundering activities needs

to deal with the use of new technology.

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

2.6.7 Unwillingness of banks to cooperate

According to Ricardo Azevedo Araujo (2008), theoretically, speaking the problem is easier than

handled in practice. The main difficulties faced by competent authorities range from an imperfect

knowledge of the bank's intrinsic willingness or ability to cooperate by reporting suspicious

activity to inadequate interpretation of the bank secrecy principle by courts. This viewpoint is

also supported by Ping (2005, p. 253) who states that: … although banks are the most vulnerable

institutions to money laundering activities, according to the complex schemes of money

laundering; it is not enough only to impose the obligation of reporting suspicious transactions on

them but it is also necessary to create a legal environment in which they face incentives to

disclose promptly information on any suspicious transactions.

This view is also emphasized by Stessens (2000, p. 172) who states that: … in order to obtain co-

operation from financial institutions that they will not be held responsible, either civilly or

criminally, if they inform the authorities responsible for combating money laundering of facts

which are covered by banking secrecy. Ricardo Azevedo Araujo (2008), this approach also

shows that the efficiency of the anti-money laundering regulation may be reached if the ability of

screening the bank willingness to cooperate increases. This effort has been performed by

Financial Intelligence Units (FIU) hereafter, created to concentrate the efforts to combat money

laundering.

2.6.8 Underground banks

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

Ping He (2004), as a channel for money laundering and capital fleeing, the underground banks

shall be wiped out according to the following articles of PRC Criminal Law: Article 174 about

the crime of establishing commercial banks or other financial institutions without due approval;

Article 176 about the crime of illegal pooling of public deposits; Article 225 about the crime of

illegal operation; Article 191 about the crime of money laundering. However, the battle against

underground banks proved to be of poor cost efficiency and underground banks would never

perish under such pressure.

These banks also offer cheap services which are also faster than the normal and registered

financial institutions. This means most people will still use them thereby giving them the

influence to carry on functioning. Under such circumstances, money laundering will be difficult

to combat.

2.6.9 Weak governance

In S Vaithilingam and M Nair (2007)’s research, According to the FATF (2006b) annual report,

many illegal activities are associated with corrupt practices and lack of transparency, which will

subsequently give rise to weak governance. This in turn results in poor and ineffective

implementation of anti-money laundering programs. Operating in this environment means which

ever effort you put in place will go in vain it will not be put into practice.

2.7 Recommendations

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

The recommendations are mainly focused on developing countries which are in a greater battle

to fight against money laundering.

2.7.1 Developing countries

S Vaithilingam and M Nair (2007) identified developing countries having challenges in

combating money laundering. The pooling of “know-how” experience and expertise by the

regulatory and enforcement authorities is still lacking in these sample countries particularly in

the developing countries, thus lacking an effective synergy. Most of the developing countries do

have laws to curb financial crime and control criminal activities relating to money laundering

activities. However, some of these countries have so far not criminalized money laundering. To

this end, developing countries should focus on the following recommendations put forth by the

Vienna convention and FATF (2003):

Adapt its legislation to comply with international requirement.

Develop or improve training programs for its law enforcement officers to ensure that they are

updated on the changes in the way money is laundered.

Should make an effort to coordinate and cooperate with other countries and international and

regional agencies to enhance the effectiveness of law enforcement action to curb money

laundering activities.

Have laws to establish a regulatory and supervisory mechanism for financial institutions. This is

to ensure that these financial institutions adhere with customer identification and verification

procedures, minimum standards of record-keeping, cooperation among banks, supervisory and

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

law enforcement agencies and mandatory reporting of suspicious transactions (FATF

recommendation 11-13). Although the banking industry is obligated to implement customer

identification (the “know your customer” (KYC) principle) under the Basel Committee on

Banking Regulation and Supervisory Practices (Core principle 15) published its Core Principles

for Effective Banking Supervision (1997), there has been constant opposition by banks as they

feel that it burdens them financially.

Allow law enforcement personnel to identify, freeze or confiscate proceeds from money

laundering activities (FATF 7 and 35).

To this extent, developed countries must provide the necessary support to developing countries

with respect to finance, resources, technical support and training programs. Without this support,

it will be a challenge for these developing countries to combat money laundering activities.

B Shanmugam et al (2003), recommended a continuous research and development. The

researchers indicated that, ‘there should be a continuous effort to assess money laundering

activities, as the launderers will no doubt take ‘loophole mining’ , that is, finding loopholes in

the law and exploiting them to a maximum.”

2.8 The targets for money launderers among other things are:

Ping He (2004), as a result, since 1980s, many international anti-money laundering documents

have regarded banking institutions as the base of combat against money laundering, and

emphasized the responsibilities banks shall assume to identify their clients, keep record and

report suspicious transactions. Casinos and lotteries were identified as placed for money

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

laundering. Gambling areas were also identified by R Alexander. According to Samah Al Agha

(2007), prophet Mohamed also highlighted gambling as an area for money laundering.

Ministry of State Enterprises, Anti-Corruption & Anti-Monopolies identified the following as

the targets for money launderers among other things:

• Countries with high level of corruption

• Countries with a fragile financial infrastructure

• Countries with lack of effective money laundering legislation

• Countries where law enforcement agents and banking staff are under-trained

• Countries that are desperate for foreign currency

Money laundering is often associated with banks, however the sophisticated money launderer

involves many other unwitting accomplices such as: -

• Accountants

• Lawyers/Solicitors

• Surveyors

• Estate Agents

• Management Services Companies

• Antique Dealers

• Dealers in precious stones

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

• Foreign Currency Smugglers

• Car Dealers

2.9 Impact to the inclusive financial sector

AML/CFT requirements place obligations on financial institutions that are expensive to meet

(e.g. having compliance officers at different locations to verify day to day transactions), more

forcefully in developing countries. Mass-market financial institutions such as WSBI member

banks, consider that these regulations are not adapted to the local context and can be

disproportionate in terms of costs and administrative burden, particularly when applied to

“small” accounts and when they have to be repeated for each of the transactions performed.

