Global

Playing with Money


Cleveland Cavaliers just clinched their first-ever NBA championship. In the world of soccer, Leicester City just won the English Premier League for the first time in team history. On both sides of the Atlantic, the two teams found a way to translate a penchant for working together into a winning strategy. The United States and the European Union should apply the same concept to combatting international money laundering.  

International cooperation to combat financial crime is needed for a simple reason. Money travels. As such, coordination across jurisdictions is the key to targeting illicit money transfers. Cases of public tenders in Ukraine, money laundering in Russia, banking in Switzerland, and real estate in France are all examples of how money laundering functions across state borders. So should efforts to combat it.

Complicity of middlemen presents an additional challenge. A new report, released by the Terrorism, Transnational Crime and Corruption Center, outlines the process of illegal asset raiding in Russia. What emerges is a transnational web comprised of lawyers, fiduciaries, judges, politicians, and organized crime groups. The illegal raiding model demonstrates the need for financial crime authorities to cooperate across both horizontal and vertical platforms. Cooperate horizontally across state borders and coordinate vertically within the different sectors of the economy.

U.S. institutions currently lead the effort against international money laundering. In 2012, HSBC agreed to pay the then record-breaking $1.9 billion to settle with U.S. authorities. BNP Paribas then took away the record when it agreed to pay $8.9 billion two years later. Most recently, the U.S. Department of Justice sought cooperation from 18 Swiss banks for an investigation into corruption and money laundering allegations in Venezuela.

On the other side of the Atlantic, the EU is preoccupied. Security and terrorism concerns figure at the top of the agenda, economic growth remains uneven, and the EU-Turkey migrant deal stands on shaky grounds. In effect, financial crime does not command top attention in the EU. It should. The Panama Papers and domestic politics could drive this shift in focus.

Washington and Brussels should capitalize on the attention brought to financial crime by the Panama Papers.  The United Kingdom Financial Conduct Authority already promised to prioritize money laundering after the recent leaks. In the context of heightened public awareness, increased funding for either existing agencies or creation of a new taskforce would readily gain political support. Successful illicit groups function under the radar and in some cases become part of the state. Thus, money laundering by organized crime groups does not figure as a principal concern among the public. The Panama Papers presents an opportunity to shift resources to combat financial crime.

Anti-money laundering efforts represent a low-impact approach to weakening illicit networks. It is the least invasive strategy to limit illegal activity, a strategy that is already in use against ISIS. In fact, the current focus on terrorist financing creates an opportunity for non-terrorist affiliated groups to function under less scrutiny. International cooperation combined with increased funding would preempt the creation of this safe space for illicit transfers.

Domestic politics represents the second key driver. Perceptions of government effectiveness remain low across the EU. President Hollande of France boasts record-low popularity ratings, Prime Minister Matthew Renzi of Italy faces a run-off in local elections, and Chancellor Angela Merkel of Germany faces pressures for her handling of the migrant crisis. Other EU countries hardly fare any better. Within this strained outlook, an anti-money laundering operation could provide a concrete example of successful government action. 

Illicit money flows undercut economic growth, erode effectiveness of state institutions, and undermine security. State interests of different countries rarely align. Anti-money laundering provides a mutually-beneficial endgame to enable international cooperation.


Image: “Money Laundering Euros” (Taxrebate.org.uk/Flickr)

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