A study published by the Journal of Financial Crime and conducted by Ron Pol, a political scientist from New Zealand, discovered that authorities from around the world have only been able to recover 0.2% annually of the estimated $2 trillion USD in funds stemming from illicit crimes and activities. New Zealand in particular was only able to recover 1% of its $6 to $8 billion in criminal funds even with tougher regulations implemented to fight money laundering such as requiring banks and other financial institutions to report all suspicious transactions and verify their customer’s identities.
However, Dr Pol stated that it will take more than tougher regulations to stop these criminals. A significant observation pointed out by the study was that there seems to be no distinct difference in a country’s ability to stop money laundering, regardless if the country had anti-money laundering (AML) regulations in place or not. Dr Pol accredited this to countries constantly creating new regulations without observing which rules work and which do not. Suzanne Snively, Chief Executive of Transparency International, stated that instead of tougher regulations, the “culture” and “integrity” of companies are more likely to make an impact and that, while the regulations put into place are not working, it has raised global awareness on the severity of corruption and money laundering.
Gary Hughes, a lawyer in AML and financial regulation, stated that with the increase in AML regulations, banks and other financial institutions have become more vigilant which is possibly the cause for more reports and data being reported to the federal authorities. However, Hughes added that while compliance is necessary, the cost for small businesses and firms to comply may be too high. The Ministry of Justice estimates the costs to expand regulations to accountants, lawyers and real estate agents ranges from $72 to $313 million to begin with, and an annual cost of $64 million to $223 million thereafter to maintain compliance.
Dr Pol suggests that governments around the world should focus on determining how criminals are able to launder money in the first place, and then create regulations based on what they discover. If governments fail to do this, financial crimes will still occur no matter how many regulations are put into place.
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