It is also important to tackle this issue in order to accompany the development of innovative

ways of banking, particularly suited to the needs of low income people in developing

economies. In this respect, branchless banking has proved very promising, both through

partnerships between banks and retail outlets (“agent banking”) or through technologies such as

mobile phones. The positive impact of these new ways of banking should not be weakened by

regulatory obstacles raised by AML/CFT requirements.

Banks feel a financial burden

Have laws to establish a regulatory and supervisory mechanism for financial institutions. This is

to ensure that these financial institutions adhere with customer identification and verification

procedures, minimum standards of record-keeping, cooperation among banks, supervisory and

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

law enforcement agencies and mandatory reporting of suspicious transactions (FATF

recommendation 11-13). Although the banking industry is obligated to implement customer

identification (the “know your customer” (KYC) principle) under the Basel Committee on

Banking Regulation and Supervisory Practices (Core principle 15) published its Core Principles

for Effective Banking Supervision (1997), there has been constant opposition by banks as they

feel that it burdens them financially.

Money laundering is a crucially important globalised activity in contemporary financial society

BINLEA, 2006). It avoids national controls and distributes dirty money around the world. A

country’s financial controls and tax regime can be completely bypassed (Hampton and Sikka,

(2005). Money laundering is a global phenomenon and a major obstacle in maintaining effective

operating domestic and international financial systems (Buchanan, 2004). It, therefore, poses a

significant problem to central banks as it damages the effective operations of national economies

and promotes poor economic policies (Johnston and Abbott, 2005; Buchanan, 2004). Indeed,

money laundering corrupts financial markets and erodes the public’s confidence in the global

financial system.

2.10 Failures cases

The Anti-Money Laundering Act of 2001 in Nauru failed because the law it had failed to meet

the FATF 40 recommendations and had 400 shell banks with no physical appearance in there

jurisdiction. The Anti-Money Laundering Act 2001 of Malaysia was said to be not all that

successful. This was mainly because of reporting institutions for instance complaining of

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

ignorance with respect to reporting requirements on currency transactions, monetary instruments

and foreign accounts ( B Shanmugam et al 2003), the team went on to say soldiers are basically

part of the staff in the financial institutions and that if they do not know the enemy, there is

hardly no battle. They were not able to fight the crime as they lacked the necessary knowledge.

The combating of money laundering in Malaysia was also made difficult by the staff that was not

trained. According to B Shanmugam and others (2003), “this is because the large volume of

information collected about their customers will be of no use if the employees are not trained to

detect attempts at laundering.”

Antony Whitehouse (2003) Bank of England, or the Financial Services Authority (FSA) after

1998, was a failure to combat money laundering. This may have been due in part to a lack of

motivation by government, or a lack of public awareness of the issues, but probably the greatest

underlying cause was the fact that there was no one organization with responsibility for policing,

and more importantly, prosecuting breaches of, the Regulations.

2.11 Chapter summary

Money laundering is crime that is as a result of cleaning illegally gotten money. This is

supported by a number of definitions such as the one by Tim Hidle (1999; 131). The money is

then passed through a number of placed that raise no suspicion such as lawyers’ hands who will

make transactions on behalf of there clients. Shell companies are also used for laundering

money. The challenges in combating money laundering include unwillingness of bank

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

employees to cooperate, rapid changes in technology as well the existence of underground banks

which offer affordable prices as compared to legal financial institutions.

CHAPTER THREE

RESEARCH METHODOLOGY

3.0 Introduction

This chapter is describing the methodology that the researcher used in collecting data on

ascertaining whether there will be ultimate solutions to money laundering Zimbabwe. The

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

chapter reveals procedures and activities undertaken to gather the necessary data. Major areas of

concern are research design, research population, research sample, data collection methods,

instruments, the data presentation and analysis plan.

3.1 Research Design

According to William G Zikmund and Michael Damico (1996; 157), “research design is a master

plan that specifically identifies what techniques and procedures that will be used to collect and

analyze data relevant to the reach problem.” The research design that the researcher used in this

case is descriptive in nature.

The researcher used descriptive research designs because of its ability to portray variables that

answer the questions: who, what, and how questions. It can also describe respondent’s attitudes,

intentions, and behavior. With this type of research, the researcher relies on the use of primary

data and secondary data.

3.1.2 Descriptive research

Its objective is to reveal any accurate profile events or situations. It is also undertaken in order to

ascertain and be able to describe the characteristics of the variables of interest in a situation. A

descriptive research design is concerned with high degree of accuracy to the subject. The

method is appropriate and suitable in such cases where data is derived from interviews and

questionnaires. The basis following the use of descriptive survey is that it describes the existing

state of affairs of the research subject. This is suitable for answering the question who, what,

where and whom.

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3.1.3 Justification of the research design

Descriptive research relies heavily on primary and secondary data that the researcher used to

gather the requisite data. Additionally, descriptive methods use questionnaires and interviews,

which were used as instruments for data collection during the research.

This type of research design is used in bulk of management research and it aims to provide facts

on which decisions should be based.

It offers ideas for further probe and research.

It helps to understand the characteristics of a group in a given situation.

3.2 Data Collection Techniques.

Ronald. F. Bush and Alvin C. Burns (2001; 66) states that there are basically two types of data

collection techniques available to the researcher, which are primary data collection technique and

secondary data collection technique.

3.2.1. Primary data

This is data collected in the research using methods such as interviews, observations and

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

questionnaires. The key point is that data collected is exceptional to the research. No one has

access to the distinctive data until the day of publishing the research. The primary data is original

data especially for solving the problem at hand and the data collection methods are ideal for the

study. The researcher made use of personal interviews and personally administered

questionnaires to employees at Zimbabwe Allied Banking Group find out whether there will be

ultimate solutions to money laundering as a crime.

3.3 Research Instruments

The researcher used personal interviews and personally administered questionnaires to gather

data from the employees

3.3.1 Personally Administered Questionnaires

V.Kumar (2003; 202) defined a questionnaires as a set of questions designed to evoke useful

answers. It is a vehicle of communication between those seeking insight (the survey sponsor) and

those whose insight is sought (the respondents). Questionnaires used are open –ended and

closed- ended questions. The use of questionnaires was preferred because they give the

respondents time to analyse the matter and give the valuable answers.

