In an article in the Financial Times (FT), entitled “We all must clean up our act on money laundering”, reporter John Cassara noted International Monetary Fund (IMF) estimates that world-wide money laundering can be as high as $3.5 trillion annually. While traditional criminal enterprises had used banks to wash dirty money into clean money, after 9/11, the US government saw money-laundering as a security issue. One of key issues in the Standard Chartered enforcement action by the New York state Department of Financial Services was its financial dealings with banks in Iran.
But the problem is simply beyond financial institutions. Cassara writes that there are three generally recognized ways to launder money: (1) via financial institutions; (2) bulk cash smuggling across borders; and (3) via traded goods. The US approach to fighting money laundering in financial institutions is to demand transparency and require due diligence not only on customers but on transactions as well. But money launderers will move to where they see the least resistance in the financial system. So if banks ramp up their internal compliance systems, criminal enterprises and terrorists will move to the old fashioned method of smuggling money across borders to money laundering via traded goods.
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