Cleaning Up: Countries are advancing efforts to stop criminals from laundering their trillions

Author:Rhoda Weeks-Brown
Position:General counsel and director of the Legal Department of the IMF
Pages:44-45
 
FREE EXCERPT
44 FINANCE & DEVELOPMENT | December 2018
STRAIGHT TALK
AL CAPONE HAD A PROBLEM: he needed a way to dis-
guise the enormous amounts of ca sh generated by his
criminal empire as legitimate income. His solution
was to buy all-cash laundromats, mix dirty money
in with clean, and then cl aim that washing ordina ry
Americans’ shirts and socks, rather than gambling
and bootlegging, w as the source of his riches.
Almost a centur y later, the basic concept of money
laundering is the same, but its sca le and complexity
have grown considerably. Were Capone alive today, he
would have to run his washers and d ryers around the
clock to keep pace with dema nd; the United Nations
recently estimated that the criminal proceeds laun-
dered annually amou nt to between 2 and 5 percent
of global GDP, or $1.6 to $4 trillion a year.
Threat to stability
Money laundering is what enables crimi nals to reap
the benets of their crimes, includin g corruption, tax
evasion, theft, dru g tracking, and migrant smug-
gling. Many of these crimes pose a direct threat to
economic stability. Corruption and tax e vasion make
it dicult for governments to deliver sustaina ble and
inclusive growth by dimi nishing the resources avail-
able for productive purposes, such as buildi ng roads,
schools, and hospitals. Crimin al activity undermines
state authority and the rule of law wh ile squeezing out
legitimate economic activity. And money launderin g
may create asset bubbles in markets like real estate,
a common vehicle.
A recent example illustrate s the point. A Guinean
minister helped a foreign company obtain i mportant
mining concessions in excha nge for $8.5 million
in bribes. Falsely reporting that money as income
from consulting work and private land sales, the
minister transferred it to the United States and
bought a luxury es tate in New York. But his eort
to turn ill-gotten ga ins into a seemingly legitimate
asset was ulti mately unsuccessful; last year, he was
convicted of money laundering.
In some ways, expensive homes are the modern
mobster’s collection of laundromats. A public advisory
issued by US authorities last year ind icated that over 30
percent of high-value, all-ca sh real estate purchases i n
New York City and several other major metropolitan
areas were conducted by individual s already suspected
of involvement in questionable dealings. e govern-
ments of Australia, Au stria, Canada, and other c oun-
tries have concluded that their own rea l estate markets
could also be used to inves t and launder dirty money.
Terrorism financing
More worrying still, dirty money—along with
clean—may be a source of funding for terrorism
PHOTO: IM F
Cleaning Up
Countries are advancing efforts to stop
criminals from laundering their trillions
Rhoda Weeks-Brown

To continue reading

REQUEST YOUR TRIAL