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BOOK: ‘War on Dirty Money’ reveals disconnect between armies of private sector compliance teams costing $200BN and resource-starved law enforcement

By Dr Nicholas Gilmour and Tristram Hicks

The global war on dirty money engages hundreds of thousands of full-time professionals across the financial sector, international institutions, national governments and the criminal justice sector.

It costs well over $200BN per year and rising. Yet its victories seem few and far between, with no measurable overall progress.

Slavery, drug trafficking and fraud are just a few of over 20 different crime types targeted by the war on dirty money.

These activities threaten the planet, its people and wildlife through illegal environmental destruction. Making crime not pay seems an obvious, direct, and measurable way to reverse planetary destruction, reduce human misery, and meet the challenge head-on. Recovered billions could finance a virtuous circle that reduces crime and directly supports education, public health, and sanitation.

The war is not going well. The authors trace the war back to a G7 conference in 1989, when a ‘Financial Action Task Force’ (FATF) was launched.

Over the last 30 years a vast global infrastructure has been created to try and prevent ‘dirty money’ entering a financial system that is, in fact, already awash with it.

‘Every year 34 million SARs are sent in the general direction of law enforcement, but few actually arrive, because near the end of their journey the smart new Regtech hands them over to criminal justice systems which lack the relevant technology to process them’

In our new book, The War on Dirty Money, we suggest that after a promising start, the project was derailed and stayed there. The book challenges the global approach, arguing that complacency, self-interest, and misunderstanding have now created longstanding absurdities. International and government policy makers inadvertently facilitate tax evasion, corruption, environmental and organised crime by separating crime from its root cause.

The handful of crime fighters that do exist are starved of resources while an army of compliance box tickers are prevented from truly helping.

We set out a toolbox of evidence-based solutions to help the frontline tackle financial crime.

The global regime is effectively split in two:

  • a prevention regime in the private sector that is awash with resources and
  • a public sector enforcement regime that is stripped to the bone.

Connecting the two is a vast investment in the generation of millions of ‘Suspicious Activity Reports’ (SARs) for investigation by enforcers, but at a critical point, the process breaks down, with the effect that the SARs are not used for their intended purpose.

This separation deprives prevention experts of real-world and real-time knowledge of what money launderers do and has led to a proliferating mushroom of typologies and red flags as a proxy for real experience.

These ‘facts by repetition’ are limiting honest efforts to curb money laundering.

‘Despite an army of academics devoted to crime and criminals, no one has studied if confiscating assets makes any difference to criminal behaviour’

The prevention regime issues huge fines not against money launderers but against the current shareholders of companies whose long-gone managers failed to comply with what are by and large irrelevant regulations.

The fines are used to pay for the regulators in a bizarre carousel.

Meanwhile the people who actually arrest and prosecute money launderers are starved of resources.

In 80% of countries the conviction of money-motivated criminals is followed by courts failing to confiscate their ill-gotten gains.

The logic of asset recovery is free of any research-based evidence. Despite an army of academics devoted to crime and criminals, no one has studied if confiscating assets makes any difference to criminal behaviour.

The newest and most exciting part of the global effort is ‘Regtech’ (Regulation Technology), which sells innovative technological solutions that detect millions of suspicious transactions.

Every year 34 million SARs are sent in the general direction of law enforcement, but few actually arrive, because near the end of their journey the smart new Regtech hands them over to criminal justice systems which lack the relevant technology to process them.

Individual chapters of The War on Dirty Money look at tax, corruption, and terrorism from unusual perspectives.

The tax evasion and avoidance discussion concludes that international tax evasion, despite all the rhetoric, is not even a crime.

The chapter on corruption suggests that if a country permits traffic officers in uniform to ‘tax’ road users’ then this ‘retail’ corruption is symptomatic of ‘wholesale’ corruption. After all, if the police in a country cannot control a simple problem like corrupt traffic cops, how can they hope to tackle corruption in education, health, government procurement or any other part of the public sector?

Finally, the book imagines a landscape where the war on dirty money is victorious and the billions stolen by criminals are instead available across the world to tackle the ‘Five Giants’ of want (poverty), ignorance (poor education), squalor (poor housing), idleness (lack of opportunity) and disease (inadequate health care).

Winning the war on dirty money is not an end in itself but a way to change for the better the lives of the global population.

Author Information

Nicholas Gilmour is a consultant providing expert advice and guidance to various governments and international organisations fighting financial crime.

Tristram Hicks is an international criminal justice advisor on the operational effectiveness of anti-money laundering regimes. He is a former New Scotland Yard detective superintendent.

Where to buy:

https://policy.bristoluniversitypress.co.uk/the-war-on-dirty-money

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