Banking Technology in the Fight against Money Laundering in UK Private Essay

Banking Technology in the Fight against Money Laundering in UK Private Banking - Essay Example Banking has gone a long way since this was practised in Italy during the Renaissance Period. In other parts of the world, the ancient Persians and Arab traders had used a primitive form banking facilities to ply their commerce. China even had some form of checking facilities where the traders from faraway areas could encash a check for their use while in foreign lands. Globalisation in trade and commerce has made banking a crucial part of a modern economy. The fast growth in world commerce and finance has also brought with it new challenges not seen before. Along the heels of globalisation is the growth of crime syndicates and certain individuals who find it convenient to use modern banking facilities to move large sums of money around. This attempt to hide the monies is known as money laundering and it is the purpose of this research paper to explore how the use of modern banking technology can help in the fight against this pervasive crime. The amount of money being laundered in an estimate given by Asian Development Bank (ADB) is about $2.17 to $3.61 trillion annually or around 3%-5% of the total world gross domestic product. This represents a huge security risk to international finance and presents social, economic and political concerns due to narco-politics. 1.1. Early use of Technology in Banking The early uses of technology in the banking industry were for efficiency and accuracy. At that time, security was not yet a major concern. Use of electronic banking has also gone a long way from initial use of computers to keep customers' records, compute for interest and other transactions. Information and communications technology (ICT) resulted in great strides in efficiency in the financial and banking services sectors but this also spawned cyber-crimes (Shroff, 2007) related to money and banking such as identity thefts, illegal transfers of money or fictitious accounts. The use of computer technology was meant to be a tool for competitive advantage such as improving customer service. The adoption of computer technology in the industry was related to needs of information technology such as creating a niche strategy for bank branches (Violano & Collie, 1992). 1.2. Objectives The primary research question of this paper is to investigate the effectiveness of using banking technology in fighting money laundering in private banking in the United Kingdom. In particular, this research objective is of great importance considering that London is one of the biggest financial centres in the world in terms of banking, investments and fund flows. A lot of the world’s funds pass through the London banking system and the criminals use this opportunity to mingle their funds with legitimate funds of local and foreign investors. Additionally, subsidiary research questions are posed in relation to the main question: 1. What are the steps involved in the money laundering process and what methods are used to launder money (the various ways to cover the tracks of its origin)? It is important to know what steps are involved in money laundering so it is easier to catch the criminals. The point is to disrupt the money flow and catch the criminals as early as possible and it takes knowledge of the money laundering process to do it effectively. 2. What existing banking technologies are used in the fight against money laundering? Existing banking technologies using modern computers are found to be inadequate in detecting money laundering. The urgent need is to use a far more sophisticated technology that is effective in detecting certain patterns from among thousands of seemingly-unrelated transactions. 3. What are the areas that are susceptible to money laundering in UK private banking? There are several areas in which money laundering can be done through the facilities and services of private banking. It can include practically the whole host of investment areas where large sums of money can be profitably invested and more importan tly, in the areas where it does not attract unwanted attention