Global Public Policy and the Case of Money Laundering - Term Paper Example

I. Introduction Globalization has resulted in a rush forward not just in legal but also in unlawful economic engagements, providing new challenges for public policy. Numerous of these challenges even surpass the economic sector, whether the financial or the actual realm, to have wide-ranging social and political consequences in both developed and developing nations. Even though the termination of the cold war was a key factor in intensifying and widening transnational criminal engagements, their occurrence and threats and growingly global character were acknowledge long ago (Birks 1995). There is common agreement that the loosening of cross-border economic transactions as well as the rapid technological development are two of its main causes. According to Lawrence H. Summers, U.S. Deputy Secretary of the Treasury, “At the very moment that the world economy is expanding and integrating, creating vast new opportunities for business, so the technology and capacity at the disposal of criminals is greater than even before” (Reinicke 1998, 135). The appearance of international “networks of information and communication, transportation and financial intermediation” (ibid, 135) not merely has permitted corporate players to assume a transnational framework on several organizational and functional components of management, but also allows criminal factions to fasten themselves to and consume these officially authorized, global networks. Criminals effortlessly maneuver across diverse political and legal geographies, hence establishing their individual transnational networks that expertly escape detection and prosecution (Reinicke 1998). Organized crime has turned out to be mainly borderless, while law enforcement remains fixed and restricted within territorial legal procedures. Even though no one would disagree with their basically dissimilar character and purpose, the behavioral natures of unlawful and legal corporate networks, and hence the public policy problems created by them, share significant similarities. One aspect of similarity rests in their transnational group, best portrayed by the combination of corporate and criminal engagements that typifies the global criminal interest group based in Cali, Colombia (Ringland 2002). Crime multinationals, as many have referred to them, adjust effortlessly to shifting external conditions, including government control and technological progress. Not merely are these groups highly itinerant and resilient, but their activities are consistently developing as they take response to shifting economies, circumstances and demands. Apparently these criminals attempt to escape any kind of public regulation while exploiting profits at tolerable levels of risk. With regard to the institutional level, one can notice global criminal multinationals and different kinds of strategic coalitions surfacing in response to the prospects and new demand that globalization produces (Chambliss et al. 2004). Criminal factions, similar to their legal complements, can gain from effective combinations, create their presence in domestic economies, invite competitors, lessen risk, and intrude into protected economies. Nowhere have lawful and unlawful global networks become more interwoven than in international banking and capital economies, where money laundering has increased throughout the decade to become one of the most invasive international public policy crises. There are no accurate estimates of the amount of money laundered globally. The estimates that have been formulated span from $300 billion to $1 trillion. There is slight uncertainty that the opening up of cross-border financial exchanges and the transformation in information and communication technologies, relevant to contemporary financial structures, have contributed remarkably to the challenge (ibid, 163). II. Public Policy and Money Laundering With regard to public policy framework, the struggle against money laundering should be taken into account as a particularly significant part of the fight against international crime. An investigation on transnational crime, carried out among both governments and nongovernmental organizations in groundwork for the United Nations Congress on the Prevention of Crime and Treatment of Offenders, conducted in 1995 in Cairo, determined seventeen criminal classifications. Among these which are identified, money laundering emerged at the top of the list. According to a current research by the U.S. Office of Technology Assessment, “Money Laundering is one of the most critical problems facing law enforcement today. International crime probably cannot be controlled or reduced unless criminal organizations can be deprived of their illegal proceeds. At present they enjoy a swift, silent, almost risk-free pipeline for moving and hiding money…” (Stessens 2000, 83). Specified its fundamental standing in the network of global crime, money laundering gives the livelihood for all other criminal engagements; without the capability to launder the revenues from crime, majority if not all of the rewards for an expansive range of unlawful engagements would fade away. International criminal organizations are also mainly susceptible at the point wherein their profits merge with legal financial structure. Hence, an effective drive against money laundering is probable to have pervasive beneficial repercussions (Reinicke 1998). There are several significant similarities between the attempt to regulate global money laundering and the attempt to control international financial markets. For instance, similar to multinational financial establishments, money launderers do not defy the territorial reliability of nation-states. On the opposite, they frequently take advantage from secured national jurisdictions, which allow major regulatory arbitrage. Similarly, all transnational and criminal engagements, including money laundering, defy importantly the internal autonomy of a nation, not simply where the financial structure is involved, but also on wide range economic, political and social concerns. Lastly, policymakers have to compete with numerous of the same challenges, such as regulatory discussions, critical information irregularities, and substantial differences across national regulatory governments that create any attempt