RESEARCH CLAIMING THAT AML RULES ARE ALMOST COMPLETELY INEFFECTIVE

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The Interest website in New Zealand on 24th May carried an article reporting that a new study published in an international peer-reviewed journal (Journal of Financial Crime) extends the AML industry’s open secret.  Despite nearly 3 decades, and global ubiquity, money laundering controls (and associated supporting measures) scarcely have the impact of a rounding error on criminal accounts.  Many elements of the first premise have been tested elsewhere in the academic literature.  The latest study, just published, tests the second and third of the assumptions that money laundering threatens economies, that money laundering controls are effective, that extending AML obligations to new industries will have a big effect, and that a new global ‘effectiveness’ methodology based on specified outcomes is an adequate measure of effectiveness.  A separate study tests the fourth – “Anti-money laundering effectiveness: assessing outcomes or ticking boxes?”.  However, the author does admit that the effect on individual criminals and criminal networks identified by money laundering controls is truly significant.  Authorities rightly claim success when suspicious activity reports lead to more arrests and seizures of criminal assets.  In many countries, the police do this well and ‘follow the money’ policing often results in mounting arrest and forfeiture figures.  Using countries’ own data, the research found interception rates (i.e. the UN ‘success rate’, as the proportion of criminal proceeds seized or confiscated by authorities) between a barely perceptible 0.1% and 3.3%.  However, the article ends on a relatively positive note, saying that if there is appetite frankly to address the gap between intention and outcomes, the system may not be broken, simply less effective than intended.  If so, although the first form of the FATF effectiveness framework may not be all it seems, FATF remains well placed to lead the development of new pathways to the destination intended by the G7 nations, substantially to cut profit motivated crime and its social and economic harms, and potentially enabling the prospect of demonstrably better outcomes from AML rules, beyond compliance with them.

https://www.interest.co.nz/opinion/93902/ron-pol-details-his-research-revealing-anti-money-laundering-rules-are-almost

The study “UNCOMFORTABLE TRUTHS? ML=BS AND AML= BS2 “ is available  (£20 for 30 days download) at –

https://www.emeraldinsight.com/doi/abs/10.1108/JFC-08-2017-0071

The earlier study from 2018 by the same author “ANTI-MONEY LAUNDERING EFFECTIVENESS: ASSESSING OUTCOMES OR TICKING BOXES?” is available at –

https://www.emeraldinsight.com/doi/abs/10.1108/JMLC-07-2017-0029

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Author: raytodd2017

Chartered Legal Executive and former senior manager with Isle of Man Customs and Excise, where I was (amongst other things) Sanctions Officer (for UN/EU sanctions), Export Licensing Officer and Manager of the Legal-Library & Collectorate Support Section

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