Consequences of Money Laundering in Banking Sector

Abstract

Banks are traditionally measured as pillars of economic prosperity. The best banking system will be able to ensure good production in all sectors of the economy. Money laundering is the process of providing legitimate appearance to the illegally gained revenue. Money Laundering has the tradition of eroding the financial institutions and weakening the financial sectors’ role in economic growth. It has the habit of facilitating corruption, crime and other illegal activities at the expense of countries development and can increase the risk of macroeconomic instability. Banks and other financial institutions are at the forefront of the battle against the money launderers. The negative economic effects of money laundering on economic development are difficult to quantify. International society expects every bank to perform customer identification and due diligence as it is the important control measure in preventing criminals from entering into the legitimate economy. The cost involved in combating money laundering and terrorist financing transactions are increasing largely on yearly basis however unable to eradicate them.