It may be easy to understand the impact of money laundering on the initial victims – those who lost money as a result of a predicative crime, but it can have a deeper, more lasting impact on society as a whole.
While some fear that the Anti-Money Laundering (AML) efforts could have a detrimental effect on trade, especially in developing countries, let us look at a number of ways in which money laundering can harm us all. We will focus on developing countries, as their influence can be overwhelming.
The first and most obvious impact is the rise of corruption and crime. In many jurisdictions that are shelters for successful money laundering, there are frequent concerns from the government and / or regulators – several predicative crimes, little or no reporting, enforcement, penalties, or confiscation of illicit funds, and so on. bribery of government and bank officials, lawyers, accountants and others. Shortly after this shoreline was established, bribery distracts from other, even violent, crimes.
The second effect (valid in any jurisdiction) applies to legitimate businesses. It is even assumed that the operations of the previous company can be subsidized if the washer uses the front company to hide illegal funds. This can allow a leading company to sell its products below or below cost, eliminate their legitimate competition, and open the door for expansion by a leading company. As the front company grows, it provides a greater opportunity to transfer more illegal funds to the washer. In a developing country, it is not long before a criminal / washerman takes control of the entire industry.
However, it should be noted that the washer does not share the same goals with legitimate business owners who seek to maximize their profits through profitable, ongoing operations of their businesses. The main concern of the washer is not its return, but the successful concealment of the origin and ownership of the funds under his control.
It is this disregard for normal business practices that leads to another area of concern – economic distortion. Launderers often invest their money in assets or activities that are not economically viable for the countries where the funds are located. For example, real estate prices are rising in Nairobi, Kenya, where real estate prices have fallen sharply in recent years due to the bursting of the mortgage balloon and other global pressures – 2-3 times in the last 5 years. years. And is there any miracle? With money laundering laws and a 500-mile common border with Somalia, it’s easy to guess where most of the Somali pirate ransom money went. This took the hosting away from many hardworking Kenyans.
Such distortions, in turn, can lead governments to misinterpret economic data. Without seeing the real economic tendencies of their countries, the leadership tends to make decisions that are not in the interests of their countries.
When conditions change in one of these places, the washerman will withdraw the money as soon as possible, often without taking into account or without taking into account any losses they may incur. In an economy run or run by money laundering, when this “flight capital” suddenly disappears, the effects of fluctuations throughout society can reach tsunami rates. A good money launderer does not intend to expose his money only if he can use the money of financial institutions and other investors. As flight capital goes, values fall, loans default, and banks collapse. Investigations and litigation take place. At best, the country’s reputation is tarnished. Legitimate investment goes elsewhere. In the end, not even the government can survive.
There are other risks, but they are intended for more serious students of money laundering and another day.