How effective are financial sanctions against individuals?
| DOI | https://doi.org/10.1108/JMLC-03-2018-0026 |
| Published date | 13 January 2020 |
| Date | 13 January 2020 |
| Pages | 438-443 |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Fabian Maximilian Johannes Teichmann |
How effective are financial
sanctions against individuals?
Fabian Maximilian Johannes Teichmann
Teichmann International AG, St. Gallen, Switzerland
Abstract
Purpose –The purpose of this paper is to discussthe role of money laundering methods in circumventing
sanctions against individuals. In particular, it shows how politically exposed persons can circumvent
sanctionsthrough money laundering mechanisms.
Design/methodology/approach –A total of 70 expertinterviews were conducted, comprising 35 formal
interviews with prevention expertsand 35 informal interviews with money launderers. By subjecting their
responsesto qualitative content analysis, concrete waysof circumventing sanctions are identified.
Findings –Financial sanctions against individuals are highly ineffective, as they can be easily
circumvented.To successfully influence political processes,alternative mechanisms are necessary.
Research limitations/implications –This study’sfindings are limited to the perspectives of 70
interviewees. Hence, it is possiblethat a study with a larger sample conducted in different countries or at a
differenttime could have yielded different results.
Practical implications –Identifying the gaps in anti-money-laundering mechanisms should provide
compliance officers and legislators with valuable insights into why the current prevention schemes are
ineffective and how sanctions against individuals can be circumvented. The findings, thus, highlight the
scope to improvecompliance mechanisms and the need for other toolsto influence political processes.
Originality/value –The current sanctions against individuals are found to be ineffective means of
influencingpolitics, as they can be easily circumvented. Hence, alternativemechanisms and tools are needed.
Keywords Money laundering, Compliance, Sanctions, Embargos, Circumvention
Paper type Research paper
1. Introduction
It is often argued that financial sanctions againstcertain individuals are an effective way of
influencing politics. The underlying reasoning is that those individuals are affected if they
can no longer transfer or invest their assets. However, to be effective, such sanctions must
also be difficult to circumvent. The ease with which money laundering and terrorism
financing mechanismscan be circumvented is highly relevant in this regard.
2. Literature review
There is very little literature on circumventing embargos and sanctions. Hence, this article
will rely heavily on money laundering literature and expertise. Despite massive efforts to
fight money laundering, it is commonly acknowledged that this phenomenon remains a
huge global problem (Harvey, 2004,p.339;Van Duyne, 1994,p.62;Walker, 1999, p. 36). It is
commonly concluded that efforts to combat money laundering have so far proved
inadequate (Schneider and Windischbauer, 2008, p. 309f). Hence, it is widely acknowledged
that it remains possibleto launder money or circumvent sanctions.
The existing literature focuses on organizations and mechanisms aimed at preventing
both money laundering and financing terrorism (Takáts, 2007,p.4;Bagella et al.,2009,
p. 896). The national implementation of anti-money laundering laws is usually assessedby
JMLC
24,2
438
Journalof Money Laundering
Control
Vol.24 No. 2, 2021
pp. 438-443
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-03-2018-0026
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