Talk for Article "Facing up to ineffectiveness in fight against money-laundering"

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  1. [ This comment is from a user you have muted ] (show)

    It would be interesting to get an opinion as to the impact of cryptocurrencies on money-laundering.

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      That’s a really interesting topic at the moment – I have seen lots of people writing about it but I’m unsure how it’s being addressed by regulators so we could definitely look into that

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        Regulators are supine, bending to the will of their banking masters as this article in the Telegraph reveals. Banks appoint junior staff to monitor money laundering compliance. Why would junior risk their careers challenging potential money launders? The junior staff are so in thrall of senior managers and bank directors in the macho, profits and bonus -driven banking culture they keep their heads down. This means that people can open accounts with all sorts of funny money without being challenged.

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    People who are not aware of what goes on in “offshore financial centres” including onshore ones like London, Dublin, Zurich etc say that they don’t want to conflate money laundering and tax avoidance. Money laundering and tax avoidance are executed by the same people and firms, there is a culture of secrecy and opacity, a sense of being apart from the little people who have to pay their taxes normally.

    There is no justification in the connected world for some to be able to avoid taxes simple because they are big, multinational, powerful and who will scour the world and bully and bribe offshore tax jurisdictions, as Apple has been doing after it was “found out” by the EU using Dublin as a tax shelter.

    Why do the laws exist that treat Apple and Amazon differently or allow them to hunt down the jurisdictions that will treat them most fiscally favourably? Why do the same centres and financial advisers and institutions cater for the criminals, terrorists and kleptocrats who have their money in these centres to wash it whiter than white?

    The same gold standards of privacy and secrecy that are sought by money launderers are available for the facilitation of tax “avoidance”.

    For me it won’t wash!

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    It would be great to mention if there are any anti-money laundering interventions that have been evaluated with a randomized trial. If such trials don’t exist, perhaps mentioning that there are none is also worth mentioning, as they are the gold-standard of evidence of effectiveness.

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      That’s an interesting point – I don’t know the answer but can ask the report author if anything like that has been done.

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        I wish. Let alone RCT, even the connections between basic policy effectiveness principles and the AML discourse, albeit long (with scholars calling out effectiveness gaps at least as far back as 1994) are wafer thin. Even my own paper uses an imperfect proxy indicator towards effectiveness. It would be great to evaluate impact on the reduced social and economic harms from crime from the policy intervention. And with the AML writ having been incredibly successfully diffused globally, there is huge opportunity for multi-country analysis. But whilst a body of work exists in the crime harms space, policy effectiveness, outcomes, etc, much of remains distant from the AML industry bubble.

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          Oh so many people are supposed to be working diligently on money laundering but there is no evidence of effectiveness. OECD has money landing bureaucracy ( then there is its Financial Action Task Force ( (that frankly seems to do a FAT(f) lot of good). Then there is the UN ( that is equally ineffective.

          Basically the governments that are the sum of the parts of these organisation don’t want money laundering to stop. It they did they would stop it.

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            Agree, a vast industry. Tens of billions spent annually on the compliance with rules based on standards model, demonstrably ineffective. If crime prevention is the goal (at least by proxy, impact on criminal finances), it does indeed appear monumentally ineffective, even based on official figures.

            Your assumption (‘they don’t want it to stop’) is thus logically consistent.

            But I prefer to hypothesize first a consistency with stated intent, until proven otherwise (in essence first assume the good). And that remains consistent with much evidence of genuine, well meaning intent. Some may cynically be making hay while the sun shines, and ‘Criminals Inc’ is laughing all the way to the bank, but at core, it seems to me at least, the issue is, assuming most of the industry genuinely wants to stop serious crime, but the evidence indicates it ain’t all it seems, why is there precious little evidence-informed critical thinking and discussion about effectiveness? That seems odd, I agree. Recognition of a problem is a necessary precursor to its resolution.

            Yet, even the United Nations, Europol and FATF itself (which after more than two decades measuring against the 40 recommendations accepted that compliance doesn’t indicate AML/CFT effectiveness, and, to their credit sought to move towards effectiveness [albeit not quite right first time round I contend] yet still failed to nudge the narrative. Nations still plough forward, much the same.

