Criminology Money Laundering
by
Sanaa Ahmed, Margaret Beare
  • LAST MODIFIED: 28 March 2018
  • DOI: 10.1093/obo/9780195396607-0239

Introduction

Since its introduction into the global regulatory discourse in the late 1980s, money laundering has evolved into a subject of criminological inquiry distinct from the underlying crime that generates such monies. While it originated as a law enforcement tool to combat drug trafficking in the United States in the late 1980s, anti-money laundering (AML) measures had clear foreign policy objectives as well. Since 9/11, not only have the scope and reach of AML regulations been greatly expanded, the regulatory regime has been stretched to include measures in counterterrorism financing (CTF). The initial wave of scholarship deployed Armageddon-like imagery to indicate the risks posed by money laundering and/or terrorism financing, thereby justifying AML/CTF regulation. While the imagery persists in some contemporary writing, the critical literature emerging since the late 1990s has focused on the methodological flaws in crafting estimates regarding money laundering; deconstructed the imagined risks to the society and the global financial system; and highlighted the absence of evidence showing that AML/CTF regulation works. Running through the literature––both ‘for’ and ‘against’ the anti-money laundering regimes––are a number of incongruities: (1) continual debate over whether AML regimes are the best way to tackle even money laundering, let alone terrorism financing; (2) existential questions regarding money laundering: the original rationale was that predicate offenses (i.e., drug trafficking) could be attacked by confiscating profits and driving criminal organizations out of business. Now the money itself (from criminal activities or tax abuse) has become a dominant reason behind anti-laundering bureaucracies; (3) excessive rhetoric aside, there is a lack of political and corporate will to combat money laundering and the commitment to AML remains a priority only during economic booms; (4) culture conflicts: banks and corporate cultures prioritize profit over laundering control (“money is money,” dirty or otherwise); (5) anti-laundering regimes touch only a percentage of criminal proceeds and exclude the underground economy, new virtual currencies such as Bitcoin, as well as a vast array of political, corporate, and criminal corruption; (6) the ‘collateral’ damage caused by AML/CTF regimes––most specifically, to weaker, less developed jurisdictions vulnerable to blacklisting for perceived failures of compliance––is increasingly coming to the fore; and (7) different countries have different priorities based on their economic and political circumstances and not all align with the dictates of the AML/CTF regimes.

General Overviews

Despite the prolific growth in literature, a few texts remain essential reading. Levi 2014 is a useful starting point that sets out the main issues and debates, including the expansion of money laundering to include tax evasion besides drug trafficking, corruption, and terrorism. Michael Levi was an early and continual critic of the promises made and not kept by the anti-laundering proponents; his earlier works include Gold and Levi 1994 as well as Levi and Reuter 2006. Naylor 2002, Beare and Schneider 2007, Alldridge 2003, and Stessens 2000 offer detailed accounts of the historical trends in money laundering and look at why the regulations deliver less than what they promise. Taking a political economy approach, Naylor 2002 dissects the organizational structure of criminal networks and black markets to explain why existing anti-money laundering and counterterrorism financing (AML/CTF) regulations are largely ineffective in reducing crime. Beare and Schneider 2007 unpacks the justifications offered for AML/CTF regulation by examining claims regarding the destructiveness of money laundering against the limited evidence available. The authors conclude that the impact on economies, democracies, and free markets is often exaggerated and that some of the enthusiasm for equating anti-laundering initiatives to fighting drug trafficking is really a concern over tax evasion. The situation is somewhat different in conditions of massive capital flight as experienced by Russia and, to an extent, the imbalance in movement of capital within Colombia but those conditions do not apply generally to the global preoccupation with money laundering. While the details revealed by the Panama Papers and Paradise Papers have given legitimacy to tax considerations, this concern was not acknowledged in the early rhetoric regarding the dangers of dirty money. Bennett 2004 looks at the difficulties of collaboration with countries with diverse laws and diverse priorities. Alldridge 2003 is a human rights audit of the laws of confiscation and forfeiture while Stessens 2000 marries a political science approach with an international law focus to deal with the conceptual moorings of AML/CTF regulation as well as the cooperation between jurisdictions. Van Duyne 2011 is an excellent description of the methods and practices that were involved in mobilizing consensus on AML/CTF regulation.

