Well, I’m back, having spent a week in the Suffolk countryside, which encourages a slowing of the pace and a contemplating of the navel. Just before I went away, a fellow AML enthusiast called Dev Odedra posed this question in response to one of my posts: if money laundering were legal, how many financial institutions would allow their customers to do it? And I’ve been mulling.
I suppose what we’re considering here is whether morality should come into finance. Money laundering is, after all, the mechanism by which criminals conceal the fact that their money is the proceeds of crime – so decriminalising that mechanism does not mean that the proceeds-generating crimes have not been committed in the first place. If someone came to your bank or law firm or casino and said, “Look, I’ve made this money by defrauding little old ladies”, would you be prepared – indeed, happy – to take that money and make your profit from it? (Of course, you wouldn’t be the MLRO at that point; if money laundering is legal, there’s no need for reporting and therefore the MLRO is redundant. Rather, you’re simply a fee-earner or equivalent in your firm.) Would it depend on the crime they admitted to – you’re sanguine about drug trafficking, for instance, but you do draw the line at selling pornographic images of children. Would it matter to you whether the crime was committed in your own community or somewhere more distant? Would it come down to how profitable the business would be for you? And what if they didn’t admit to anything at all, but you had your suspicions…
It wouldn’t be the first time that we’ve had to consider the moral dimension of money: we’re all familiar with the tax evasion / tax avoidance / tax efficiency scenario. The first is illegal almost everywhere and so the situation is simple – you can’t take the proceeds – but I know of several MLROs who are slightly queasy when it comes to tax avoidance, and even some who feel that tax efficiency is just a juicy rationalisation for avoidance.
Personally, I am grateful that money laundering is a crime, and not just because it has provided me with a fascinating career in AML. People who make a great deal of money from crime can be rather, well, unpleasant and threatening, and I am glad to have the law to back me up when I want to turn them and their money away. In the same way as I don’t like to see litter in the countryside, because it spoils the view for everyone, I don’t like criminal money contaminating the financial system, because it makes everyone’s assets seem more grubby. But that’s just my rather po-faced view. What do you think: if money laundering were legal, how many financial institutions would allow their customers to do it?
Hi Susan, interesting but isn’t the question hypothetical, sort of non-factual, a never-to-happen event, more chance of an enormous black hole opening up in St Peter Port and swallowing up the GFSC. The facts; criminals commit crime, earn money as the proceeds of crime and make profit, if these profits were taxable would any government care about the origin as long as the taxman was paid? e.g decriminalisation of cannabis and taxing the sales. There’s an interesting scenario!
Secondly, why would governments all over the world make ML legal, when in a little over 20 years built up a multi billion dollar industry in sanctioning and fining FSB’s the world over, not for committing ML or TF but breaking regulations, the same regulations they wrote, they investigate, they enforce, a self perpetuating money earner for the State! Brilliant, we should have thought of it. There’s an interesting scenario!
Thirdly, many academics prescribe to the view in the last 20 years the current anti-money regulations from FATF down has not stopped, diminished or even harmed organised crime groups (“OCG”) and seizures remain a fraction of the illegal money in the system year on year…is it time to think different! Do things differently, maybe stop writing regulations to self-fund the State coffers, and put more money, effort and resources into dedicated specialised policing teams and the courts to prevent, disrupt, and dismantle multi-national OCGs and sieve there fortunes.
Conclusion: Last 20 years, OCG profits continue unabated, States/Gov make more & more profits via regulation enforcement, do we stick with the same or time to change?… I guess we already know the answer!.. Where’s that black hole!
Thank you for your comment, Phil, and welcome to the blog. Indeed, it’s all hypothetical – but wouldn’t the world be dull if we talked only of things that we are certain can happen? And your own reply posits two more interesting scenarios for us to ponder…
It’s quite ironic that I saw this article soon after seeing one on Accounting Web (https://www.accountingweb.co.uk/practice/general-practice/six-misconceptions-around-money-laundering), the responses to which rather made me worry that some in the accountancy profession already think it is….(or at least think that anything their clients do must be legal, because, apparently it’s only big firms who could have clients who launder….)
I’d respectfully disagree with Phil’s comments above; to suggest that there’s a difference between “committing money laundering” and “breaking regulations” rather misses the point: the regulations aren’t there as a money making tool, they’re there to prevent the facilitation of laundering. People/companies who break those regulations are doing just that, facilitating laundering and shouldn’t be able to convince themselves that they’re just cutting corners on some money-spinning red tape.
Many thanks for that very useful link, Gareth – alarming, but useful! And I’m with you on this one: the bane of my life is staff and organisations who view AML simply as a regulatory matter – something they have to do to retain their licence. My goal is to make everyone in the regulated sector FURIOUS about money laundering, INCENSED that criminals are abusing our workplaces for their filthy purposes, and OUTRAGED that anyone should think for a moment that we are going to use our skills and resources to help them disguise the proceeds of crime. That’s the purpose of AML! Here endeth the lesson.
To answer your question, I’d say most or all would allow their customers to launder money. And this is because financial institutions have a very poor track record when it comes to things like enforcement and ethical behaviour. We profit off things like the arms trade and vital medicines. Banks don’t have morals and their ethics are more concerned with the impact their behaviours have on their shareholders, not on the general public.
Welcome to the blog, Adam, and thank you for your comment. Sadly, I think this is often the case. Of course financial institutions are not charities – they have to make money for their shareholders – but some of them seem to get the balance wrong…
There is a partly-established system of making illegal transactions both secret and unjustifiable, by private contract. It operates in Australia and New Zealand and appears to operate in the UK as well. I had an interesting chat with a fairly senior lawyer there, whom I picked on after seeing him assisting a Select Committee with their enquiries. I have met a few lawyers who see it and are horrified; a few who set it up and get scared and threatening if one talks about it; and lots who seem genuinely not to see it. I am hoping the SFOs of these countries fall into the last category. They certainly don’t fall into the first.