Latest: Corruption and Money Laundering.

In fight against money laundering and terror finance, 'the emperor wears no clothes'

When I was a boy, I loved the fairytale, "The Emperor Wears No Clothes."

Unfortunately, the metaphor could well be used to describe our efforts against international money laundering.  The overwhelming majority of observers are unwilling to see what is obvious: our anti-money laundering efforts are just a percentage point away from total failure.

But, this is no fairytale.  The worldwide failure to combat money laundering has a dramatic impact.  Why?  Because outside of crimes of passion—for example, murder committed in a jealous rage—criminals, kleptocrats, and some unscrupulous companies are motivated by greed. 

In today’s interconnected world, the manifestations of unfettered avarice impact us all.  We see it in our communities: the opioid, meth, and cocaine epidemics are devastating. Human trafficking, fraud in government programs, and identity theft can affect our daily lives.  Of course, money laundering and terror finance also impact national security.

Sometimes law enforcement, policymakers, and the media get so distracted with the immediacy of the criminal behavior that they forget the aim of criminal activity isn’t the crime itself—but the proceeds of the crime. Just about everybody agrees that the “War on Drugs” failed.  But we do not acknowledge that our inability to stop the laundering and seize the proceeds fuels the greed behind the drug trade.

How much money is being laundered? Estimates are all over the map, but the bottom line is: a lot. The IMF and United Nations Office on Drugs and Crime (UNODC) estimate the scale of global money laundering falls somewhere around two to five percent of global gross domestic product, roughly the size of the U.S. federal budget.  The IRS says that “money laundering is tax evasion in progress.”   If tax evasion here and abroad is included in the count, the magnitude of international money laundering is staggering.

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