  • Alldridge, Peter. 2003. Money-laundering law: Forfeiture, confiscation, civil recovery, criminal laundering and taxation of the proceeds of crime. Oxford: Hart.

    E-mail Citation »

    Focuses on regulation in primarily England and Wales. Examines justification and motivation for legal responses to proceeds of crime and attempts a human rights audit of law of confiscation and forfeiture.

  • Beare, Margaret E., and Stephen Schneider. 2007. Money laundering in Canada: Chasing dirty and dangerous dollars. Toronto: Univ. of Toronto Press.

    E-mail Citation »

    Excellent overview of one hundred years of AML in Canada: details of legislation; analysis of the politics/work/ criticism of existing regulatory institutions. Debunks key myths regarding offshore havens and the negative impact of money laundering on economies; democracies; free markets; and state revenues. Detailed analysis of why efforts to estimate the volume of money laundering invariably fail.

  • Bennett, Tim. 2004. A practitioner’s guide to money laundering compliance. London: LexisNexus.

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    Charts the development of the legislation and case law from when foreign revenue offences were unrecognized by the UK government to date. Sets out practical difficulties in implementation, such as the enforcement of revenue laws of regimes such as Iraq, Libya, etc.; lack of amnesties for people fleeing war, and religious and political persecution.

  • Gold, Michael, and Michael Levi. 1994. Money laundering in the UK: An appraisal of suspicion-based reporting. London: The Police Foundation and Univ. of Wales.

    E-mail Citation »

    One of the earliest reports that questioned the suspicion-based regimes that were coming into place to tackle money laundering.

  • Levi, Michael. 2014. Money laundering. In The Oxford handbook of organized crime. Edited by Letizia Paoli, 419–443. Oxford: Oxford Univ. Press

    E-mail Citation »

    Useful overview: defines money laundering to include drug trafficking, terrorism financing, corruption, and tax evasion; reiterates methodological issues in estimating the volume of laundering; questions efficacy of AML measures. Describes conscription of financial system into reporting, and the generation of extensive data that isn’t seriously used for investigations. Contends that AML practice targets small jurisdictions and banks rather than big nations and big banks. Useful as a money laundering primer.

  • Levi, Michael, and Peter Reuter. 2006. Money laundering: A review of current controls and their consequences. Crime and Justice: An Review of Research 34:289–375.

    DOI: 10.1086/501508E-mail Citation »

    Good overview of global AML/CTF regulatory regime and its efficacy; sketchy discussion of methods; good overview of problems associated with estimating volume. Also provides good review of enforcement issues in the United States and the United Kingdom.

  • Naylor, R. T. 2002. Wages of crime: Black markets, illegal finance and the underworld economy. Montreal: McGill-Queen’s Univ. Press.

    E-mail Citation »

    Excellent, critical overview of the political economy of money laundering; detailed history of money laundering praxis. Debunks key myths: money laundering/criminal networks are not hierarchical organizations; supply-side controls do not work in black markets; drugs are not central to the current AML regime; and rich, developed countries are the destination of laundered funds, not offshore islands. Describes how being the AML “backbone” helps the US economy.

  • Stessens, Guy. 2000. Money laundering: A new international law enforcement model. Cambridge, UK: Cambridge Univ. Press.

    DOI: 10.1017/CBO9780511494567E-mail Citation »

    Excellent overview of law and praxis in major European countries. Very thorough treatment of jurisdiction and how it affects AML regulations, adjudication, and enforcement; details how realpolitik determines cooperation between judicial, administrative, and police authorities, and affects the exchange of information, evidence gathering, and repatriation of laundered monies. Despite conceptual weaknesses (posits drug money as mainstay of laundering operations; describes offshore havens as final destination of laundered monies), excellent resource on Europe.

  • van Duyne, Petrus C. 2011. (Transnational) organised crime, laundering and the congregation of the gullible. Valedictory address, Tilburg University.

    E-mail Citation »

    Excellent discussion on the creation of money-laundering regulation, drawing on the history of organized crime in the European Union. Holds up regulation as the outcome of the “fear rhetoric shared by a relatively small number of problem owners”; shows how dissent and difference are managed by eclipsing such people from the debate; failing to question assumptions or test contradictory evidence. Critical to understanding consensus-mobilization in practice.

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