Justification Personally Administered Questionnaires

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

The researcher used this type of questionnaires because they have got better chances of getting

the responds as compared to other means. They also provide room for the respondents to

examine the questions and they place less pressure on the respondent like interviews do. There

was a mixture of open-ended and closed questions because they cover the gaps of each type.

Closed questions made it easy to scrutinize the data, they also increase the response rate because

the respondents will not take time thinking about the question. Open-ended questions also gave

the respondents opportunity to ventilate their views about the topic.

3.3.2 Personal Interviews

According to V .Kumer (2003:130) “interviews are used to obtain in-depth information on a

specific topic.” For the purposes of this research, the researcher used personal interviews.

Personal interviews have got merits which justify why the researcher opted for them.

3.3.2.1 Justification for personal interviews

The researcher had the opportunity to clarify questions to the respondents for better

understanding of the theme.

The researcher had a chance to observe non-verbal gestures and this enables the researcher to

understand the unsaid words.

Personal interviews assisted the researcher to get information from some employees who were

on a busy schedule and could not have time to go through the questionnaire, the researcher only

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asked the areas of significance to the study.

Secondary Data

Secondary data is the systematic collection, and evaluation of data to describe, explain and

thereby understand actions and events that occurred in some researches. The sources used during

the research include texts, internet, journals and news papers. This type of data is easy and cheap

to collect and provides readily available information about the subject.

3.4 Research Population

Following the delimitations of the study, the research population was drawn from employees at

Zimbabwe Allied Banking Group Harare Retail Banking Division, Corporate Banking division,

Stock Broking, Gweru and Kwekwe branches. According to Dooley D (1995; 131) “researchers

want to generalize from their sample to all potential elements, termed population.”

Table 3.1 Population and sample sizes

Division Managerial Non-managerial Total

position position
Retail Banking Division 14 57 71
Stock Broking 2 5 7
Corporate Banking 6 10 16
Target population 22 72 94
Sample unit (22*0.40) = 9 (72*0.40) = 29 38

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3.4.1 Research Sample

This sample was drawn from the divisions which the researcher felt are most vulnerable to

money laundering that is Retail Banking Division, Corporate Banking division and Stock

Broking.

3.4.2 Sample Design

The researcher initially used convenience sampling to choose the branches to consider due to the

fact that the branches are geographically spaced within the country. The researcher came up

with five branches in Harare, corporate banking, stock brokers, Gweru branch and Kwekwe

branch. Within these branches, the researcher went on to use stratified random sampling to group

the employees into two categories that is managerial and non-managerial employees. The

samples from each strata where selected using simple random sampling.

Sampling Unit

Unit is a basic unit from which the researcher will extract data and was a sample of 38

employees drawn from a target population of 94 employees. Choosing units saves on time, the

researcher will also be in position to conduct people who are likely to produce correct

information.

3.5 Data presentation

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This section is a description of the approach that will used to organize, describe and present the

collected data. The researcher used tables, bar graphs and pie charts.

3.5.1. Data editing

The process was done just after the collection of questionnaires and completion of interviews.

The essence of editing is to ensure that the requested data is legible.

3.6 Data analysis

The data was analysed using the chi-squared distribution test. This is section under hypothesis

testing which an educated guess about the state of affairs. The researcher wanted to test whether

money laundering has an ultimate solution.

3.6.1 Tabulation

Data is presented in simple tables to show the frequent occurrence of each response. This

facilitates the presentation of data on pie charts and bar graphs.

3.7 Chapter summary

This chapter deals with the research methodology that will be used during the research. It

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

involved the research design, population, sample, research instruments, validity and reliability,

pretesting and data analysis. The next chapter focuses on data presentation techniques,

discussions, analysis and interpretation of findings.

CHAPTER FOUR

DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.0 Introduction

The purpose of this chapter is to present, analyze and discuss research findings. In this chapter,

the researcher has presented the findings in both writing and graphic communication. Graphic

devises help the researcher to communicate more effectively since they:

Show group of numbers that will be very difficult to show in a written message

Show relationships that will take many sentences to explain, and

Give a quick visual impression that enable readers to compare figures quickly

The data was analysed using the chi-square distribution to illustrate the relationship between

different variables.

4.1 Questionnaire and interview response rate

From the 17 questionnaires dispatched to non-managerial staff at Zimbabwe Allied Banking

Group retail banking division, corporate banking and stock brokers, 14 questionnaires were fully

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

completed, giving a response rate of 82%. From the 5 questionnaires personally administered to

non-managerial staff from the same departments as above, 4 were fully completed giving a

response rate of 80%. This high response rate illustrates that the results from this research are

credible. The researcher attributes the high questionnaire response rate to the fact that he had

previously assured the respondents that their responses were for academic purposes only and

would not be divulged to the public. The high response rate is also ascribed to the fact that the

researcher once worked with some of the respondents. The response rate of the dispatched

questionnaires is depicted in Table 2 below:

Table 4.1: Questionnaire response rate

Department Disbursed Fully Partly Not Response

Completed Completed completed Rate (%)


Retail banking 14 10 3 1 71
Corporate banking 5 5 0 0 100
Stock brokers 3 2 0 1 67
Total 22 17 3 2 77
Source: Questionnaire survey

Table 2 indicates that the retail banking division and stock brokers are the departments with

questionnaires that were not completed, they had one questionnaire per department, whilst

corporate banking department managed to have all questionnaires fully completed. Furthermore,

it can also be seen that corporate banking had the highest questionnaire response rate of 100%

while stock brokers had the lowest response rate of 67%. The researcher also achieved a 75%

response rate from non-managerial staff and 75% from managerial staff at ZABG from the

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interviews contacted. The research was affected with the issue of leave as some of the

employees were not at work and the few who were there were too busy to bump into other

business.

Table 3: Interview response rate.

