Introduction to Money Laundering
Every criminal needs to "launder" the proceeds of crime, but where organized crime, drug trafficking and corruption are
involved, the consequences of money laundering are bad for business, development, government and the rule of law.
Because they deal with other people's money, banks (and other financial and professional institutions) rely heavily on
a reputation for probity and integrity. Banks need their good name to build business. A financial institution with a reputation
for shady dealing will be shunned by legitimate enterprise. The prestige of even a major bank that is revealed to have assisted
in the laundering of money can be severely damaged. Money laundering is bad for business.
An international financial centre that is used for money laundering can become an ideal financial haven. An international financial centre perceived to be opening its doors to drug traffickers' cash and organized crime will eventually
fail to keep the accounts of major legitimate corporations because they fear tarnishing their own reputation by association.
Developing countries that attract "dirty money" as a short-term engine of growth can find it difficult, as a consequence,
to attract the kind of solid long-term foreign direct investment that seeks stable conditions, good governance and which can
help them sustain development and promote long-term growth. Money laundering is bad for development.
Left unchecked, money laundering can erode a nation's economy by changing the demand for cash, making interest and exchange
rates more volatile, and by causing high inflation in countries where criminal elements are doing business. The siphoning
away of billions of dollars a year from normal economic growth poses a real danger at a time when the financial health of
every country affects the stability of the global market. Money laundering is bad for the economy.
Most disturbing of all, money laundering empowers corruption and organized crime. Corrupt public officials need to be able
to launder bribes, kick-backs, public funds and, on occasion, even development loans from international financial institutions.
Organized criminal groups need to be able to launder the proceeds of drug trafficking and commodity smuggling. Terrorist groups
use money laundering channels to get cash to buy arms. The social consequences of allowing these three groups access to the
capacity to launder money can be disastrous. Taking the proceeds of their crimes from corrupt public officials, traffickers
and organized crime groups is one of the best ways to stop them in their tracks.
In recent years, the international community has become more aware of the dangers that money laundering poses in all these
areas, and many governments and jurisdictions have committed themselves to taking action. The United Nations and the other
international organizations are committed to helping them in any way they can.
The Ten Fundamental Laws of Money Laundering
Money Laundering and Globalization
Criminals are now taking advantage of the globalization of the world economy by transferring funds quickly across international
borders. Rapid developments in financial information, technology and communication allow money to move anywhere in the world
with speed and ease. This makes the task of combating money laundering more urgent than ever.
The deeper "dirty money" gets into the international banking system, the more difficult it is to identify its origin. Because
of the clandestine nature of money laundering, it is difficult to estimate the total amount of money that goes through the
laundry cycle. Estimates of the amount of money laundered globally in one year have ranged between $500 billion and $1 trillion. Though
the margin between those figures is huge, even the lower estimate underlines the seriousness of the problem governments have
pledged to address.
There have been a number of developments in the international financial system during recent decades that have made the
three F's-finding, freezing and forfeiting of criminally derived income and assets-all the more difficult. These are the "dollarization"
(i.e. the use of the United States dollar in transactions) of black markets, the general trend towards financial deregulation,
the progress of the Euromarket and the proliferation of financial secrecy havens.
Fuelled by advances in technology and communications, the financial infrastructure has developed into a perpetually operating
global system in which "megabyte money" (i.e. money in the form of symbols on computer screens) can move anywhere in the world
with speed and ease.
For more information about other organizations involved in anti-money laundering activities, please see Links.
Publications
