How Well Does the Money Laundering Control System Work?

• In Event: The International Markets of Money Laundering and of Anti-Money Laundering

Abstract

The continued globalization of finances has generated an ever larger array of methods for making criminal earnings appear legitimate. The global regime to control money laundering has become more sophisticated and comprehensive, i.e., expensive and intrusive. The modest research literature of the last twenty years reinforces the pessimistic conclusions of Levi and Reuter’s 2006 essay in Crime and Justice. There is no evidence that money laundering is declining or becoming more difficult or expensive. The system’s failure has many sources. Nations which pushed for its creation and development (particularly the United States) have been unwilling to implement critical elements. Major banks have repeatedly failed to meet their obligations, suggesting either insufficient commitment or a lack of the necessary skills and systems to comply effectively, despite substantial fines. Regulatory oversight had been inadequate. There is however evidence that the system aids enforcement of laws against criminal enterprises; this evidence is not yet widely appreciated by scholars. Despite the consensus that the system works poorly, there is almost no discussion of substantial reforms. Social scientists should be more active in studying what is arguably the largest instance of third-party policing and the phenomenon of laundering itself.

Authors

• Mirko Nazzari, University of Sassari

• Peter Reuter, University of Maryland