Uncoupling the relationship between corruption and money laundering crimes

Author:Norman Mugarura
Position:Garadi Ltd, Barking, United Kingdom
Pages:74-89
SUMMARY

Purpose - Money laundering schemes are inextricably linked to corruption whereby the latter is utilised either as “a means to an end or as an end in itself”. The prevalence of one of these offences in a country usually signifies the prevalence of the other. The foregoing connection is supported by studies carried out by the World Bank and Asian Development Bank to correlate the connection between money laundering and corruption. Corruption has been exploited to facilitate commission of other crimes such as drug trafficking, prostitution, small arms trafficking and illegal currency trafficking. It has destroyed the myth that corruption is a domestic political issue amenable within individual states borders. Therefore, the design of anti-corruption policy measures should incorporate effective implementation anti-money laundering (AML) strategy and their enforcement on corrupt public officials. It needs to be noted that money accrued from corruption constitutes criminal property under the majority of global AML/CFT frameworks which have been domesticated by individual national governments. Both... (see full summary)

 
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Uncoupling the relationship
between corruption and money
laundering crimes
Norman Mugarura
Garadi Ltd, Barking, UK
Abstract
Purpose – Money laundering schemes are inextricably linked to corruption whereby the latter is
utilised either as “a means to an end or as an end in itself”. The prevalence of one of these offences in a
country usually signies the prevalence of the other. The foregoing connection is supported by studies
carried out by the World Bank and Asian Development Bank to correlate the connection between money
laundering and corruption. Corruption has been exploited to facilitate commission of other crimes such
as drug trafcking, prostitution, small arms trafcking and illegal currency trafcking. It has
destroyed the myth that corruption is a domestic political issue amenable within individual states
borders. Therefore, the design of anti-corruption policy measures should incorporate effective
implementation anti-money laundering (AML) strategy and their enforcement on corrupt public
ofcials. It needs to be noted that money accrued from corruption constitutes criminal property under
the majority of global AML/CFT frameworks which have been domesticated by individual national
governments. Both corruption and money laundering thrive in an environment of bad governance, lack
of requisite local oversight institutions, a tenuous legal systems and laws and bad governance. These
offences have become so intertwined that it is not easy to tell which is which because they are embedded
in each other and in the context of this paper are symbiotic.
Design/methodology/approach – The paper articulates that there is a close connection between
corruption and money laundering offences. It was undertaken by evaluating primary and secondary
data sources to demonstrate the interconnectivity of the foregoing criminal offences in the regulatory
realm. The overlapping relationship between corruption and money laundering has been acknowledged
by many oversight institutions and national governments. For example, Singapore enacted a
legislation: “Corruption, Drug Trafcking and other Serious Crimes (Conscation of Benets) Act” in
(1999) recognizing the foregoing interconnectivity. The G20 imposed on Financial Action Task Force
the requirement to incorporate mechanisms within its framework to combat money laundering and
terrorist nancing measures to ght corruption. Therefore, this paper has demonstrated a close
correlation between corruption and money laundering and what ought to be done at various oversight
levels to forestall them.
Findings – Corruption and money laundering are inextricably linked such that where one exists, the
other one will be also lurking in the background. The paper has articulated the connection between
corruption and money laundering and the context they are manifested either together or differently. It
has demonstrated that the foregoing offences are literally “Keith and Kin” and should be accorded the
same level of attention as serious nancial crime, both in theory and practice of states.
Research limitations/implications – While there are many papers which have been published on
the subject of money laundering and corruption, not many articulate the connection between corruption
and money laundering in the context of this paper. The paper was undertaken by evaluating primary
and secondary data sources and analysing this data in different contexts of this paper. However, it
would have been better to corroborate some of the foregoing sources by working with oversight AML/
corruption institutions. Therefore, the author will ensure that future studies carried out on the subject
matter of money laundering and corruption are undertaken with a high measure of collaboration with
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1358-1988.htm
JFRC
24,1
74
Journalof Financial Regulation
andCompliance
Vol.24 No. 1, 2016
pp.74-89
©Emerald Group Publishing Limited
1358-1988
DOI 10.1108/JFRC-01-2014-0002
oversight AML/corruption agencies and possibly also civil society organisation which have a mandate
on these similar issues.
Practical implications This paper is of practical signicance for governments, policy and
oversight institutions in dealing with issues relating to corruption and money laundering. The paper
provides insights into the dynamics of the foregoing twin offences, the context they are manifested and
how the law can be better utilised to forestall them. Corruption and money laundering have eviscerated
the individual economies capacity to engage in national development programmes, and they need to be
addressed as a matter of seriousness, both nationally and internationally. This paper will provide
insights into what states need to do to harness the law relating to corruption and money laundering
offences, both at an oversight institution and individual national government’s level.
Social/implications – Corruption and money laundering crimes have eroded the fabric of societies,
eviscerated individual states capacity to pursue national development goals and not to mention fuelling
other crimes such as nancing of terrorism, human and small arms trafcking, drugs trafcking, to
mention but a few. Therefore, no state can afford to ignore the foregoing transgressions against
humanity because no state can claim to be immune from the offshoot effects of corruption and money
laundering.
Originality/value – There are not many published papers which articulate the connection between
money laundering and corruption in the context of this paper. This paper is one of its kind, original and
a must read. It is a must read because it has a lot offer literally to every one û academics, researchers,
students, policy and regulatory institutions and the list goes on.
Keywords Corruption, Money laundering, The role of regulatory institutions
Paper type Research paper
1. A brief overview of money laundering and corruption
On many occasions, money laundering schemes are inextricably linked to corruption
whereby the latter is utilised either as “a means to an end or an end itself”. The foregoing
linkage was recognized by the studies carried out by the World Bank, Asian
Development Bank and United Nations Global Compact which have correlated a close
connection between money laundering and corruption (FATF Paper, 2009). In his report
concerning money laundering and corruption (1999), Diekman denes the foregoing
offenses as elements of economic crimes.
Corruption is regarded as the misuse of public ofces with the intention of achieving
personal gains, and it constitutes a distortion of the governing structure of a country.
The prevalence of corruption in countries like India where legislative measures have
hitherto failed to address it reinforces Diekman’s proposition that corruption thrives
under conditions of tenuous legal infrastructure and legal systems. It is rstly provided
as an incentive to facilitate placement or integration of tainted assets into the nancial
economy, but it is utilised to undermine measures introduced to forestall it (UN, 2013).
The most common form of corruption which also involves money laundering is bribery
– it is used as a means to facilitate placement of illicit proceeds of crime into the nancial
system. In bribery, there is a giver and receiver of the bribe whereby one person provides
a bribe in form of either presents, monetary gains or other forms of advantages to the
person taking the bribe against performance of acts or alternatively the omission of such
acts in the course of the latter’s ofcial duties. The bribe giver and receiver could either
be an ofcial or an institution of government such as the Police in some countries. There
has been a growing recognition of the interconnectivity of the foregoing offenses in
countries like Singapore which has enacted a legislation: “Corruption, Drug Trafcking
and other Serious Crimes (Conscation of Benets) Act” in (1999) recognizing the
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Corruption
and money
laundering

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