Repairing legitimacy after blacklisting by the Financial Action Task Force
| Date | 01 January 2004 |
| DOI | https://doi.org/10.1108/13685200410809751 |
| Pages | 38-49 |
| Published date | 01 January 2004 |
| Author | Jackie Johnson |
| Subject Matter | Accounting & finance |
Journal of Money Laundering Control Ð Vol. 7 No. 1
Repairing Legitimacy after Blacklisting by the
Financial Action Task Force
Jackie Johnson
INTRODUCTION
Over the last three years the Financial Action Task
Force (FATF) has blacklisted countries it believes
provide an environment of laws and practices con-
ducive to money laundering. Their assessment of
each country's ®nancial environment is extensive
and covers four main areas: loopholes in ®nancial
regulations, particularly in relation to identi®cation;
obstructions raised by other commercial and legal
requirements; impediments to international coopera-
tion; and resources allocated to anti-money launder-
ing programmes. Failure to comply with FATF
best practice results in blacklisting.
Blacklisting questions the legitimacy of the coun-
try or jurisdiction identi®ed and its right to conduct
®nancial business in the global environment. How
countries react to this challenge, how they regain
some form of legitimacy, what their new legitimacy
means and how it impacts on their future operations
are discussed in the following sections of this paper.
LEGITIMACY
The concept of legitimacy used in this paper is bor-
rowed from organisational theory where organisa-
tional legitimacy is viewed not as a quality or
characteristic determined by an organisation, but as
an attribute conferred on it when external parties,
aected by the organisation's outcomes, endorse its
goals and activities. Here its applicability and rele-
vance is extended to examine the actions of countries
in the face of a legitimacy crisis: namely blacklisting.
In the context of organisational theory, legitimacy
implies nothing about the legality of an entity's activ-
ities, merely that the goals and activities of those par-
ties that are in a position to confer legitimacy are
aligned with those of the organisation concerned.
Dowling and Pfeer
1
suggest that organisations
actively seek to align the values implied by their
activities with the values of the larger social system
in which they operate, while Suchman
2
de®nes legiti-
macy as a `generalised perception or assumption
that the actions of an entity are desirable, proper or
appropriate within some socially constructed system
of norms, values, beliefs and de®nitions'.
Given that the organisation concerned does not
have to gain approval from all of society, it can
remain legitimate in the face of attacks providing
it can retain support from enough parties to
ensure its survival. Even so, maintaining legitimacy
is dicult given its rather nebulous quality and
society's changing views and norms. O'Donovan
3
stresses the importance for an organisation to identify
its conferring entities, since the aim of the organisa-
tion is to bring all these conferring entities into
total agreement with the organisation's goals and
value system, either by changing its own activities
so that there is more congruence between the organi-
sation's values and the values of the conferring entity,
or by attempting to alter the values of those entities
which the organisation believes can bestow legiti-
macy upon it. It is unnecessary for an organisation
to attempt to manage all of society's perceptions, it
need only identify speci®c entities and choose tactics
best suited to its chosen audience, since only these
groups are able to confer or withdraw organisational
legitimacy. This relationship is demonstrated in
Figure 1.
Within the circle are those entities in total agree-
ment with the organisation's operations. In the
inner square are those entities that the organisation
views as being able to confer legitimacy. Some will
not agree with the organisation's goals and values,
while others are in partial agreement. The organisa-
tion would like them all within the circle in complete
agreement with its activities. Those entities in the
outer square are viewed by the organisation as
irrelevant, having no bearing on the organisation's
legitimacy and consequently they would not be
considered in any organisational decision making.
Suchman de®nes three types of organisational
legitimacy: pragmatic, moral and cognitive. Each
one rests on a somewhat dierent behavioural
dynamic:
(1) Pragmatic legitimacy is determined by the sup-
port for an organisation's activities, aims, objec-
tives and policies based on their expected value to
the conferring entity.
(2) Moral legitimacy is not based on gains to
Page 38
Journalof Money Laundering Control
Vol.7, No. 1, 2003, pp. 38± 49
#HenryStewart Publications
ISSN1368-5201
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