Economic Effects Of Money Laundering

MONEY LAUNDERING 1
Introduction
“Money laundering is indeed a global phenomenon which undermines the economic and political stabilities of countries. However, as much as money laundering is a global phenomenon, over the last decade, it has been apparent that development countries have been more exposed and vulnerable to its exploits. The purpose of this essay is to discuss the social and economical effects of money laundering as it relates to a “Caribbean country”. The paper also tends to examine the impact of anti-money laundering legislations on the banking system, business entities and private individuals.” (Aluko, A., Bagheri, M., 2012)
What Is Money Laundering?
“Money laundering is the process of creating the appearance that large amounts

Developing countries often bear the brunt of modern money laundering because the governments are still in the process of establishing regulations for their newly privatized financial sectors. This makes them a prime target. In the 1990s, numerous banks in the developing Baltic States ended up with huge, widely rumored deposits of dirty money. Bank patrons proceeded to withdraw their own clean money for fear of losing it if the banks came under investigation and lost their insurance. The banks collapsed as a result.
She also states that other major issues facing the world's economies include errors in economic policy resulting from artificially inflated financial sectors. Massive influxes of dirty cash into particular areas of the economy that are desirable to money launderers create false demand, and officials act on this new demand by adjusting economic policy. When the laundering process reaches a certain point or, if law-enforcement officials start to show interest, all of that money that will suddenly disappears without any predictable economic cause and that financial sector falls apart.
Anti-Money Laundering (AML)

A reputation for integrity is the one of the most valuable assets of a financial institution.” (FATF, 2017)
“If funds from criminal activity can be easily processed through a particular institution – either because its employees or directors have been bribed or because the institution turns a blind eye to the criminal nature of such funds – the institution could be drawn into active complicity with criminals and become part of the criminal network itself. Evidence of such complicity will have a damaging effect on the attitudes of other financial intermediaries and of regulatory authorities, as well as ordinary customers.” (FATF, 2017)
“As for the potential negative macroeconomic consequences of unchecked money laundering, one can cite inexplicable changes in money demand, prudential risks to bank soundness, contamination effects on legal financial transactions and increased volatility of international capital flows and exchange rates due to unanticipated cross-border asset transfers. Also, as it rewards corruption and crime, successful money laundering damages the integrity of the entire society and undermines democracy and the rule of the law.” (FATF,