The war against money-laundering is being lost

From the article:

Money-laundering was not even a crime across much of the world until the 1980s. Since then countries from Afghanistan to Zambia have been arm-twisted, particularly by America, into passing laws. This effort intensified after the 9/11 terrorist attacks in 2001 and the passage of America’s Patriot Act, which targeted the money trails of those financing terrorists and other criminals.

This has turned AML compliance into a huge part of what banks do and created large new bureaucracies. It is not unusual for firms such as HSBC or JPMorgan Chase to have 3,000-5,000 specialists focused on fighting financial crime, and more than 20,000 overall in risk and compliance.

The AML push has succeeded in stamping out the most pernicious practices, such as using shell banks (those with no real customers) in sunny places to launder suitcases stuffed with drug money. But criminals haven’t been forced to get particularly creative: it is not much more difficult today than it was 20 years ago to rinse dirty money by setting up a shell company, disguising the loot flowing through it as legitimate revenue and persuading an established bank to process it.

As a result, the numbers tell of a war being lost. The “Global Threat Assessment”, a report by John Cusack, an ex-chair of the Wolfsberg Group, an association of banks that helps develop AML standards, estimates that $5.8trn-worth of financial crime was perpetrated in 2018—equivalent to 6.7% of global GDP. Statistics on how much is intercepted by authorities are patchy. A decade-old estimate by the United Nations Office on Drugs and Crime put it at just 0.2% of the total. In 2016 Europol estimated the confiscation rate in Europe to be a higher but still paltry 1.1%.