Eradicating money laundering key to investment

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“There are some countries in Africa who are right now in the process of trying to repair a bad reputation for fraud, for corruption, for money laundering, and we’ve recently seen HSBC declare that they’re going to withdraw from corresponding with banking in East Africa. There are challenges, there are problems, and it is played out in a global environment,” Martin Woods, head of anti-money laundering at Thomson Reuters, told CNBC Africa.

Woods added that the strongest anti money-laundering device is however technology, which can track and monitor large volumes of transactions, incoming and outgoing funds and the paper trail that can either reveal  malicious or fraudulent action.

(READ MORE: Technology drives down insurance fraud)

“The big issues that arise now [are whether you are] providing finance to terrorists, or terrorist suspects. You need to screen your transactions, your clients against lists published by multiple governments where there are prohibited parties. If you undertake transactions for those parties, you will breach serious regulations across the globe and find yourself in very hot water,” Woods explained.

He added that the screening process is turning out to be successful globally, as it has become more difficult for people to launder money and breach sanctions, but it still remains a prominent issue.

(WATCH VIDEO: Fraud investigation and anti-bribery issues plague S.Africa)

The Financial Action Task Force, based in Paris, nevertheless drives international money laundering standards as a means of clamping down on the crime.

“You must know the customers you’re dealing with. You can’t bank blind. You have to bank with information to ensure that you’re not banking with the wrong people or the wrong money,” said Woods.

“Governments have a lot to play in terms of cooperation. The effectiveness needs to be driven by cooperation between regulators, the regulated, between the private sector and the public sector, because the common enemy is the terrorist, the terrorist financier, the money launderer.”