Money laundering and money laundering countermeasures : international regime versus technological system

Abstract

Synopsis

Money laundering has increased in scope and is believed to contribute to disruption of the financial system and uphold drug trade, trafficking of women and children for commercial sex, weapon smuggling, and terrorist financing. It is not only conducted by traditional criminals, but is often assisted by corrupt financial institution officials. The expansion of finance capitalism allowed for worldwide capital flows in a weakly regulated financial system. Financial havens and electronic payment technologies supporting anonymous customer relations have in turn offered opportunities to launder illicit proceeds without raising suspicion from public authorities.

In the late 1980s an international anti money laundering (AML) offensive was initiated. Under direction of the Financial Action Task Force (FATF), international standards have been developed and adopted within many countries’ national policy frameworks. The terrorist attacks of September 11th 2001 gave rise to a policy u-turn in international AML. Whereas collaboration before this incident centred on tracing criminal money after crime commitment, post-September 11th 2001 collaboration took on a preventive risk-based approach seeking to predict possible terrorist attacks.

This thesis examines money laundering and AML techniques, drawing on ideas from the science, technology and society (STS) tradition. It explains the driving forces behind enhanced international action against the problem and demonstrates that an international AML regime has emerged. The regime possesses the features of a technological system, and this influences AML policies. The analytical framework combines three approaches of regime theory with Thomas P. Hughes theory of technological systems.

The various approaches are both competing and complementing and prevail at different stages in the regime process. Regime formation is explained by US hegemony, suitable with the power based approach. Regime maintenance centres around the work of the FATF and is rooted in the realization that fighting money laundering in a collaborative manner is more beneficial than negotiating several bilateral agreements, which is consistent with the interest based approach. International AML is influenced by expert knowledge. This expert knowledge can be explained both by epistemic communities exemplary of knowledge based theories, and by technical authority exemplary of the technological systems approach.

Keywords: money laundering - electronic payment technologies - cyberpayments - financial havens - secrecy - transparency - AML - FATF - international regime technological system