Money laundering policy should be based on facts

The authorities justify their antimoney laundering (AML) legislative zeal on
the basis that they believe money laundering to be on a scale so vast as to
threaten the very foundations of the financial system.

Estimates of billions of pounds in the UK and trillions of dollars globally
are quoted and repeated to the extent that they inherit some sort of

In many respects, such numbers justify not only the extending legislation,
but also the resources that have been put into compliance by the regulated
sector. However, academics are beginning to question the belief that more is
better, asking instead for an appraisal of what has actually been achieved to

So far there is little to suggest that the authorities have managed to
balance the i
nterests of the law enforcement authorities shouting for an ever-widening
arsenal of tools against the costs imposed on society.

Unfortunately, with vagueness surrounding exactly what constitutes money
laundering, it is impossible to measure the impact of AML counter measures. In
consequence, there has been a tendency to focus on second best measures of
effectiveness that in the past have looked at the volume of SARs, prosecutions,
convictions and asset recovery.

There has been an increasing emphasis on the last of these measures. It is
curious that policy surrounding asset recovery appears to be being driven by
fiscal targets of dubious provenance. A recent Home Office paper indicated a
target for LEAS for recovery of £250m by 2009-10 and, more significantly, a
longer term target of up to £1bn. Of concern is the absence of proof that such
sums exist for recovery.

There is richer data contained within the information systems of the Assets
Recovery Agency. What this provided was information about how criminals were
spending their money ­ not on undermining the integrity of the financial system,
but rather on the acquisition of goods and chattels and, where financial
instruments were exploited ­ with a desire to prepare for retirement. Do we have
here evidence of ‘laundering’ or simply of consumption?

It is important that we begin to cut through the rhetoric and build policy
not on threat, but on facts. If there is a pretension of information-based
policy making, then hopefully it is not based on asset recovery data. It would
be very difficult to use the content of these databases for any pretence of
risk-based policy.

Dr Jackie Harvey is principal lecturer and programme
director of accounting and financial management at Newcastle Business School at
Northumbria University

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