The fight against money laundering: An economic analysis of a cost-benefit paradoxon

ISSN： 1368-5201

Source： Journal of Money Laundering Control, Vol.10, Iss.1, 2007-01, pp. : 91-105

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Abstract

Purpose - To provide an economic view on the costs and benefits of anti-money laundering (AML) efforts. Design/methodology/approach - Based on a international, comparative study conducted in Switzerland, Singapore and Germany, the authors outline the impact of AML measures on banks and the financial services industry. The paper discusses possible reasons for the failure of AML to fight the predicated crimes. It also discusses the collateral damage caused by AML. Findings - Compared with the monetary and non-monetary costs of money laundering prevention for the society and the economy, the benefits are small. Instead of broadening and deepening the current AML framework, a thorough review of the current approach should take place. Research limitation/implications - Costs and benefits of AML measures are hardly quantifiable. The authors resort to a qualitative approach, stylising possible outcomes and side effects of money laundering prevention. Practical implications - Useful set of arguments for discussing the benefits and shortcomings of the current and upcoming AML measures. Originality/value - Money laundering measures and their impact are examined using basic laws of economy and financial intermediation.