Money laundering has been described as the mother of all crimes. The exact amounts involved are difficult to judge, but an estimated trillion dollars are laundered each year - enough to dwarf the gross national product of many countries.
There are many ways to conceal the identity of money acquired by drug trafficking, theft, smuggling, tax evasion and other criminal activities. In a globalised economy with porous territorial boundaries, money laundering may be facilitated by banks, secretive offshore havens, accountants, lawyers and other experts. A major question is how to combat it. Can the law really succeed?
This book provides an extensive discussion of the international legal frameworks for combating money laundering and the legal problems that can arise in the implementation of the rules. There are important international differences even in the definition of money laundering. Some states are introducing confiscation as a device to deprive offenders of their profits from illegal trades. The author provides evidence that some, such as the United States, resort to confiscation more readily than others. Banks are now expected to check the origins of suspicious deposits and transfers. Many international treaties have been signed, to encourage cooperation in tracking the money and the criminals between jurisdictions. Institutions such as the Financial Action Task Force help to collect information and to coordinate international policies. They also provide blueprints for possible future legislation.
The book is the English-language version of Guy Stessens's PhD thesis. Within its own parameters, it is very well written and researched and provides considerable detail on the legal aspects of the fight against money laundering.
There are plenty of references to case law, statutes and international agreements. However, one of the difficulties with the book is that it conceptualises the fight against money laundering primarily as a problem of devising good laws and enforcing them. It does not explicitly acknowledge that legal processes are always political and informed by the prevailing politics and power relations. Any fight against money laundering solely conceived in terms of law enforcement is likely to achieve limited success.
The state is expected to implement legislation to combat money laundering, but some states have indulged in money laundering to pursue political aims. For example, the Central Intelligence Agency laundered money through the now defunct Bank of Credit and Commerce International to pursue US foreign-policy objectives.
In market economies, governments have to rely on banks and others to monitor compliance with legislation, but the requirements may be resented or considered too costly. So despite considerable fine tuning of internal controls and reporting requirements, the UK banks failed to prevent the former Nigerian dictator Sani Abacha from laundering hundreds of millions of pounds. Then there are offshore havens that promise secrecy to all comers and are tolerated by western governments. Money laundering requires secrecy. Without secrecy many offshore jurisdictions have not got much to trade Perhaps the events of September 11 will galvanise governments to examine the role of offshore havens.
The book also fails to consider the inequities built into international trade, which encourage money laundering and drug trafficking. For example, more than half of the gross national product of Colombia is used to service its international debt.
The terms of trade are loaded against developing countries. In their desire to provide food, shelter, clothing and other essentials for their families, many people are attracted to the narcotics trade.
No amount of condemnation, international treaties or laws can deal with some of the deep-rooted causes of money laundering. The problem requires the restructuring of the terms of international trade, something western governments are not willing to do. Hence any legalistic fight against money laundering will have only a very limited success.
Attention to the socio-political aspects of money laundering would have made this book much stronger. Stessens could also have considered the ethics of the financial world, which shuffles illicit monies with little public accountability.
These criticisms notwithstanding, the book is a worthy addition to the literature and deserves to be read by serious scholars.
Prem Sikka is professor of accounting, University of Essex.
Money Laundering: A New International Law Enforcement Model
Author - Guy Stessens
ISBN - 0 521 78104 3
Publisher - Cambridge University Press
Price - £50.00
Pages - 460