TNI Briefing - Countering illicit and unregulated money flows

Money laundering, tax evasion and financial regulation

Tom Blickman

Crime & Globalisation Debate Paper
December 2009

Since its origin in 1989 the the international anti-money laundering regime is not working as well as intended. After two decades of failed efforts, experts still ponder how to implement one that does work. A bolder initiative is required at the United Nations level, moving from recommendations to obligations, and fully engaging developing nations.

In this issue of Crime & Globalisation, Tom Blickman tracks the history of the international anti-money laundering (AML) regime. Since its origin in 1989 there is a growing awareness that the AML regime is not working as well as intended. After two decades of failed efforts, experts still ponder how to implement one that does work.

During that time other illicit or unregulated money flows have appeared on the international agenda as well. Today, tax evasion and avoidance, flight capital, transfer pricing and mispricing, and the proceeds of grand corruption are seen as perhaps more detrimental obstacles to good governance and the stability and integrity of the financial system.

Tax havens and offshore financial centres (OFCs) were identified as facilitating these unregulated and illicit money flows. The 2007-2008 credit crisis made only too clear the major systemic risk for all global finance posed by the secrecy provided by tax havens and OFCs. They were used to circumvent prudential regulatory requirements for banks and other financial institutions and hide substantial risks from onshore regulators.

In 2009 the G20 has again pledged to bring illicit and harmful unregulated money flows under control. This briefing looks at previous attempts to do so and the difficulties encountered along the way. Can the G20 succeed or is it merely following the same path that led to inadequate measures? What are the lessons to be learned and are bolder initiatives required?

In brief, the paper concludes that current initiatives have reached their sale-by date and that a bolder initiative is required at the United Nations level, moving from recommendations to obligations, and fully engaging developing nations, at present left out in the current ‘club’-oriented process.

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Tom Blickman

Researcher, Drugs and Democracy Programme

Tom Blickman (1957) is an independant researcher and journalist, based in Amsterdam. Before coming to TNI he was active in the squatters and solidarity movements in Amsterdam. He worked for Bureau Jansen & Janssen, a research institute on intelligence and police matters. Now he specialises in International Drug Control Policy and Organised Crime as a researcher at TNI's Drugs & Democracy Programme.