Tackling the Dual Threat: Money Laundering and Terrorist Financing – Legal and Policy Perspectives

Techniques for concealing the proceeds of crime include moving cash across borders, buying businesses to funnel money, acquiring easily transportable valuables, using transfer pricing, and relying on “underground banks.” Since the mid-1980s, governments and law enforcement agencies have established a more global, intrusive, and standardized set of measures to target criminal money flowing through the financial system. However, the impact of these measures on laundering methods, prices, or criminals’ willingness to commit various crimes is largely unknown, aside from anecdotal evidence. Available data suggests that the anti-money laundering (AML) regime has had limited success in reducing crime. While it aids in investigating and prosecuting certain criminals who would otherwise avoid justice, the number is lower than anticipated by those supporting the “follow the money” approach. The regime also allows for the easier recovery of funds from major criminals and financial intermediaries, though the amount recovered is minimal compared to the income or profits from crime. While the regime targets funding for terrorism, modern terrorists require very little money for their operations, so AML measures are unlikely to cut off their funds but may provide valuable intelligence. The controls on money laundering impose significant costs on businesses and society, warranting a more thorough analysis of their positive and negative effects.