            Another logical hypothesis is that the real policy goal is ‘to get the FATF tick’, so as not to interfere with unrestricted access to global financial markets. But, solid proof is scant. Few governments would admit to it openly.

            So, I labour with assuming that the goal is effective crime detection, dismantling, prevention capability. Nonetheless, I must accept that the evidence is not strong, because if that really was the case, the AML juggernaut would long ago have paused, to recalibrate towards those goals.

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    Absolutely fundamental to money laundering is the complicity of governments. Governments condone money-laundering bolt holes, of which London is the largest and most vibrant, but also including Switzerland, Lichtenstein, Ireland, Luxembourg, Cyprus, Malta, Monaco, and Panama and others.

    But key to the world’s money laundering infrastructure is the kaleidoscope of British Overseas Territories including British Virgin Islands, the Cayman Islands, Bermuda, the Isle of Man, the Channel Islands and Gibraltar that facilitate all the world’s kleptocrats, oligarchs, authoritarians and terrorists to wilfully exploit their tax fiddling and money laundering capacities.

    Crucial to an understanding of money laundering, using such places is “legal money laundering” that deprives the British Exchequer and other finance ministries of billons in tax funds it needs for defence, health, education and social care.

    The British government is belatedly requiring more transparency to curb illegal activity but is doing nothing to stop multinational corporation avoiding tax, quite legally, by booking transactions through these tax bolt holes.

    “Transfer pricing” is where, for example, a British company has, say, a refrigerator made in China for sale in the UK. The fridge first “sold” to a company in the British Virgin Islands and the company books a profit that is subject to little or no tax. The fudge is then sold by the BVI company into the UK where the holding company books little or no profit so that it is not subject to British taxation.

    A glance at the annual reports of any international trading company will show the subsidiaries registered in British tax havens. Action Aid has campaigned to curb these practices that have been unchallenged for years.


    On the mainland United States, states like Delaware, have “tax efficient” structures that facilitate money laundering.

    The US has tax laws that encourage multinational corporations like Apple, Google, Microsoft and Facebook to retain profits they make outside the US – to the extent that Apple raised a loan inside the US to pay a dividend rather than repatriating funds it held overseas and paying tax on them. Donald Trump has moderated the effect of these laws which has seen large sums repatriated by such corporations.

    But the fact remains that if governments really wanted to stamp out money laundering they would close down money laundering centres, they would stop large companies using legal tax dodges that create the culture and climate that facilitates money laundering.

    Watch the Brexit process of Britain’s proposed withdrawal from the European Union: some of the most rabid “Brexiteers” are wealthy people who see themselves getting richer by Britain being outside the EU thus avoiding the increasing money laundering and fiscal scrutiny that the EU is imposing as is demonstrated by its battles with some of the US multinationals that use money laundering facilities in EU countries.

    Any investigation about money laundering – both legal and illegal – should start with an examination of the contributions companies and corporations make to political parties and the lobbying that is, opaquely, applied to political parties and governments to discourage any changes in the fiscal, money transfer and other benefits of offshore tax havens.

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      “Crucial to an understanding of money laundering, using such places is “legal money laundering” that deprives the British Exchequer and other finance ministries of billons in tax funds it needs for defence, health, education and social care.”

      Well no it doesn’t.

      The whole point of money laundering is to pay taxes, and the reason why governments such as the U.S. and the U.K. allowed the creation of their own offshore finance centres in the first place, and why they do pretty much nothing to change the way these places function.

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        I think if we conflate money laundering (moving criminally-obtained wealth in such a way as to hide its origin) with tax avoidance (which we may say is immoral but is not illegal) it could get a bit murky. It may be right that governments have turned a blind eye to both for the same reasons though, and I think we could look at the role of shell companies in both.

        1. [ This comment is from a user you have muted ] (show)

          Absolutely right Jack. ML is distinct from (lawful) tax avoidance. Tax evasion, however, is a crime. And irrespective whether or not criminalized as an ML predicate in various countries, it remains conceptually such. It’s scale can also be surprising. In ‘small, egalitarian, law abiding’ NZ, for example, one official estimate puts it annually on a par with all other domestic profit-motivated crime (drugs, fraud, etc), and another official reckoning roughly twice as much.

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