Targeted Contacted Response rate

Category interviews interviews (%)


Managers 4 3 75
Non-managerial 12 9 75
Total 16 12 75
Source: Interview survey

4.2 Data presentation analysis and interpretation

4.2.1 The reasons for committing the crime in relation to employee level of motivation

Money laundering as a crime in the banking sector in Zimbabwe is committed for different

reasons which are assumed to be in relation to level of employee motivation. The reasons entail

ignorance, the need for cash and fun. The findings presented below illustrate the level of

employee motivation ranging from high to low related to the reason for money laundering.

Figure 4.1 The reasons for money laundering in relation to employee level of motivation

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

16
14
12
number
10
of
8
employee
6
s
4
2
0
For fun Ignorance Need for
cash
reason for committig the crime

high modest low


The graph shows that most of the employees which are involved in the crime have modest and

low level of motivation and have the high need for cash. Those with the low level of motivation

are the ones who are so much involved in the rime.

The data from the graph above was analysed below using the chi-square.

The significance level (α) is 0.05

Null hypothesis: The reason for money laundering and level of employee motivation are not

related.

Alternative hypothesis: The reasons for money laundering and the level of employee motivation

are related.

Table 4.3: The level of motivation in relation to the reasons for committing the crime

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Level of motivation

High Modest Low


Reason for o e o e o e Row

committing total

the crime
For fun 2 0.3429 0 0.6857 0 0.9714 2
Ignorance 0 0.1714 0 0.3429 1 0.4857 1
Need for cash 4 5.4857 12 10.9714 16 15.5429 32
Column total 6 6 12 12 17 17 35

Expected count (e) =


010009000003c60900000000a1090000000004000000030
10800050000000b0200000000050000000c021f00810003
0000001e000400000007010400a1090000410b2000cc001
e008000000000001e008000000000002800000080000000
1e00000001000800000000000000000000000000000000
00000000000000000000000000ffffff00fefefe009bd4fe00
72000000feeaba00009bd400baeafe0000007200eaba7200
eafefe007272ba0072baea00d49b0000d4fefe009b009b00f
efed400ba729b00fefeea00ba72720072007200fed49b0000
72ba009b00000000009b00ba72000072009b009bd4ea009
bbaea009b007200babad400baeaea00d49b72009b72ba009

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

b9bd4009bd4d400eababa00729bd4009b9b9b00ba9b0000
babaea00eafed400ead4d400d4feea00fed4d400d4d4d400d
4d4ea00009bba00eaba9b00d49b9b0072bad400d4fed400b
aead400ba9bba00eafeea000000000000000000000000000
0000000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000000
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2020202020202020202020202020202020202020202020

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2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
202020c001502020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
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2020202020202020202020202020202072002020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020

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2020202020202020202020202020202020202020202020
2020202020a1600000405020e1800271604050e0f100a0b
05020c0020361600001912020e1817100e1800040502020
206000019120e181729160000000d020e18000405020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
02020202020202020202020202020202021c0502071d10
0319120317292a020615020c09020c092e12061502060d0
20e112b2c030d020a211002021c050206150e0f332c0a16
150e1112030d020a2110020202020202020202020202020
2020202020202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
20202020202020202071d1007131202061502020c0d020
71312071312020309020e1a050a0b0502070800000d0202
020207080d02022505020202060d0202070800000d0202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202060405

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

020a160902030d021e1f08090e180d0a2110223408090a0
b05020c15020a161502061502020a0b050a35120c09020a
3512030d020a1615020615020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
02020202020202020c0d020202020a160000191207080d0
c00191b0017100e18193200171002030d02020206000015
0202020300001733180d0202060000000d020206000015
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
02020202020202020202020202020202020202020c0d02
0e31020202020202020202020202020202020202020202
020202020e111202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
020202020202020202020a160000171002020202020202
0202020202020202020202020202020202060405020202

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

02020202020202020202020a0b05020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202

Tafadzwa Murungu, May 2010 MSU R06405048 70


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0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202000000000000000000000000000000
0000000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000202

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020202020202020202020202020202020202020202
0202020206000d020300150a160000150202020c0d02071
405020202020e180009020a1600001502020e1800090e18
00271604050e1817100e0f100202071312020c000004050
a16000015020e1817100a1600192f00302b0f100a0b0502
0c00202b1a050206001502020e180009020a16000015020
20e1800090e1800271604050e18170e1a0502060d020319
120e18150202062609032721100202020e0f10281003191
20e1815020e0f10282319120317292a0e112b2c020e0f100
71d1002071d10020c150319120e18150e112b2c0a0b0507
08152d020615020c09020c092e1206150206151e12020e0
f1028100319120e1815020e0f10282319120317292a0e11
2b0206090a16150207131202030d020a0b052223090e240
20202022505020207131202030d0202250502071312020
615020a0b0502020207081710020207131202020207131

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

202030d0a0b0502020c15020c0902020c0d020713120713
12020c0d02030d020202022505020207131202030d0202
250502071312020615020a0b05020300000405020a16090
20319120e1a05070815021c050202020c0902020a160902
031912020c09020a160902030d02020c150202020e18171
00202071d100202020a1609020319120c15021e1f200207
13121e1f08090e180d0a21101e1f080d0e11120202020c09
02020a160902031912020c09020a160902030d02020c150
20713120a1615020a16000015020617100206150e180d02
02070800000d020a1600001502070800000d0a160000191
202030d02020e0f10071312020a1609020202020a160000
1502030d02070819120e1a0507080d0c00191b001710070
80d030019120202070800000d020a16000015020708000
00d0a160000191202030d020a0b05020c0d020202020202
020202020202020202020202020e0f10020202020202020
2020e0f1002020202020202020e11120e0f100202071312
02071405020c150202020202020e1112020202020202020
2020202020202020202020202020202020202020e0f1002

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

02020202020202020e0f1002020202020202020e1102030
0000004050202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
2060405020202020202020202020708000009020202020
2020604050202020202020202020202020202020202020
2020202020202020202020202020202020202020202020
202020202020202020604040000002701ffff03000000000
0

χ 2cal =
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The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 76


The solutions to money laundering as a crime in the banking sector in Zimbabwe

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

= 8.0081+0.1714+0.4024+0.6857+0.3429+0.0964+0.9714+0.5446+0.0134

= 11.2363

df = (r-1)(c-1)

= (3-1)(3-1)

=4

From the tables χ 2


(0.05) (4) = 9.488

This is graphical presentation of the results of the analysed data

Figure 4.1a

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

B A

0 χ 2
(0.05) (4) = 9.488 χ 2
cal = 11.2362

The whole side marked A is the rejection region, while B is the acceptable region, this is

determined by the critical value 9.488 and in this case the test statistic 11.2362 has fallen in the

rejection region and this becomes the basis of our interpretation or conclusion.

