The International Monetary Fund will launch a donor-supported fund to combat money laundering and terror fund, a growing menace in the financial world.

The Multi-Donor Trust Fund, the first in a series of so-called Topical Trust Funds, the IMF said in a statement, will start operations on May 1.

It will provide about $31 million in over five years to contribute to the strengthening of global anti-money laundering (AML) and combating the financing of terrorism (CFT) regimes, using the Fund's proven expertise and infrastructure.

Switzerland, Norway, Japan, Saudi Arabia, Britain, Luxembourg, Korea, and France will be providing about two-thirds of the financing, the IMF announced on Wednesday, adding discussions are still ongoing with a number of other donors who have also expressed interest in contributing to the Trust Fund.

"Global financial stability hinges on collective action at the international level, but also on effective national systems. The trust fund combines both these elements," Murilo Portugal, deputy managing director of the IMF said.

"Robust AML/CFT regimes are an important pillar of the international regulatory and supervisory system and part and parcel of the current efforts to strengthen the global financial framework," he said.

Observing that financial stability is closely linked with financial integrity, the IMF said money laundering and terrorist financing activities can undermine the soundness and stability of financial institutions and systems.

It can further discourage foreign investment, and distort international capital flows. Moreover, problems in one country can quickly spread to other countries in the region or in other parts of the world, it argued.

IMF said individual countries benefit from robust AML/CFT regimes as enhanced financial sector integrity and stability facilitates their integration into the global financial system.

They also contribute to more transparent governance and effective fiscal administration. The integrity of national financial systems is thus essential to financial sector and macroeconomic stability both on a national and international level, the statement said.