at cross-border cooperation somehow problematic, yet important for policy effectiveness (Chambliss et al. 2004). Money laundering also inserts to both the national and international public policy attempt of some of new problems that have to be resolved. Primarily, so as to identify unlawful activities, any attempt at regulation must be able of obtaining and handling substantial amounts of information relevant to the progressively multifaceted financial exchanges that technological launderers employ to evade detection. Who must sustain jurisdiction over this information, and how such information must be gathered, assessed and secured from illegal use, raise some central policy concerns. Second, in the domain of financial control, until the 1990s authorities were capable to handle global public policy within the Group of Ten, and just recently they are starting to develop this global regulatory discussion to manifest the increasing relevance emerging economies; attempts to regulate money laundering will have to cast a broader web from the beginning (Reinicke 1998, 138). With regard to policy responses, the alternatives are basically the same. Nevertheless, it is improbable, but now unthinkable, that a nation would intentionally take on a strategy of offensive involvement through calming its own national legislation against money laundering, acknowledging the existence of criminal groups as the consequences of favorable capital inflows for the domestic economy. Intervening unpleasantly through the extraterritorial relevance of domestic law is somehow clearly an alternative, and one that the United States has employed on some occasions. The most popularly known event so far has been the arrest, trial, and conviction of strongman from Panama, Manuel Noriega. Though, majority of countries would take matter with a technique that expands internal autonomy in these issues beyond territorial restrictions; thus, this form of unpleasant intervention is commonly not taken into account a very positive approach to accomplish a global solution (Stessens 2000). Self-protective intervention, on the contrary, apparently is an alternative that cannot anymore be ruled out. In spite of the potential unfavorable repercussions for international trade and capital flows, legislators may feel growing demand to limit capital inflows from across the globe, particularly if they are related to the narcotics trade, with its accompanied local economic as well as social costs. Nowhere has this disagreement become more obvious than in U.S.-Mexican relations. There is little uncertainty that in the United States such issues have resulted in to rethinking of the advantages of the North American Free Trade Agreement and have created suspicion on its further growth, substantive and geographic (ibid, 92). If unpleasant intervention in money laundering is a wicked negotiation, and defensive interference has the common unfavorable consequences, is there possibility for global public policy in this domain? Global attempts to eradicate money laundering to date fail of such a grand endeavor. However, there is slight uncertainty that the nature of the dilemma makes this the mere workable technique well-matched with the persistent expanding of the global economy. To date quite a few countries have had significant experience with policymaking at the national level to control money laundering (Chambliss et al. 2004). III. Toward a Global Anti-Money Laundering Administration In analyzing international attempts to eradicate money laundering one is fascinated by the reality that there has been slight or no time delay between national and international public policy attempts. In reality, just as in the instance of global prudential bank control, one can notice with growing occurrence instances of reverse engineering, wherein a global convention or a legally nonbinding contract functions as a governing orientation, if not a blueprint, for nations in the middle of constructing, or just starting to construct, their own local policy structures (Reinicke 1998). This is particularly relevant as far as the United States is concerned. In the latter part of the 1980s, Congress submitted the Anti-Drug Abuse Act, which essentially recognized that the problem could simply be resolved cooperatively and invited the secretary of treasury “to enter into negotiations with the appropriate financial supervisory agencies… to reach international agreements” (ibid, 140) on a range of money laundering-associated matters involving “adequate record [keeping] of large United States currency transactions” (Reinicke 1998, 140) by overseas banks and other financial establishments, and to “establish a mechanism whereby such records may be made available to United States law enforcement officials… further cooperative efforts, voluntary information exchanges, the use of letters rogatory and mutual legal assistance treaties” (ibid, 141). The policymakers also appealed that the secretary passes within two years a statement to Congress on the result of the agreements. Undoubtedly, the character and purpose of this congressional decision are suggestive of the International Lending Supervisory Act of 1983, which instigated U.S. attempts to protect what came to be recognized as the Basle Agreement (Reinicke 1998). The European Union took in an instruction to control money laundering in 1991. What is remarkable about this instruction is that at the instance the European Commission transferred its proposal to the Council of Ministers for deliberation and endorsement, in March 1990, money laundering was a criminal act in only one member state. The reality that the idea came from the European level was an open response to the incorporation of the European market for financial services, which demanded a more organized framework. Another European proposal lies with the Council of Europe, which now counts numerous countries from eastern and central Europe. The council, in 1990, implemented the Convention on Laundering, Search, Seizure and Confiscation of Proceeds from Crime. However, since of the fall of 1997 a mere eighteen of the forty constituents of the council had approved the convention (Chambliss et al. 2004, 108). On the other hand, even though the application of general criteria will lessen the enticement for money launderers to participate in regulatory arbitrage, an