Money Laundering and Globalization

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Money Laundering and Globalization

Peter W. Alldridge
University of London - Queen Mary



Queen Mary School of Law Legal Studies Research Paper No. 5/2009
Journal of Law and Society, Vol. 35, Issue 4, pp. 437-463, December 2008

Abstract:
The article traces the various imperatives generated by the combination of the money laundering panic of the late 1990s with the advent of globalization. If there is to be an attempt legally to regulate laundering, it (laundering) must be a relatively serious offence, and consequently the anticipated harm must be something other than complicity. The regulatory framework must aspire to being universal and watertight, and (because otherwise the policing costs would be too great) the professions must be recruited to that endeavour. Laundering must be one of the driving forces of international cooperation in criminal justice and thus a force for the homogenization of criminal justice systems.

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Mafia Groups Channelling Funds Into Banks
Published on 02-10-2009
Source: Calgary Herald

VIENNA — Cash-rich Mafia groups have been channelling funds into banks desperate to survive the global credit crisis, the UN anti-crime chief said on Monday.



Antonio Maria Costa of the UN Office on Drugs and Crime said he had collected ample evidence to make such accusations.



"Consultations I've had with prosecutors and law-enforcement officials around the world show there is ample evidence that the banking system's illiquidity is providing a unique opportunity for organized crime to launder their money," Costa told Reuters.



"Just about every financial centre can be characterized as part of the problem," Costa said in the interview, but declined to name countries or banks involved, saying that was for prosecutors and other law-enforcement bodies to do.



Costa said a Vienna conference next month marking the 10th anniversary of a UN General Assembly special session on drugs would mull ways to boost steps against money laundering and ease the impact of drug gang profits on the integrity of states.



He said the multilateral Financial Action Task Force (FATF) formed in 1991 did much to help drive mafia money out of banks over the ensuing decade but that achievement was being challenged by the global hemorrhaging of legitimate credit.



"You have the supply — an organized crime industry with enormous amounts of cash, estimated at $322 billion in 2005, not any more stored in banks — and the demand, a banking sector strapped for liquidity," said Costa.



"This is a supply- and demand-driven situation. Our intuition, based on logic, is now supported by ample evidence."



Asked where cases were occurring, he said: "Traditionally, Europe and North America are the places where, as financial centres, most money would be laundered.



"What we are seeing," Costa said, "is the weakening of the strongest instrument embedded in the FATF campaign, and that is, 'Know your client'. That is, accept resources only from those you know, and if you don't do so, inform the authorities.



"It has been quite widely documented that because of the difficult financial situation of banking institutions, that principle has been weakened to the point of being indirect evidence of what we are (talking about)." Costa said many member states in his UNODC agency were saying the time was not yet right for additional measures against money launderers taking advantage of struggling banks.



"I insist that the (globalized) crime industry has become so gigantic, destabilizing so many countries, that it is emerging in areas where we have not seen it before. They're buying more than just industry, real estate, elections, power," he said.



"We will present some concepts and lines of action for member states to consider when ministers meet next month, related to the size and shape of organized crime and the threat it is now posing."



Costa raised the appearance of links between the liquidity crunch and organized crime cash flows at a closed gathering of financial industry professionals in Frankfurt in November.



Britain said in December that financial sector fraud had risen alarmingly, fifteen-fold, since its credit markets began seizing up but was typically committed by internal managers and suppliers rather than organized crime.