Uncomfortable truths? ML=BS and AML= BS2

Ronald F. Pol
Journal of Financial Crime
Vol. 25 Issue: 2, 2018, pp.294-308

publicationThe purpose of this paper is to advance debate and prompt new strategies substantially to improve the capacity to disrupt serious profit-motivated crime. Using interdiction rates (the proportion of criminal funds seized or forfeited) as an interim proxy effectiveness indicator, this article challenges elements of the dominant anti-money laundering/counter-financing of terrorism (AML/CFT) narrative, and reflects on policy effectiveness and outcomes. Interdiction rates in jurisdictions surveyed hardly constitute a rounding error in the accounts of profit motivated criminal enterprises. The current AML/CFT model appears almost completely ineffective in disrupting illicit finances and serious crime.

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Responding to a general reluctance to “call a spade a spade” (Rider, 2013), this article frankly asserts that the current anti-money laundering/counter-financing of terrorism (AML/CFT) model is almost completely ineffective in disrupting criminal finances and profit-motivated crime.

The Financial Action Task Force (FATF) as global standard-setter has been so successful promoting adoption of AML/CFT controls that in less than three decades a standardised template of policies, regulations and institutions is now globally ubiquitous. Nearly every country and jurisdiction has implemented extensive AML/CFT controls. They generally meet recognised standards, and millions of private sector firms comply with them. This article, however, is concerned with policy effectiveness and outcomes. Not whether rules exist, or if they are complied with, but whether they work. Do they produce intended outcomes?

The policy question is simple. If AML/CFT policy interventions enabling the identification and disruption of criminal finances and profit-motivated crime have not proven effective, will ‘more-of-the-same’ produce materially different results? Logic, and the uncomfortable reality of repeatedly poor outcomes from doing so, suggests not.

If disrupting and preventing serious crime is the policy goal, the gap between AML/CFT policy objectives and outcomes may be too large for the standard model and usual ‘incremental approach’ to bridge. For policy interventions with a reasonable prospect for crime not to pay, beyond rhetoric, frank evaluation of results, and a potential step-change in policy, regulatory and enforcement vision and capability may be required. Nor need the baby join the bathwater. The ubiquitous AML/CFT complex offers an existing framework from which to explore the prospect of better outcomes.