international structure will not be effective unless legislators are capable to surpass the regulatory dialectic and information irregularities that have emerged from the frequently shifting procedures of criminal organizations, from financial modernization, and, most significant in the global setting, from the discontinuity between the unlawful and legal territories that mark the possibility of money laundering. The only workable means to address this challenge is through the establishment of advanced financial intelligence divisions in each nation. Luckily, the United States is not the single nation that has used major data processing facility and artificial intelligence to monitor and identify money laundering. At the time of the early 1990s the “Australian Transaction Reports and Analysis Centre (AUSTRAC), the National Criminal Intelligence Service (NCIS) in the United Kingdom” (ibid, 110), and others were all created for the same objective. The population of financial intelligence divisions all over the world has increased drastically ever since, to seventeen by 1995. The international financial system should be regarded as an international public good. This good can merely grant its advantages on all affiliates if it remains clear and reliable and is not exploited by some for temporary benefits, such as drawing in criminally acquired money through relaxed or badly enforced regulations. To sustain integrity and transparency, and to permit every country impartial access to the benefits that the global financial system gives, it will be essential to institute a set of bare minimum directives with regard to money laundering (Reinicke 1998, 145). With regard to the operational level this demands that the IMF, in its operation on financial domain restructuring in emerging economies, take in these recommendations through setting up a set of regulations and workable policy procedures to be complied upon by constituent countries and their financial establishments, as well as to those that already put emphasis on traditional regulatory and supervisory matters (ibid, 146). IV. Conclusion Whatsoever one believes of the venture of upsetting financial activity associated to crime, there is a questionable relationship between the hostile prosecutorial attempts to penalize money laundering and the larger agenda of employing criminal punishments, regulation and monitoring techniques to interrupt criminal finance. The relationship is shaky mainly because of restrictions in what form of doubtful engagement the system can monitor, a restriction that becomes apparent once the system in perceived as an outcome of laws, rules and monitoring techniques. While the criminal laws that preside over who gets punished, indicted and sentenced for money laundering provide officials enormous power to classify almost anything that involves money acquired from illegal acts, the regulatory scheme and investigative techniques to dig out criminal engagement are somehow restricted, providing authorities only a few means of locating the people who are overeating on profits from, and funding organized criminal engagements. In most means, the larger context to criminal financial engagement hence lingers significantly unaffected by the combat against money laundering. It does appear workable that aiming at financial activity associate to crime could at times be a successful means of identifying and disturbing the primary crime. Currency reporting encourages some traffickers to think twice about walking into a bank heaving a large trash bag loaded with stolen cash. Those compelled to structure their deposits so as to escape reporting demands perhaps confront a slightly greater cost, coercing cash into the financial framework. A rebel familiar to the authorities who prefers to use his personal name when opening a bank account creates the risk that his account will be frozen. However, beyond a number of these apparent temporary solutions, the justification for aiming at criminal financial engagements is significantly separated from the functioning of the system. Components of the high-minded rationale are previously obvious in the legislative account of the criminal and regulatory laws that comprise the struggle against money laundering. Since then, supporters for the combat against money laundering are inclined to put emphasis on how the fight can elevate the costs of committing crime or the simplicity of detecting violators, whether the violators are drug pushers or terrorist sponsors. Much of the debate makes logic and locates advocacy in unreliable events (Birks 1995). This makes it difficult to ascertain, on balance, what to result from the fight. The system in on no account an absolute disaster; it is perhaps ever simple to recognize that contemporary offenders and regulatory laws are seldom just marking an intrinsic mistake, and frequently are just marking offenses that make it inexpensive for the authorities to penalize criminals for engagements associated to, but not openly including, the feared damage of the described offense. References Birks, Peter. Laundering and Tracing. Oxford: Oxford University, 1995. Boran, Christopher. "Money Laundering." American Criminal Law Review (2003): 847+. Chambliss, William J. et al. All is Clouded by Desire: Global Banking, Money Laundering and International Organized Crime. Westport, CT: Praeger, 2004. Lathrop, Douglas A. How Political Consultants and Campaign Tactics Affect Public Policy. Westport, CT: Praeger, 2003. Ng, Yew-Kwang. Efficiency, Equality and Public Policy: With a Case for Higher Public Spending. Basingstoke, England: Macmillan Press, 2000. Reinicke, Wolfgang. Global Public Policy: Governing without Government? Washington, DC: Brooking Institution, 1998. Ringland, Gill. Scenarios in Public Policy. New York: John Wiley & Sons, 2002. Roessner, David & Wise, A. "Public Policy and Emerging Sources of Technology and Technical Information Available to Industry." Policy Studies Journal (1994): 349+. Stessens, Guy. Money Laundering: Pinochet, the Junta and a New International Law Enforcement Model. Cambridge, England: Cambridge University Press, 2000. Zagaris, Bruce. "A Brave New World: Recent Developments in Anti-Money Laundering and Related Litigation Traps for the Unwary in International Trust Matters." Vanderbilt Journal of Transnational Law (1999): 1023. Read More