Fighting Financial Crime: Global Public Policy and the Anti-Money Laundering Regime The inaugural Financial Crime Forum will examine the newest and most effective ways your peers in business and government can tackle this alarming trend. Financial crime is increasingly seen as a threat to Australia’s economic stability, integrity and potential for future growth. PricewaterhouseCoopers’ 2007 Global Economic Crime Survey found that in Australia, 50 per cent of businesses reported incidents of financial crime – with half of those reporting losses of over 1.5 million AUD. Australia’s case is not unique: worldwide, financial crime has increased nearly 40 per cent during the past two years. As expanding free markets continue to drive global financial growth, financial crime will become increasingly difficult to scale and track. The event will focus on: <LI jQuery1232740838359="59">The national fight against financial crime <LI jQuery1232740838359="60">Borderless crime and international collaboration <LI jQuery1232740838359="61">Cybercrime and technological innovations to combat it Staff training and internal security Hear from leading organisations such as: <LI jQuery1232740838359="65">Australian Federal Police <LI jQuery1232740838359="66">Australian Crime Commission <LI jQuery1232740838359="67">Australian Tax Office <LI jQuery1232740838359="68">National Australia Bank Commonwealth Bank The inaugural Financial Crime Forum will examine the newest and most effective ways your peers in business and government can tackle this alarming trend. Fighting financial crime: global public policy and the anti-money laundering regime Paper prepared for the annual meeting of the International Studies Association 48 th Annual Convention, Chicago, 28 Feb-3 March 2007 Panel FD11: ‘Crime, States and Globalisation’ Eleni TsingouCentre for the Study of Globalisation and RegionalisationUniversity of Warwick E.## email not listed ## Abstract The paper examines the emerging regimes, institutions and policies governing the fight against financial crime at the global level by focusing on the global drive against money laundering and terrorist financing (AML/CFT). The paper aims to explain how AML/CFT institutional frameworks are being set up and why; identify the policy priorities best served by current developments, the winners and losers of the process and the contradictions arising in the pursuit of these policies; and analyse the discrepancies between the governance framework and its expected effectiveness. The paper seeks to investigate the role of leading OECD countries, and the United States in particular, in the shaping of official and actual practices in the fight against money laundering and terrorist financing, in the context of a wider approach to financial crime. It also aims to show that global public policy in this field mostly serves to address policy-makers’ need for public action with respect to a diverse set of public policy goals; to relieve OECD financial centres from competitive pressures from offshore finance; and to shape private sector practices in a way which can consolidate and strengthen the position of the largest global financial players. The paper aims to analyse the conceptual, political, institutional and regulatory evolution of regimes targeting financial crime by focusing on developing arrangements in the fight against money laundering (AML). It explains that a plethora of international, regional and national standards have emerged as a result of a drive to eradicate crime by targeting its proceeds and excluding those engaged in criminal activities from legitimate financial channels. The paper shows that while the emerging regime is increasingly focused and consistent in its aims, as well as global in its scope with respect to the national jurisdictions involved, it remains inefficient, not only because it is still developing but also, because several of its premises are questionable. The paper argues that in the face of significant public policy issues (corruption, drug trafficking, or terrorism), the AML regime serves the need for public action. The paper is organised in four parts. In the first place, the paper presents the policy issues. It subsequently analyses the emerging AML framework and proceeds to identify some of the inconsistencies within the regime and to address the ensuing legitimacy gaps. Finally, the paper questions the effectiveness and legitimacy of a regime that is being designed in narrow terms, and the absence of linkages with associated global financial governance challenges. Why tackle money laundering? Defining the crime and the policy issues What is money laundering?The Financial Action Task Force (FATF), the international organisation responsible for standard-setting in AML offers the following definition: “The goal of a large number of criminal acts is to generate profit for the individual or group that carries out the act. Money laundering is the processing of these criminal proceeds to disguise their illegal origin”. However, international harmonisation about which crimes are relevant under the above definition is only just starting to happen. Traditionally, rules and laws evolved from the drug trade but a diverse array of crimes have since been added to the list in different jurisdictions. 1 1 FATF standards refer to the proceeds of all serious offences but there is a level of discretion with respect to the list of crimes most countries adopt. Indicative crimes include: drug trafficking, organised crime, racketeering, human trafficking, murder, robbery but also such white-collar crimes as fraud, corruption, bribery, insider trading and market manipulation. Some jurisdictions, most notably the UK have extended this list to include the proceeds of all crimes (Johnson and Abbott, 2005). 2 field. AML measures are also fast becoming a potent foreign policy tool with the introduction of an officially sanctioned focus on problem countries and politically exposed persons. 3 While the above are all relevant concerns, how they are prioritised over time and which actors care most about what makes for a diverse set of interests that illuminates developments in the AML regime. Currently, combating terrorist financing appears to be the primary preoccupation (although whether it has a legitimate place in the list of concerns can, as will be subsequently shown, be disputed). The AML frameworkThe AML regime is developing on two fronts, prevention and enforcement, and at three levels: national, regional and international (global). 4 Prevention is mostly about sanctions, regulation and supervision, reporting and customer due diligence; enforcement is about confiscation, prosecution and punishment and investigations. In essence, however, despite the criminalisation of money laundering and the recent prominent and public role of enforcement agencies in the AML regime, the process appears to be mostly a regulatory one. In this context, Lutz’s (2004) analysis of three types of relationship between levels of regulation is illuminating. Lutz outlines three types of process to explain how regulation is generated: (i) regulatory models are downloaded from the global or the regional level; (ii) regulatory models are uploaded to the global level; and (iii) regulation is diffused in a horizontal manner (e.g. through imitation of best practice). Subsequent analysis will indicate that all three types are relevant in the emerging AML. Enforcement processes, on the other hand, are less developed, both in terms of visible results but also as an institutional framework, especially at the international level. The global level Money laundering became a pertinent global issue in the 1980s, culminating in the establishment of the FATF in 1989. Comprised of sixteen members in the early days, it reached a membership of twenty-eight by 1992 and now counts thirty-three members. 5 3 The Office of Foreign Assets Control (OFAC) of the US Treasury has initiated a sanctions programme – there are currently over 200 pages of lists of designated countries and blocked persons affected by this programme. Countries affected include Myanmar, Cuba, Iran, Iraq, Liberia, Libya, North Korea, Sudan, Syria and Zimbabwe. 4 For an overview of the different features of the regime, see Appendix I. 5 FATF member countries are: Argentina, Australia, Austria, Belgium, Brazil, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong – China, 4 لإتمام الملف اضغط هنــــا