International cooperation to combat money laundering

Money laundering is a process that turns “dirty money” into “clean money.” The proceeds of crime – dirty money – are disguised to hide their illicit origins, and then the money is integrated into the legitimate economy. The process washes dirty money until it appears to be clean. Often, but not always, the cleaning of dirty money involves moving it across national borders and integrating it into another economy.

In April 2016, about 11.5 million financial and legal documents, the so-called “Panama Papers,” were leaked through Panamanian law firm Mossack Fonseca (Forster, Reference Forster2016). These documents allegedly revealed a global system of undisclosed offshore accounts, money laundering, and other illegal activity, implicating world leaders, financiers, celebrities, criminals, and tax evaders. One of the consequences of the Panama Papers was the sharpening of the national and global focus on the risks associated with money laundering, tax evasion, and terrorist financing.

Criminals disguise the illegal origins of their wealth, and terrorist organizations try to conceal the destination and the purpose for which the money has been collected. Money laundering plays a part in corruption as corrupt public officials need to hide the kickbacks they receive and the public funds they may have misappropriated. Organized criminal groups have substantial proceeds from drug trafficking and commodity smuggling. Together these activities have profound social consequences and require cooperative international activity to combat them.

There is a great deal of international and national cooperative efforts to counter financial crime and money laundering. The evidence for success is very mixed (U4, 2017). Legislation exits in most countries to criminalize money laundering and the associated activities such as opening bank accounts in false names. Law enforcement agencies have investigated and prosecuted those accused of money laundering and prison sentences have been imposed. Money laundering is certainly big business and is significant for many economies, with estimates of over US$1 trillion being laundered every year by drug dealers, arms traffickers, tax evaders, and other criminals.