1.1 Introduction: why this book?
Writing a book on a subject that surfaced 25 years ago looks like writing a contemporary history book. Given that the subject, in this case money laundering, is still perceived to be an acute problem, there is nothing wrong with looking back and raising questions about what happened, what went well and what went wrong.
The initiative to do something about the profits of crime, more than three decades ago, was not a one-off event. It has continued to develop up until the present day and indeed, is still evolving. Therefore, it is appropriate to look back in time as well as to look around in the present and wonder what was the original state of knowledge about this phenomenon and what is its present âstate of the (knowledge) artâ. We expect that a quarter of a Century of policy implementation provides a suitable time span for surveying what happened with this new anti-laundering supervisory and law enforcement regime. This comprises the accompanying ideas and concepts as well as the empirical material which should have been unearthed in the course of combating this menace. Given the variety of stakeholders in the field, one would also expect a multitude of insights, narratives and a great deal of data.
Naturally, given the importance of the subject, one would expect that all this has already been brought together in one or more comprehensive volumes, leaving us only the task of updating. However, that is not the case. It is true that many eminent studies and monographs have been published since money laundering became a global political issue. We will discuss these in later chapters. But it is also true that notwithstanding all these efforts, there is still much fragmentation of data and little unity in concepts, with the exception of the idea that money laundering is a serious threat (even if there may be some rare dissidents). However, the shared agreement about its threat is a shallow one, covering many opinions on the nature of crime-money. Does imply gross proceeds or net profits; saved money due to economic and financial crime? Nobody can spell out the real nature of the threat or make a substantiated statement about its size: âhow much?â Addressing this question is bound to lead to disagreement because the underlying question âWhere are the (validated) facts and figures?â has not yet been properly addressed. Addressing this issue may also reveal a variety of assumptions that are not shared by all participants in this undertaking. For example, the economic (macro) approach works with different assumptions than the behavioural, empirical approach.
This contrasts with what one may reasonably expect if one would, as a layman, for the first time learn about the gravity of a threat which has loomed for decades above our heads without becoming smaller, but also without âcoming downâ. This justifies some suspicion: can it be true that a threat that has endured for decades has still failed to materialise? Such circumstances taken together would in other situations be sufficient to lose faith in the threat predictions. Strangely enough this is not the case with the subject of money laundering. Despite this non-occurrence, empirical observations on these doomsday scenarios are few and far between. Remarkably, though its ânon-occurrenceâ has been put forward and challenged, such as by Ferwerda (2013) or Reuter (2013), it has rarely been picked up and debated politically. In terms of Popperâs (1969) philosophy of science: in the absence of âconjectures and refutationsâ there is no real debate. Perhaps this circumvention of debate may be the best way to uphold faith in the tenets of the anti-money laundering policy. Whether this is the case has never really been properly made explicit. And as the philosopher Wittgenstein remarked: âWovon man nicht sprechen kann, darĂźber muβ man schweigen.â1 So, for the time being we maintain the faith aspect as it is. Later in this work our hypothetical layman will return and haunt us with plain questions about policy tenets, such as âWhat is all this good for?â We will then see whether we have collected sufficient material to answer him with facts instead of faith.
From the threat perspective mentioned above it is worthwhile bringing facts, concepts and opinions together in one narrative which is not about one particular point to be proven and others to be rejected. Rather the aim is to put together views, concepts, facts and findings and analyse them to the bone. Views can contain truths, half-truths and myths; empirical findings and their interpretation can be valid, biased or spurious. All that has to be brought to light and narrated. We think it is time for such a narrative.
1.2 Where did the global anti-money laundering narrative start?
The international anti-money laundering policy is considered to have been âcemented at the summit meeting of the Heads of State of the G-7 in Paris in July 1989. It followed from previous initiatives, including the US Bank Secrecy Act of 1970.2 The âG-groupâ is an informal gathering of Heads of States, Prime Ministers, Ministers of Finance or their delegates of the most important industrialised countries. These meetings started in 1973 in the White House with five participants. Given the informal nature of these gatherings that number has changed at each subsequent event. At present there are 20 members and consequently we speak of the G-20, though it is still as informal as when it was the G-7.
In 1989, the leaders of the industrialised world came together to discuss a wide range of subjects. There were 11 issues on the agenda3 and money laundering was just a sub-subject of the last one: drugs issues, of which the last two sections were devoted to criminal assets recovery and the creation of a financial action task force respectively.4 It looked like the proverbial mouse coming out of the mountain. It would prove to become a mouse with a long, never-ending tail. Interestingly it was the only outcome of this meeting that crossed the memory threshold of history. This first meeting and the actions arising from it will be re-visited in Chapters 8 and 9.
The delegates of the attending states expressed their usual âgrave concernâ about the phenomenon of laundering money originating from drug trafficking. Growth in drug trafficking in the 1980s was conjoined with âlaunderingâ in the minds of officials. It is from here that the imagery of a serious global financial threat was put forward. However, after a quarter of a Century that threat is still not substantiated. Taylor (1992) considered this imagery as seriously misleading.5 Apart from that, this proclamation attracted much attention and it looked as if a new threat had been identified: not only by the seven industrialised countries present at that meeting, but by an ever-growing number of countries.6 When such a âgrave concernâ is being expressed persistently by world leaders it is to be expected that the international political community will lend its unrestricted support â and so it did.
As a matter of fact, the initiative of the G-7 was no surprise. There was a confluence of political decision making to outlaw money laundering. In this policy development the USA took the initiative with the US Money Laundering Control Act in 1986, which followed the Bank Secrecy Act of 1970. It used its political leverage to put drug related money laundering on the international agenda of the UN, leading to the Vienna Convention in 1988. In the same year the Basel Committee on Banking Supervision issued a statement warning banks and other fina...