Anti-money laundering ratings: uncovering evidence hidden in plain sight
Published date | 07 October 2019 |
Pages | 836-857 |
DOI | https://doi.org/10.1108/JMLC-01-2019-0006 |
Date | 07 October 2019 |
Author | Ronald F. Pol |
Anti-money laundering ratings:
uncovering evidence hidden in
plain sight
Ronald F. Pol
School of Law, La Trobe University, Melbourne, Australia
Abstract
Purpose –This paper aims to increase the transparency of information in official anti-money laundering
rating datato assist evidence-informed decision-makingin compliance, policy-making and research.
Design/methodology/approach –This paper converts anti-money laundering rating data into
information-richvisualisations, reintroduces a comparisonmethodology and ranks all anti-money laundering
regimes evaluatedto date.
Findings –Official anti-moneylaundering ratings as currently structured and presented offersurprisingly
little policy-relevant information. Persistent failure to transform available data into information for
knowledge and insight suggeststhat the risk has been realised that impressionistic judgments or politicised
interests drive the policy agenda at least as much as objective evidence or substantive economic and social
goals.
Practical implications –Any reluctance to generate policy-relevant information from the industry’s
primary data setor disinclination to engage constructively with a growingbody of independent critical policy
effectiveness evidence callsinto question whether implementing anti-money launderingcontrols with some
prospectof achieving substantial societal benefits, or perpetuatingthe current system, prevails.
Originality/value –With a dearth of scholarship at the intersection of money laundering and policy
effectiveness scholarshipand practice, this paper combines elements of these disciplinesand examines anti-
money laundering effectiveness from a different viewpoint. Rather than seeking to measure money
laundering or estimatethe proportion of criminal proceeds successfullyintercepted, this paper draws directly
from the anti-moneylaundering industry’sown“main”dataset.
Keywords Evaluation, Outcomes, FATF, Anti-money laundering, Policy effectiveness,
Profit-motivated crime
Paper type Research paper
1. Introduction
The tiny community ofPunakaiki (a New Zealand coastal town famous for picturesquerock
formations resembling piles of giant pancakes) paid millions of dollars for a seawall to
mitigate the risks of rising seas and severe storms associated with climate change. A
question at a public “town hall”meetingasked when residents should “stop investing in the
seawall and look at moving on.”The suggestion was not well received. A motion “never to
raise the issue again”was approved, with only one vote against (Blundell, 2018,p.15).It
seems that the capacityfor self-deception is so strong that even when formally introducedto
the idiomatic elephant, people can choose not to “see”the obvious even as it engulfs the
room (or limestone rock formations).
Postscript: This paper was submitted on 23 January 2019 with rating data to 22 January. It was
updated to 1 August 2019 with new rating data and consequential/minor amendments.
JMLC
22,4
836
Journalof Money Laundering
Control
Vol.22 No. 4, 2019
pp. 836-857
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-01-2019-0006
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
It is perhaps less surprising if wilful blindness “only”affects “other”people. De Koker
recently observed that –even as late as the mid-2000s, some 15 years after the general
introduction of anti-money laundering rules –industry insiders “still refused to
acknowledge that compliance with [anti-money laundering standards] could hamper the
implementation of policies to increaseaccess by the poor to the financial system”(de Koker,
2018, p. 250). Considered inconsistent with a dominant narrative imposing money
laundering controls to “protectthe financial system from abuse”(FATF, 2019b), a proposed
study was “deemed too sensitive for funding”by industry stakeholders. Only after the
(independently financed) study found that “(t)he pursuit of financial inclusion and the
pursuit of an effective [anti-money laundering] regime are complementary and not
conflicting financial sectorpolicy objectives”(2018, p. 250) did the industry begin to face the
issue of financial exclusion.
Likewise, on a granderscale, and unaddressed still, the United Nations’descriptionof the
“success rate”of such controls as “limited, to say the least”, and the pointed question
“whether there is something wrong with the existing control system”(UNODC, 2011,
pp. 119, 131). With US State Department assistance, the UN calculated the proportion of
criminal proceeds successfully intercepted by authorities as merely 0.2 per cent (UNODC,
2011, pp. 7, 119, 131). A barely perceptible impact on criminal finances implies little
meaningful impact on serious profit-motivated crime and its social and economic harms,
despite the phenomenal efforts of a global anti-money laundering movement. A few years
later, Europe’s law enforcement agency, Europol, came to a similar conclusion (Europol,
2016). Independent researchershave also long illustrated “uncomfortable truths”about “the
paucity of links between [money laundering] controls and crime reduction”(some listed at
Pol, 2018b, p. 303).
A review of earlier findings, withadditional data on compliance costs, suggests that the
impact on criminal finances might be just 0.1 per cent, with the proportion attributable to
anti-money launderingefforts perhaps as low as 0.02 per cent (author, forthcoming):
[T]he risible impact of nearly three decades of money laundering controls barely registers as a
rounding error in the accounts of ‘Criminals, Inc’if up to 99.9% of illicit proceeds remains in
criminal hands [...] Anti-money laundering’s idiosyncratic success narrative contrasts sharply
with the harsh reality experienced by millions of people, communities and economies harmed by
drugs-, arms- and human-trafficking, sex- and labour-exploitation, fraud, corruption, tax evasion,
and countless other such crimes that continue, largely unchecked by an astonishingly ineffective
and remarkably expensive policy experiment.
Researchers testing the anti-money laundering industry’s claims to effectiveness over more
than two decades have found serious gaps between intention and results (briefly outlined
below, in section 3), yet with little discernible effect on the dominant narrative, or resultant
policies. The initial “compliance with rulesbased on standards”model continues unabated.
It may be worthwhile studying why industry participants appear unwilling to address
independent evidence contraryto the “official”narrative (Alldridge, 2016;Benson, 2016;Pol,
2018b), but this articleasks a simpler question in another under-explored area.
For whatever reasons the anti-money laundering industry’s“in-group”seemingly
disregards “out-group”evidence (and occasional discordant evidence from “in-group”
participants like the UN and Europol),any such constraints presumably do not apply to the
primary evidence base produced by the industry itself. Moreover, since 2014 an extensive
and rapidly expandingdatabase also has a section conveniently labelled“effectiveness”.
This article examines anti-money laundering effectivenesswith a cross-disciplinary lens
and different perspective.Rather than seeking to measure money launderingor estimate the
Uncovering
evidence
hidden in plain
sight
837
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