Interpretation: Therefore reject null hypothesis at 5% level of significance and conclude that

there is a relationship between the reason for money laundering and the level of motivation.

4.2.2 Assessing the employees’ willingness to prevent money laundering in relation to

corporate governance.

The research revealed that 58% of the employees in the banking sector are willing to prevent

money laundering under strong corporate governance. It is also indicated that 26% is willing to

prevent money laundering under moderate corporate governance with 16% under weak corporate

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

governance. The information is presented in figure 4.1 below:

Figure 4.2

Willingnessofem ployeestocurbthecrime
versuscorporategovernance

16%

26% 58%

Strong Moderate Weak


The data collected and presented above is analysed below.
Table 4.4: Employee willingness to prevent money laundering to relation to governance
Willing Unwilling

Corporate o e o e Raw total

governance
Strong 11 7.0571 2 5.9429 13
Moderate 5 5.4286 5 4.5714 10
Weak 3 6.5143 9 5.4857 12

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

Column total 19 19 16 16 35

Expected count (e) =


010009000003c60900000000a1090000000004000000030
10800050000000b0200000000050000000c021f00810003
0000001e000400000007010400a1090000410b2000cc001
e008000000000001e008000000000002800000080000000
1e00000001000800000000000000000000000000000000
00000000000000000000000000ffffff00fefefe009bd4fe00
72000000feeaba00009bd400baeafe0000007200eaba7200
eafefe007272ba0072baea00d49b0000d4fefe009b009b00f
efed400ba729b00fefeea00ba72720072007200fed49b0000
72ba009b00000000009b00ba72000072009b009bd4ea009
bbaea009b007200babad400baeaea00d49b72009b72ba009
b9bd4009bd4d400eababa00729bd4009b9b9b00ba9b0000
babaea00eafed400ead4d400d4feea00fed4d400d4d4d400d
4d4ea00009bba00eaba9b00d49b9b0072bad400d4fed400b
aead400ba9bba00eafeea000000000000000000000000000
0000000000000000000000000000000000000000000000
0000000000000000000000000000000000000000000000

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 82


The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 83


The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 84


The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 85


The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 86


The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 87


The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 88


The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 89


The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 90


The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 91


The solutions to money laundering as a crime in the banking sector in Zimbabwe

Tafadzwa Murungu, May 2010 MSU R06405048 92


The solutions to money laundering as a crime in the banking sector in Zimbabwe

χ 2cal =
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000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000000000000000000000000000
000000000000000000000000000000000000000000002020202020202020202020
202020202020202020202020202020202020202020202020002020202020202020
202020202020202020202020202020202020202020202020202020002020202020
202020202020202020202020202020202020202020202020202020202020002020
202020202020202020202020202020202020202020202020202020202020202020
00202020202020202020202020202061a000405020202020202020202020202020
20202000202020202020202020202020202030a0214150d0202020202020202020
202020202023f02020202020202020202020202020f1700000a0202020202020202
020202020202020200020202020202020202020202020214160b02080b02020202
020202020202020202020200020202020202020202020202020202020800000b02
020202020202020202020202020200020202020202020202020202020202020202

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020202020202020202020202020202020200020202020202020202020202020202
020202020202020202020202020202020202020200020202020202020202020202
020202020202020202020202020202020202020202020200020202020202020202
020202020202020202020202020202020202020202020202020200020202020202
020202020202020202020202020202020202020202020202020202020200020202
020202020202020202020202020202020202020202020202020202020202020200
020202020202020202020202020202020202020202020202020202020202020202
020200000000000000000000000000000000000000000000000000000000000000
000000000000020202020202020202020202020202020202020202020202020202
020202020202020200020202020202020202020202020202020202020202020202
02020202020202020202020002020f1d05020202020202020202020202020202020
2020202081218020202020202020002061b1802020202020202020202020202020
2020202020202020f1c0202020202020200020e0b0202141600000b020202020202
02020202061a000405020211050202020202020014150d0202031218061a0b02020
2020202020202030a0214150d020e0902020202020200060c0d02020f191802030a
0202020202020202020f1700000a0202030a02020202020200060c0d02021416090
20312180f1700000000040514160b02080b02030a0202020202020014150d020202
141600000b02020202020202020202020800000b020e09020f1700000900020e0b0
202020202020202020202020202020202020202020202021105020203121310000
2060c0d020202020202020202020202020202020202020202020e0a020202020f10
020002020607050202020202020202020202020202020202020202080902020203
0a02080b0002020202020202020202020202020202020202020202020202020202

0202030000040500040000002701ffff030000000000
= 2.2030+2.6160+0.0338+0.0402+1.8959+2.2514

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

= 9.0402

df = (r-1)(c-1)

= (3-1)(2-1)

=2

From the tables χ 2


(0.05) (2) we get 5.991

Presented below are graphical results of the analysed data.

Figure 4.2a

B A

0 χ2 (0.05) (2) = 5.991 χ 2


cal = 9.0402

The whole side marked A is the rejection region, while B is the acceptable region, this is

determined by the critical value 5.991 and in this case the test statistic 9.0402 has fallen in the

rejection region and this becomes the basis of the interpretation or conclusion.

