Secondly, the question remains whether money-launder-ing and predicate crimes can always be properly geo-graphically separated. Even if organized crime groups decide not to undertake their primary criminal activities (for example, drug trafficking) in the countries where they have their money invested, it would be unrealistic to assume that they would not engage in other criminal activities, such as corruption. In fact, a number of authors have argued that money-laundering can lead to spillover mechanisms from criminal money to crime.
Because of the possibility of money-laundering in the financial sector, reinvestment of the money in illegal activities in the licit sector can be the consequence.136 A
Development, Report for the Asian Development Bank, May 2002, p.
11.
133 V. Tanzi, ‘Money Laundering and the International Financial System’, IMF Working Paper, International Monetary Fund, No.
96/55, Washington D.C. 1996; McDonell, R., ‘Money Laundering Methodologies and International and Regional Counter-Measures’, Presented at: Gambling, Technology and Society: Regulatory Chal-lenges for the 21st Century, Rex Hotel, Sydney, 7–8 May, 1998; J.
Boorman, and S. Ingves ‘Financial System Abuse, Financial Crime and Money Laundering’, IMF Background Paper, Washington D.C.
2001; Financial Action Task Force, Money Laundering FAQ, Wash-ington D.C, 2011, Accessable at http://www.fatf-gafi.org/document/
29/0,3746,en_32250379_32235720_33659613_1_1_1_1,00.html.
134 B. L. Bartlett, The negative Effects of Money Laundering on Economic Development, Report for the Asian Development Bank, May 2002.
135 V. Tanzi, ‘Money Laundering and the International Financial System’, IMF Working Paper, International Monetary Fund, No. 96/55, Wash-ington D.C. 1996.
136 D. Masciandaro, “Money Laundering: The Economics of
Regula-ing efforts at the global level. Otherwise, the system will be only as strong as its weakest link and will be exploited by organized crime.
Though it is important to be aware of the various socio-economic consequences, socio-economic considerations alone cannot and should not be decisive factors for enacting or implementing appropriate legislation or regulation. The key objective has to remain the fight against organized crime in all its dimensions. Anti-money-laundering leg-islation and measures form an integral part of this endeavour.
The subsequent chapter will give an overview of existing instruments at the international level to fight organized crime and related money-laundering activities. The dis-cussion will show that most of the necessary instruments to fight organized crime and related money-laundering activities exist already. Yet, the existing ‘success’ rate of identifying criminal capital flows is limited, to say the least. Based on all available estimates, less than 1% of the total amounts that are being laundered are detected.
Data collected by the US State Department suggest that some US$3.1 billion were seized in connection with money-laundering activities in 38 countries out of 62 countries analysed (2010 or latest year available); more than 80% of this was seized in North America.144 This would be equivalent to some 0.2% of the best estimate of the extent of money-laundering at the global level. In comparison, more than 20% of the globally produced illicit opiates are being seized and more than 40% of the cocaine.145 Are money-launderers really so much smarter than drug traffickers, or is there something wrong with the existing control system? The problem appears not to be a lack of international instruments (as will be shown in the next chapter), but shortcomings in the implemen-tation of existing instruments in a number of jurisdic-tions.
144 US Department of State, International Narcotics Control Strategy Report 2010 and 2011; Department of Justice Assets Forfeiture Fund for fiscal year 2010; Department of Treasury Assets Forfeiture Fund for fiscal year 2010.
145 UNODC, World Drug Report 2010, Vienna 2010.
tions with countries concerned - can be damaging for financial centres that do not want to adhere to interna-tional rules and regulations.142 Thus, incentives are cre-ated for financial centres to forego possible short-term benefits.
In order to guarantee the application of uniform, objec-tive criteria, the Financial Action Task Force (FATF) engaged in an initiative on ‘non-cooperative countries and territories’ (NCCTs). Using 25 criteria, the FATF researched the potential weaknesses of international financial centres which enabled it to identify those where the regulations and practices significantly infringed the fight against money-laundering and international coop-eration. Based on these findings, the FATF established a list of countries and territories with important flaws in their anti-money-laundering instruments or a lack of willingness to cooperate in combating money-launder-ing. Published first in 2000, this list was periodically updated. The FATF requested that the identified coun-tries and territories adapt their systems to internationally recognized standards. The mere threat of appearing on this list of ‘non-cooperative countries and territories’
prompted many countries and territories to improve their systems, so that they could be removed from the list.143 In 2006, the FATF adopted a new surveillance process - the International Co-operation Review Group (ICRG) – to identify, examine and engage with vulner-able jurisdictions that are failing to implement effective AML/CFT systems. This replaced the NCCT process.
In 2009, the ICRG procedures were amended, and the FATF now publishes a list of countries with strategic AML/CTF deficiencies after every FATF meeting.
vi. Key role of global anti-money-launder-ing efforts – enablanti-money-launder-ing the authorities to follow the money trail
Finally, one should not forget the key role of any anti-money-laundering legislation: enabling state authorities to follow the money trail in order to detect underlying criminal activities and to dismantle the groups involved.
This remains the main reason for the implementation of anti-money-laundering measures. The operations of criminal organizations are potentially vulnerable to detection via the money trail and there are good reasons for the authorities to exploit these vulnerabilities.
Any such system, however, will only work if there are no loopholes. Thus, there is a need for comprehensive, all-inclusive participation in international
money-launder-142 B. L. Bartlett, The negative Effects of Money Laundering on Economic Development, Report for the Asian Development Bank, May 2002, p. 9.
143 PolyReg, FATF Sanctions, February 2011. Accessable at http://www.
polyreg.ch/e/sanktionslisten/fatf.html.