Money Laundry

C. Sharman J.

Description

A generation ago not a single country had laws to counter money laundering; now, more countries have standardized anti-money laundering (AML) policies than have armed forces. In The Money Laundry, J. C. Sharman investigates whether AML policy works, and why it has spread so rapidly to so many states with so little in common. Sharman asserts that there are few benefits to such policies but high costs, which fall especially heavily on poor countries. Sharman tests the effectiveness of AML laws by soliciting offers for just the kind of untraceable shell companies that are expressly forbidden by global standards. In practice these are readily available, and the author had no difficulty in buying the services of such companies. After dealing with providers in countries ranging from the Seychelles and Somalia to the United States and Britain, Sharman demonstrates that it is easier to form untraceable companies in large rich states than in small poor ones; the United States is the worst offender.Despite its ineffectiveness, AML policy has spread via three paths. The Financial Action Task Force, the key standard-setter and enforcer in this area, has successfully implemented a strategy of blacklisting to promote compliance. Publicly identified as noncompliant, targeted states suffered damage to their reputation. Subsequently, officials from poor countries became socialized within transnational policy networks. Finally, international banks began using the presence of AML policy as a proxy for general country risk. Developing states have responded by adopting this policy as a functionally useless but symbolically valuable way of reassuring powerful outsiders. Since the financial crisis of 2008, the G20 has used the successful methods of coercive policy diffusion pioneered in the AML realm as a model for other global governance initiatives.

Sujets

• International finance
• Political economy
• Organized crime

Informations

• Publié par: Cornell University Press
• Date de parution: 15 octobre 2011
• Nombre de lectures: 0
• EAN13: 9780801463198
• Langue: English
• Poids de l'ouvrage: 3 Mo

Extrait

THE MONEY LAUNDRY

A volume in the series Cornell Studies in Political Economy edited by Peter J. Katzenstein

A list of titles in this series is available at www.cornellpress.cornell.edu.

T

HE MONEY LAUNDRY

RECRI MI NALGUL AT I NG F I NAHE GL OBALN T NCE I E CONOMY

J . C . S h a r m a n

CORNELL UNIVERSITY PRESS Ithaca and London

Copyright © 2011 by Cornell University

All rights reserved. Except for brief quotations in a review, this book, or parts thereof, must not be reproduced in any form without permission in writing from the publisher. For information, address Cornell University Press, Sage House, 512 East State Street, Ithaca, New York 14850.

First published 2011 by Cornell University Press

Printed in the United States of America

Library of Congress Cataloging-in-Publication Data Sharman, J. C. (Jason Campbell), 1973–  The money laundry : regulating criminal finance in the global economy / J.C. Sharman.  p. cm. — (Cornell studies in political economy)  Includes bibliographical references and index.  ISBN 978-0-8014-5018-1 (alk. paper)  1. Money laundering—Prevention. 2. Banks and banking, International—Law and legislation. I. Title. II. Series: Cornell studies in political economy.  HV6768.S53 2011  364.16'8—dc22 2011013087

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Cloth printing

10 98 7 6 5 4 3 2 1

To my family and Bilyana

C o n t e n t s

Acknowledgments ix

Introduction: Policy Diffusion and Anti-Money Laundering 1 1. Money Laundering and Anti-Money Laundering 14 Pa r t O n e :L a u n d e r i n gA nt i –M o n e y D o e s P o l i c y W o r k ? 2. An Indirect Test of Effectiveness 37 3. A Direct Test of Effectiveness 68 Pa rt Tw o : W h y H a s A nt i –M o n e y L a u n d e r i n g Po l i c y D i f f u s e d ? 4. Blacklisting 99 5. Socialization and Competition 131 Conclusions: Implications for Scholarship and Policy 165

Bibliography185 Index197

A c k n o w l e d g m e n t s

This book grew out of an earlier interest in tax havens. I traveled from island to island conducting interviews about a cam- paign led by the Organization for Economic Co-operation and Develop- ment (OECD) to impose global tax regulations. While those I met with were concerned about this campaign, they stressed that the institution that really scared them was an obscure body called the Financial Action Task Force, which is in charge of enforcing anti-money laundering standards. My curiosity on this subject was further piqued in performing policy work with the Commonwealth. It became clear that introducing regulations to counter money laundering imposed serious costs on developing coun- tries, while the benefits were elusive. Strangely, although regulators and those in the financial sector would accept this conclusion about prominent costs and nebulous benefits, they nevertheless argued that these regulations were a good thing, or at least an inevitable fact of life. Many of those I spoke with in powerful Western governments and international organizations were either bemused or annoyed when asked if the regulations really worked or what costs they imposed. These questions were regarded as a waste of time, as they suggested that countries and firms had a choice about adopting the standard set of regulations on money laundering. In fact, they did not. Given the novelty of money laundering as a policy concern, how had this sense of inevitability come about? The final element that provoked my interest was the extent to which insti- tutions and policies in disparate countries faithfully, perhaps even slavishly, followed foreign models, based on a willing suspension of disbelief about these models’fit with local circumstances. Whether I was stuck in Nauru after the only plane broke down, or listened to Tanzanian or Malawian policymak- ers, or observed the destroyed capital and airport of Montserrat, I thought it was plain to see that these countries have incredibly pressing problems aside from financial crime. Yet addressing these problems often gives way to the perceived imperative to keep up appearances for outside audiences concerned about anti-money laundering policy.

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