Money laundering a grave danger to national economy

The panel confirms that Money laundering threatens the investment climate as investors lose confidence in the economic system and its regulatory legislation.

Participants in the symposium discussing money-laundering and its risks to the national economy confirmed the importance of combating money-laundering due to the risk it poses to the economy and community. Organized and complex crime is considered the most serious threat to society.

Last Tuesday’s symposium discussing money-laundering and the dangers it posses to the national economy was organized by the Studies and Economic Media Center in collaboration with Banking Magazine, and sponsored by Cooperative and Agricultural Credit Bank (CAC Bank).

The Assistant General Secretary for Commercial and Banking Affairs at CAC Bank, Mohammed Ahmed Taqi said that the fight against money laundering is one of the most serious problems associated with globalization.

He said the bank realized the severity of this problem a long time ago, as well as the dimensions of the phenomenon, so a specialized unit for combating money laundering was created.

CAC Bank consultant Rasheed al-Ansi called for the combined efforts of all bodies to combat money laundering. “We seek through the symposium to come out with practical recommendations to contribute to greater awareness about the seriousness of this issue and to overcome the devastating dimensions", al-Ansi said. 

“Money laundering is organized crime which poses grave dangers to the banking and financial systems, and threatens the economic security of the whole country”, said Dr. Abu Baker Morshed al-Zuheiry, Assistant Professor of Public Law at Sana'a University.

Money laundering threatens the investment climate as investors lose confidence in the economic system and its regulatory legislation, al-Zuheiry said. 

Money launderers establish front companies offering their goods and services at competitive prices. These prices affect legitimate investment. Money laundering leads to money being smuggled abroad, resulting in a widening financial gap, representing a loss to the national economy, al-Zuheiry said.

Money laundering will convert investment projects to non-productive investment because the interest of money launderers is not in profits or development, but to hide the criminal source of funds.

Participants consider money laundering crime as the most serious threat to society.

In terms of the risks of money laundering to the overall national income, al-Zuheiry said it deducts part of the national income, transferring needed funds abroad, decreases national production, and deprives the state treasury of an important resource because of tax evasion. Those risks to lead to miscalculation in financial policy, an increase of the exchange rate and the deterioration of the national currency.

Al-Zuheiry said that money-laundering has negative impacts on the rate of inflation, which generally increases when there is a high incidence of money laundering, which causes the deterioration of the national currency. The increase of the domestic money supply does not correspond to the increase of goods being produced, resulting in a high rate of inflation in addition a deficit in the balance of payments. The deterioration of the national currency comes from money launderers easily moving their currency from one country to another, threatening the state’s reserves of foreign exchange. This threat will force the government to demand foreign loans to cover the external financing gap resulting from the smuggling of funds abroad.

In terms of the risks of money laundering to financial policy, al-Zuheiry said that the sudden movement of money from country to another will lead to instability of monetary policy, which has negative impacts on the economy.

Other dangers of money laundering include the increase in unemployment as well as the increase in crime rate and corruption, al-Zuheiry said.

For his part, Head of Studies and Economic Media Center, Mustafa Nasr said that the crime of money laundering represents a real threat to the economies of developing countries and developed countries alike, due to spread of electronic banking and the expansion of financial transfers between states. 

He pointed out that developing countries urgently need strong legislation to combat money laundering, particularly those associated with transactions of corruption, bribery, and breaches of trust.

The Central Bank of Yemen (CBY) revealed around eleven suspected case of money laundering in Yemen, two of whom were brought to court, said Abdu Saif, Chief of the Information Collection Department at CBY.

Of the two revealed cases brought before the court, the first was done at the request of a foreign entity, and others as a result of drug trafficking.

Four years ago, we discovered just eleven suspected cases of money laundering, therefore, these kinds of crimes are limited in Yemen, said Saif.

Academics and researchers in the symposium criticized the absence of precise statistics on money-laundering in Yemen. 

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