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

Interpretation: Therefore reject null hypothesis at 5% level of significance and conclude that

there is a relationship between the corporate governance and employees’ willingness to prevent

money laundering

4.2.3 Educating the employees about money laundering

A greater number of the management at Zimbabwe Allied Banking Group, that is 57% (4/7*100)

have opted for the use of education and training as the best way of putting their employees in a

best position to detect and prevent money laundering. The remaining 43% is shared between

holding regular workshops (14%) and through thorough induction training (29%). A line graph

was used to present the findings from the research, see figure 4.4:

Figure 4.3

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

Suggestedwaysof educatingthe
employees

4.5
4
3.5
3
2.5 Series1
2
1.5
1
0.5
0
Through Holding Thorugh
education regular induction
and workshops training
training

4.2.4 Educating the public about money laundering

The research also assisted in finding out possible ways of educating the public about money

laundering laws. The options on the ways of educating employees were given on the

questionnaire and through the interviews, new ideas such as the use of television and radio were

proposed. From the research, 35% of those who participated in the research opted for the use of

fliers as a way of educating the public. The other 26% had the idea of publishing in the

newspapers, 17% opted for the use of workshops where the information will be conveyed face-

to-face to the public. The use of television and radio had 22% in favor of it from the

respondents. The results are presented in a graphical structure below.

Figure 4.4

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

Suggested ways of educating the


public

Use of fliers

22% Holding regular


35%
workshops
Publishing in the
26% news paper
17%
Use of television
and radio

4.2.5 The extent perceived of preventing money laundering

From the research carried, it is showing that the crime can, to a larger extent be prevented. The

management at ZABG who were contacted during the time of the research, 71% showed that the

crime can be prevented. The remaining 29% had the perception that to a lesser extent, money

laundering can be prevented. These are the views of the managers at ZABG given the

confidence that they have with there subordinates. The findings are illustrated in figure 4.2

below:

Figure 4.5

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

Extent of preventing the crime

29%
lesser extent
greater extent
71%

Some of the managers at ZABG doubted the ability of their employees in detecting and

preventing money laundering. They also pointed out the issues like politics, corruption and the

ineffectiveness of the Bank Use and Suppression of Money Laundering Act as posing greater

challenges to their subordinates.

4.2.6 Challenges in an attempt to combat money laundering Zimbabwe

The research carried out at ZABG helped to identify some of the challenges that are being faced

in an attempt to prevent money laundering as a crime in Zimbabwe. The identified challenges

are as follows:

The research showed that some of the senior management within the banking sector are involved

in committing the crime which makes it difficult for the juniors to prevent it. An employee will

be in a dilemma of choosing whether to loose a job or just pass the transaction. In such cases it

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

causes complications for the employees to prevent the crime since instructions comes from the

superior.

The research has also shown that the launderers in Zimbabwe are using fake identity cards. ‘The

fake national identity cards are being printed from the registrar’s office. These are then used to

open numerous accounts with different banks using different names for the same individual

hence making it difficult to trace how the funds are being moved around the system,’ said one

ZABG employee in an interview. It is also difficult for a bank employee to doubt an ID from the

registrar where he or she does not have experience with. This will reduce the credibility of them

being capable of preventing the crime.

It is also noted that the willingness of reporting of suspicious transactions is turned away buy the

low level of deposits in the financial sector. This will result in the employees not reporting the

transactions so that they will not shun away huge deposit customers thus money laundering is

going on unstopped. Researches from ZABG showed that departments in the banking sector

compare their figures of revenue generation each month end and this will result in departments

that are generating huge profits from criminal activities not stopping them as this will affect their

revenue generation negatively. This also raises the issue of conflict of interest which is another

major challenge in an attempt to curb the crime.

Know Your Customer (KYC) principle is difficult to practice. This is because most people are

not property owners which make it difficult to have adequate and relevant information which

denote their residential premises. The information provided is valid for a short period of time as

the customers are of no fixed abode due to the fact that they will be renting. This is also affected

by transfers that are done to them by their respective employers from one area to another, these

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customers will not update the bank of these changes and this makes it difficult to locate them in

the event of any matters arising.

In addition, the research also showed that some of the employees in the financial sector are

committing the crime due to low salaries. This is the greatest challenge as money will never be

adequate to any individual. The organization is also a profit making institution hence there is

need to strike a balance between costs incurred and profits generated. This point can also be

linked to the greater need for cash. Employees will keep on finding means to compensate

themselves to meet their requirements at the expense of the organization.

Moreso, respondents from the study indicated that the crime is being committed due to relaxed

policies within the institution. This has found the employees making use of the loop-holes that

they identify within the system.

On the other hand, corruption is an extended arm which perpetuates money laundering in

Zimbabwe. For instance police officers and employees’ negligence to report any suspicious

transactions after being bribed leads to high cases of crimes in money laundering since little or

no cases will be reported. Moreover, corruption has also risen from printing of fake IDs which

are being used by the criminals. This is also one of the major challenges and the two (money

laundering and corruption) move together.

It is also identified that some of the Zimbabwean citizens are illiterate. This means that they can

be cheated by the launderers who take advantage of their status.

4.2.7 Techniques used to launder money in Zimbabwe

The use of ghost accounts is one of the techniques used to launder money in Zimbabwe. These

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accounts do not have identifiable holders but they exist. These have been facilitated by the

printing of fake identity cards. The account holders are difficult to arrest as the identity cards

will not provide information that will lead to the arrests of the culprit.

The respondents also indicated that some of the money launderers are doing it in the form of

helping the less privileged. This can be in the form of building charity homes such that they can

not raise any suspicion from the crowd.

Buying and selling of soccer players was also identified as the way of laundering money. This is

also in line with the formation of numerous teams. The formation of Highway team which was

based in Mutare was also identified as an example of money laundering by some individuals who

had gained from illegal diamond mining at Chiyadzwa.

Nominal partnerships are also suggested to be used for money laundering by the culprits. The

sources for money will not be doubted as partnerships are formed to raise more capital, but in

this case they will be used to launder money as they know that suspicion will not arise from the

employees in the financial sector.

4.2.8 Chapter summary

The chapter presented the findings of the research in various forms which included pie charts,

bar-graphs and line graphs. The reasons why employees in the banking sector are involved in

money laundering, the challenges that they face as well as ways of educating employees and the

public about the crime are also clearly laid down. Also identified during the research are the

ways in which money is being laundered in Zimbabwe and a typical example is the use of ghost

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accounts. The data was analysed using the chi-square distribution.

