Great expectations but little evidence: policing money laundering

Policy Design and Practice

2020

This paper uses anti-money laundering as a case study to illustrate the benefits of cross-disciplinary engagement when major policymaking functions develop separately from public policy design principles. It finds that the anti-money laundering policy intervention has less than 0.1 percent impact on criminal finances, compliance costs exceed recovered criminal funds more than a hundred times over, and banks, taxpayers and ordinary citizens are penalized more than criminal enterprises. The data are poorly validated and methodological inconsistencies rife, so findings cannot be definitive, but there is a huge gap between policy intent and results. The scale of the problem not addressed by "solutions" repeatedly "fixing" the same perceived issues suggest that blaming banks for not "properly" implementing anti-money laundering laws is a convenient fiction. Fundamental problems may lie instead with the design of the core policy prescription itself. With an important policymaking function operating largely as an independent silo of specialist knowledge, this paper suggests that active engagement with critical, diverse perspectives, and deeper connections between the anti-money laundering movement and other disciplines (notably, policy effectiveness, outcomes and evaluation principles of public policy) should contribute to better results.

Section: Ineffective To the Corementioning

confidence: 99%

Anti-money laundering: The world's least effective policy experiment? Together, we can fix it

Policy Design and Practice

2020

“…For more than two decades, researchers identified significant gaps between the intentions and results of the modern anti-money laundering effort, including its core capacity to detect and prevent serious profit-motivated crime and terrorism (Anand, 2011; Brzoska, 2016; Chaikin, 2009; Ferwerda, 2009; Findley et al , 2014; Harvey, 2008; Levi, 2002, 2012; Levi and Maguire, 2004; Levi and Reuter, 2006, 2009; Naylor, 2005; Pol, 2018b; Reuter and Truman, 2004; Rider, 2002a, 2002b, 2004; Sharman, 2011; Tsingou, 2010; van Duyne, 2003, 2011; Verhage, 2017).…”

Section: Steadfast In the Face Of Evidence Of Effectiveness Gapsmentioning

confidence: 99%

Response to money laundering scandal: evidence-informed or perception-driven?

2020

JMLC

Purpose The purpose of this paper is to utilise underused information in anti-money laundering rating data to assist policymaking and research. Design/methodology/approach This paper explores what evidence “hidden in plain sight” in official anti-money laundering rating data reveals about claims justifying the expansion of money laundering controls in response to European bank scandals. Findings A perceived lack of international coordination influencing the policy response to a series of alleged anti-money laundering breaches does not accord with the anti-money laundering industry’s own evidence base. Practical implications Responding to new crises with superficial solutions without addressing fundamental questions with a multi-disciplinary perspective risks repeating and extending a decade-long cycle of ineffectiveness in efforts to mitigate the social and economic harms from profit-motivated crime. Originality/value This paper draws fresh conclusions from the anti-money laundering industry’s “main” data set, underused in policymaking and research.

“…Concerns about major gaps between intention and results can be traced nearly as far back as FATF’s rapid formulation in 1990 of what still remains anti-money laundering’s “compliance with rules based on standards” operating model (Gold and Levi, 1994). A long line of literature questions the model’s effectiveness in many areas, including its fundamental capacity to detect and prevent serious crime and terrorism (Anand, 2011; Brzoska, 2016; Ferwerda, 2009; Findley et al , 2014; Harvey, 2008; Levi, 2002, 2012; Levi and Maguire, 2004; Levi and Reuter, 2006, 2009; Naylor, 2005; Pol, 2018b; Reuter and Truman, 2004; Rider, 2002a, 2002b, 2004; Sharman, 2011; Tsingou, 2010; van Duyne, 2003, 2011; Verhage, 2017), yet the core model continues, virtually unchanged.…”

Section: Evaluations “Impressionistic Politicised and Ineffective”mentioning

confidence: 99%

Anti-money laundering ratings: uncovering evidence hidden in plain sight

2019

JMLC

Purpose This paper aims to increase the transparency of information in official anti-money laundering rating data to assist evidence-informed decision-making in compliance, policy-making and research. Design/methodology/approach This paper converts anti-money laundering rating data into information-rich visualisations, reintroduces a comparison methodology and ranks all anti-money laundering regimes evaluated to date. Findings Official anti-money laundering ratings as currently structured and presented offer surprisingly little policy-relevant information. Persistent failure to transform available data into information for knowledge and insight suggests that the risk has been realised that impressionistic judgments or politicised interests drive the policy agenda at least as much as objective evidence or substantive economic and social goals. Practical implications Any reluctance to generate policy-relevant information from the industry’s primary data set or disinclination to engage constructively with a growing body of independent critical policy effectiveness evidence calls into question whether implementing anti-money laundering controls with some prospect of achieving substantial societal benefits, or perpetuating the current system, prevails. Originality/value With a dearth of scholarship at the intersection of money laundering and policy effectiveness scholarship and practice, this paper combines elements of these disciplines and examines anti-money laundering effectiveness from a different viewpoint. Rather than seeking to measure money laundering or estimate the proportion of criminal proceeds successfully intercepted, this paper draws directly from the anti-money laundering industry’s own “main” data set.