Are anti-money laundering measures still enough?

Screenshot - New study on illicit finance

Just now when Germany has agreed on new anti-money laundering measures in order to line-up with applying EU directives, a study of Transatlantic Leadership Forum shows how outdated the current regulatory frameworks are.

“Both the Europe and the United States must update their supervisory frameworks, which are out of date. The EU has created a single market for financial services and, inside it, a common currency area with centralized prudential super- vision, while relegating AML (or, better, counter-illicit finance) duties to national supervisors. This arrangement inevitably introduces coordination problems and creates resource mismatches in small jurisdictions with outsized financial sectors”, as Joshua Kirschenbaum states. The senior fellow at German Marshall Fund’s Alliance for Securing Democracy, focusing on illicit trade.

Transparency is a must in this case. But it seems not being applicable as the European Union as also the USA fail to track money flows. It seems that governments do neither have appropriate legal opportunities nor having the tools and organisational structure to track for example foreign direct investments.

For Kirschenbaum, much more creativity and interdisciplinary cooperation amongst law enforcement institutions is needed. 

The mindset should be re-focused. Currently (and due to historic reasons) state-authorities are eager to collect what is provable in court. The success of a forensic investigation is measured in convictions. No conviction – no success. But the first thing to do is to eliminate the security risk, not to condemn criminals in trials that often last for years – with uncertain outcome. The old way of thinking that security is given when criminals are behind bars is maybe still correct. But it avoids the fact that an illegal business model is far from being eliminated when a few of the protagonists are taken out of circulation.

The study can be found here.