CHAPTER 5

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SUMMARY, CONCLUSION AND RECOMMENDATIONS

5.0 Introduction

This chapter is a presentation of the summary of the chapters, research conclusions as well as

recommendations to the research findings.

5.1 Summary

This research study sought to find the solutions to ultimately prevent money laundering in the

banking sector in Zimbabwe. The researcher used descriptive study method to gather data as the

research design is intended to portray an accurate profile of events or situations. The research

study was to a lesser extent affected by the issue of forced annual leaves as some of the

employees were not at work and the few who where at work were working under pressure.

Some of the employees were afraid that the information will be used for other purposes other

than academic purposes and some were of the opinion that they will be regarded as being

ignorant. This made them provide incomplete information. However, the researcher assured the

non-managerial staff that their contributions would be treated with utmost confidentiality and

would not be used against them by informing the management about their status and publishing

it to the public. From the research, it is noted that, to a greater extent, money laundering can be

prevented in the banking sector in Zimbabwe as perceived by the managerial staff.

5.2 Research conclusions

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It has been noted from the research that 71% of the managerial employees at Zimbabwe Allied

Banking Group has the view that money laundering as crime in the banking sector can be

ultimately prevented. This is a well above an average of 50% to the positive side of the story.

This is attributed to the level of confidence that they have in their employees despite the

challenges.

It has been clearly pointed out that employee motivation has an influence to the level of

employee motivation. The analysis has proved that the two have got relationship. Indicated is

that the highest numbers of employees with moderate to low level of motivation are the ones

much involved into committing the crime.

The findings of the research also show that there is a relationship between corporate governance

and money laundering in the banking sector. This is derived from the analysis that was made in

chapter of this paper. Weaker governance promotes money laundering as compared to a strong

or stiff one.

Also noted from the research is that most of the managerial employees at ZABG preferred the

use of education and training as the best method of educating their subordinates about money

laundering prevention and detection.

The major cause for money laundering that was excavated from the research is that there is much

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need for cash. This has been noted by both managerial and non-managerial employees at

Zimbabwe Allied Banking Group. Action has to be taken to solve or reduce the hunger for cash

from the employees.

5.3 Recommendations

Motivation of employees

The research has shown that there is every need to motivate the employees in the road to detect

and prevent money laundering. Chapter four has shown that the two, money laundering and

employee level of motivation move side by side. Employees with low level of motivation are

not in a position to prevent the crime, they might be involved or not willing to report any

suspicious transactions. To place emphasis on motivation, another researcher noted the need of

motivation that is Antony Whitehouse (2003). The researcher pointed out that the Bank of

England, or the Financial Services Authority (FSA) after 1998, was a failure to combat money

laundering. This may have been due in part to a lack of motivation by government

There is need for education and training to employees

One of the aspects noted during the course of the research was that the employees lacked

confidence in themselves as being capable of detecting and preventing money laundering. This

was observed from the way they answered the questionnaires which were partly completed.

They also lacked confidence as they attempt to answer the questions during the interviews. The

most preferred way of educating the employees is education and training. The other option is

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thorough induction training. It is assumed that new employees in the field are not aware of the

crime and hence are prone to promoting it if they do not go for training. According to B

Shanmugam and others (2003), the combating of money laundering in Malaysia was made

difficult by the staff that was not trained (refer to empirical evidence of failure cases in chapter

two).

Close monitoring at the registrar's office

Noted is also the existence of ghost accounts, this is being facilitated by the registrar's office

where individuals are being involved in corrupt activities of printing fake national identity cards

for criminals. Proper monitoring should be put in place within that office such that the work will

not be tough for the prospective detectors and preventors of the crime.

Tightening of the policies within the institutions

It was identified during the analysis of the data in chapter four that there is a relationship

between corporate governance and committing of the crime. To this extent, the corporate

governance of the firms should not be left relaxed as the prospective offenders will take

advantage of the situation. There is every need to put in place tight and effective policies. Close

monitoring of accounts is also a basic requirement to curb the problem.

Establish a basic salary level within the industry

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Given that the research showed in most instances that the crime is being committed due the need

for cash, a basic salary level should be established within the industry. Having the different

institutions within the same industry paying salaries with a greater margin to employees in the

same level will lour the others to be involved in the crime because they will feel underpaid, thus

they will resort to a way of trying to cover up and the result is committing the crime.

Know Your Customer (KYC)

This is one of the major challenges in attempt to prevent the crime. The researcher suggests that

account holders should provide information about their work information and the employers

should obliged to inform the bank in the event of termination of the contract or changes that

might affect the extent to which the individual can be located.

Having external auditors coming in

It was also noted during the research that the most senior personnel in the organizations are also

involved in committing the crime. This will make it difficult for a junior employee not to

carryout the transaction and will not be in position to report the case because of the need to

maintain his or her job. To this extent, there is need to bring in external auditors on a regular

basis though it is an expensive session.

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REFERENCES

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incentive-based approach, Journal of Money Laundering Control, Volume: 11, Number: 1, pp:

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Bala S, Mahendhiran N and Sugathi R. (2003); Money laundering in Malaysia, journal of money

laundering, Vol 6, No 4, pp 373-378, Henry Stewart Publications

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The solutions to money laundering as a crime in the banking sector in Zimbabwe

Eastern and Southern Africa Anti-Money laundering, Report on cash courier-based money

laundering (ESAAMLG), 18 August 2008, Mombasa Kenya

INCSR 2006 Volume II, Money Laundering and Financial Crimes

Johnston. R. B and Carrington I (2006); Protecting the financial system from abuse, Challenges

to banks in implementing AML/CFT standards, Journal of Money Laundering Control, Vol. 9,

No. 1, pp. 48-61, Emerald Group Publishing Limited

Mackenzie M (2004); Money Laundering; What will Criminal Elements think of Next?, Journal

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Ma Yu-Feng (2004); Anti-Money Laundering activities of Financial Institutions in Taiwan,

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Ping H (2010); A typological study on money laundering, Journal of Money Laundering Control

Vol13, No1, pp 15-32, Emerald Group Publishing Limited.

Ping He (2006); Lawyers, notaries, accountants and money laundering, Journal of Money

Laundering Control, Vol 9, No 1, pp 62-70, Emerald Group Publishing Limited.

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Ping He (2004); Banking Secrecy and Money Laundering, Journal of Money Laundering

Control, Vol 7, No 4, pp: 376-382, Henry Stewart Publications

Ping H (2004); The new weapon for combating money laundering in the EU, Journal of Money

Laundering Control, Vol 8, No 2, pp115-121, Henry Stewart Publications.

Richard Alexander (2004); The 2003 money laundering regulations, Journal of Money

Laundering Control, Vol 8, No 1, pp 75-94, Henry Stewart Publications

Salak. M and Trifin J. R (2003); The Anti-Money Laundering in the Republic of Nauru, Journal

of Money Laundering Control, Vol 7, No 1, 2003, pp 75 – 83, Henry Stewart Publications.

Samah Al Agha (2007); Money laundering from Islamic perspective, Journal of Money

Laundering Control, Vol 10, No 4, pp 406-411, Emerald Group Publishing Limited.

Schneider S (2006); Testing the limits of solicitor-client privilege, Lawyers, money laundering,

and suspicious transaction reporting, Journal of Money Laundering Control, Vol 9, No 1, pp 27-

47, Emerald Group Publishing Limited.

Toth M and Istvan L Gal (2004), The Fight against Money laundering in Hungray, Journal of

Money Laundering Control, Vol 8, No 2, pp 186-192, Henry Stewart Publications.

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Van der Zahn Mitch, et al (2007); The anti-money laundering activities of the central banks of

Australia and Ukraine, Journal of Money Laundering Control, Vol. 10 No. 1, pp. 116-133,

Emerald Group Publishing Limited.

Whitehouse A (2003); A brave new world: The impact of domestic and international regulation

on money laundering prevention in the UK, Journal of Financial Regulation and Compliance,

Vol. 11, No. 2, pp. 138–145, Henry Stewart Publications.

WSBI experience and proposals to FATF, Anti Money Laundering And Combat Financing

Terrorism Rules And The Challenge Of Financial Inclusion, DOC 0565/09 September 2009

Tim Hindle (1999), The Economist book, Pocket Finance, Economist Newspapers Ltd, London

http://www.laundryman.u-net.com/ page2-wisml.html 15/02/10 1950hrs

http://allafrica.com

http://en.wikipedia.org/wiki/money_laundering 15/02/10 2000hrs

http://www.issafrica.org/pgcontent.php?UID

http://www.datanomic.com/solutions/solutions-pep-screening

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http://www.blog.consected.com/2010/02/anti-money-laundering-or-discrimination.html

APPENDICES

Appendix A

Research questions for managers

I am student at Midlands State University under the department of Business Management. I am

carrying out a research on finding out the solution to prevent money laundering in Zimbabwe.

Money laundering or laundering the proceeds of a serious offence means any act, scheme,

arrangement, device, deception or artifice whatsoever by which the true origin of the proceeds

of any serious offence is sought to be hidden or disguised..

May you please help this study by attempting the following questions?

NB The information provided is private and confidential.

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Where there are options, indicate with a tick

1. In which department or division are you?

Retail banking division Stock brokers Corporate banking

To what extent do you think that money laundering can be ultimately prevented?

Greater extent Lesser extent

Given the different lvels of motivation. Which level do you think your employees are and why

would they be involved in commiting the crime. Tick the box that matches your view.

Level of motivation

Reason for High Modest low

committing the

crime
For fun
Need for cash
Ignorance

With reference to the corporate governance of your organization, how do you see your

employees in preventing money laundering? Tick the box that matches your view.

State of corporate Willing Unwilling

governance
Strong
Moderate

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Weak

How can your employees be in a position to prevent money laundering?

Through thorough induction training

Holding regular workshops

Through education and training

What challenges to you see in an attempt to curb the crime?

……………………………………………………………………………………………………

……………………………………………………………………………………………………

……………………………………………………………………………………

Which money laundering techniques do you think are the most hidden?

……………………………………………………………………………………………………

……………………………………………………………………………………………………

……………………………………………………………………………………

THANK YOU

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Appendix B

Research question for non-managerial employees

I am student at Midlands State University under the department of Business Management. I am

carrying out a research on finding out the solution to prevent money laundering in Zimbabwe.

Money laundering or laundering the proceeds of a serious offence means any act, scheme,

arrangement, device, deception or artifice whatsoever by which the true origin of the proceeds

of any serious offence is sought to be hidden or disguised..

May you please help this study by attempting the following questions?

NB The information provided is private and confidential.

Where there are options, indicate with a tick

1. In which department or division are you?

Retail banking division Stock brokers Corporate banking

2 Given the different lvels of motivation. Which level are you and why do think you would be

involed in money laundering. Tick thebox that matches your view.

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Level of motivation

Reason for High Modest low

committing the

crime
For fun
Need for cash
Ignorance

With reference to the corporate governance of your organization, how do you match it with your

willingness to prevent money laundering? Tick the box that matches your view.

State of corporate Willing Unwilling

governance
Strong
Moderate
Weak

4. How can the public be educated about money laundering laws?

Use of fliers

Holding workshops regularly

Publishing in the news papers

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5. Do you think see any challenges in preventing money laundering?

More often Not at all

What challenges to you see in an attempt to prevent the crime?

……………………………………………………………………………………………………

……………………………………………………………………………………………………

……………………………………………………………………………………

Which techniques for money laundering do you think are the most used?

……………………………………………………………………………………………………

……………………………………………………………………………………………………

……………………………………………………………………………………

THANK YOU

Appendix C

Interview Schedule

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Non-managerial employees

Do you think you are able to detect and prevent money laundering?

Why do you think the crime is being committed in relation to your level of motivation?

Which methods of money laundering do you think are the used?

What challenges are you facing in detecting and preventing money laundering?

How can the public be made aware of the money laundering laws.

Managerial employees

Do you think money laundering can be completely resolved?

Why do you think the crime is being committed in relation to your level of motivation?

How do you match your corporate governance and employee willingness to participate in

curbing the crime?

Which methods of money laundering do you think are the used?

What challenges are you facing in detecting and preventing money laundering?

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