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Chapter 7 analyzes OECD activities in the field of crime control, focusing on corruption and money laundering. Both aspects have witnessed growing international concern during the 1990s, and various international activities have been started to criminalize and prosecute corruption and money laundering across countries. While each of these crimes seriously impact both politics and the economy, the political solutions found in the context of the OECD have been very different: Corruption has been tackled by an OECD convention and emerged as a core issue of OECD activities and publications, while money laundering has been treated by the Financial Action Taskforce (FATF), a semi‐autonomous agency that is formally independent of the OECD but is based in the organization's building and has a widely overlapping membership. The chapter reconstructs the political process that led to the emergence of both models, showing how different conditions on the input side resulted in different models of fighting financial crime.

This chapter analyzes international harmonization of regulations controlling two major types of international economic crimes: transnational money laundering and foreign corrupt practices. In both cases, harmonization efforts started as domestic, notably US, regulation, which expanded into global regulation through international standard setting bodies, such as the FATF (Financial Action Task Force), the European Council on transnational money laundering and the OECD and UN on foreign corrupt practices. Involvement of the private sector, notably by private banks, in the drafting and implementation of the FATF Forty Recommendations is analyzed as an example of public-private partnership (PPP) in international harmonization.

The previous empirical chapters have all demonstrated the key problem hindering cooperation against illicit trade: international regulation aimed at curbing the trade exacts a heavy price from governments with little motivation to pay that price. These governments are not concerned about the trade's negative externalities; rather, they are protecting the interests of domestic actors involved in the trade. They are therefore reluctant to bear the burden and make the sacrifices that international regulation entails. As a result, an international political conflict ensues between governments supportive of regulation and governments opposed to it. This chapter explores the sources and dynamics of the international political conflicts over three types of illicit trade: drugs, money laundering, and counterfeits. The analysis highlights the commercial interests that have hindered international regulation and the exercise of American coercion to compel cooperation.

This chapter presents case studies of non-binding norms and compliance with trade agreements. Topics covered include efforts against money laundering, the International Organization for Standardization, the World Bank Operational Standards, and environmental norms in the Asia-Pacific Economic Cooperation forum.

Fragile states are said to threaten international security by providing hospitable environments for transnational crime. “Failing states are inextricably linked to the increasing power of international criminal networks and ‘illegal’ economies,” the United Kingdom's Prime Minister's Strategy Unit contends. This connection makes intuitive sense: Weak regimes may lack the capacity or will to combat crime, while the corruption, insecurity, and weak rule of law found in many fragile states play to criminals' advantage. This chapter evaluates the connection between state weakness and transnational crime, paying special attention to six sectors of crime: narcotics production and trafficking; human trafficking; small arms trade; money laundering; environmental crime; and maritime piracy. It argues that the relationship between transnational crime and weak states is more complicated than popular mythology suggests.

This chapter addresses the questions: why should poor countries be expected to repay the debts imposed upon them by unelected and repressive governments? Who should shoulder the burden of repaying the billions of dollars stolen by the likes of Mobutu, Marcos, and Saddam Hussein? How can creditors expect South Africans to pay for loans taken out during the apartheid regime and at that time used as a means of oppression? It argues that loans to certain borrowers or for certain purposes are prima facie illegitimate. This category includes loans to dictators, odious debt (debt used for repression), and extortionate loans. Second, certain types of behavior by lenders can also make a loan illegitimate: usury, money laundering, and gross negligence in lending. When these conditions are met, responsibility for repayment cannot be properly placed on the borrower.

This chapter traces the legal history of money laundering and the policies used to counter it as they have arisen over the past few decades. It first provides an overview of the main characteristics of the contemporary practice of money laundering before discussing the origins as well as the structure and nature of anti-money laundering (AML) policy. The AML policy is founded on one fundamental logic: if most crime is profit driven, then lowering the profits will lower the incidence of crime. In this sense, just as money laundering is a derivative crime, by definition linked to a predicate offense, so too the ultimate object of AML policy is not to reduce money laundering as such but rather to reduce the predicate crimes like terrorism and tax evasion. This chapter also examines international cooperation in the fight against money laundering and the process of policy diffusion involved in the implementation of AML measures across the globe.

This chapter examines the rise of anti-money laundering policies that have developed as an important element in many global anti-crime efforts. The chapter starts with the background of fighting money laundering and American domestic laws and politics related to fighting this crime. The development of the Financial Action Taskforce (FATF) is presented, including the role of the United States in setting and expanding this organization. Tracing the interplay of American and international efforts with several methods, including network analysis, the chapter shows how strongly the United States as an institutional entrepreneur has influenced global anti-money laundering efforts, a policy that is highly rationalized. In sum, the chapter delivers a detailed account on global governance against money laundering and confirms the expected outcome of a coherent institutionalization based on rationalized policies and institutional entrepreneurship.

This chapter examines the 40 Recommendations of the Financial Action Task Force (FATF), which has been producing anti-money laundering standards since 1990. As an intergovernmental organization comprised of a relatively small and homogenous group of States, FATF has been able to formulate and revise Standards that are designed to mould domestic laws on money laundering throughout the world. But at the same time, FATF has operated in a relatively non-transparent manner, and has historically excluded non-member States from the formulation of recommendations to which they are nevertheless subjected. By blacklisting non-compliant States, FATF has managed to bring about implementation of the FATF 40 Recommendations by non-members as well as FATF members. FATF has taken steps to increase participation by non-members through regional affiliates known as FATF-Style Regional Bodies, but this is not equivalent to membership itself.

This chapter examines whether anti-money laundering (AML) policy works by testing two alternative views. The first is whether AML policy has produced a major reduction in predicate crime, in line with the logic first used to justify a “follow the money” approach (effectiveness in absolute terms). The second is whether the AML system has delivered benefits to society greater than the costs the system itself has imposed (cost-effectiveness). The chapter evaluates the effectiveness of AML policy as well as the costs and benefits of the AML system in rich countries compared with developing countries such as Barbados, Mauritius, and Vanuatu. It also considers the disconnect between standard policy prescription and local circumstances by focusing on the experience of Nauru. Finally, it assesses the effectiveness of the global AML system in dealing with corruption and kleptocracy in poorer countries.

This chapter reviews the protection of a right to security by the wider criminal legislation enacted by successive New Labour governments. It includes in turn the other Civil Preventive Orders that share the form of the Anti-Social Behaviour Order (ASBO); the Vetting and Barring Scheme (enacted by New Labour but significantly scaled back by the Coalition); various pre-inchoate offences of preparation, possession, and failure to report; three classic complete criminal offences that have acquired or moved towards a preinchoate form in recent years — fraud, theft and assault; and imprisonment for public protection, a sentencing power (largely abandoned by the Coalition). The chapter is aims simply to demonstrate that the ASBO was indeed the flagship of a fleet of measures punishing the undermining of the public's feeling of security.

Financial crime has become commoner and the link between mafias and money laundering has become closer. How states have reacted. Is this the worst kind of crime committed in the system? What about public embezzlement through the tax havens?

This chapter examines how socialization and symbolic competition have contributed to the diffusion of anti-money laundering (AML) policy, arguing that when catalyzed by blacklisting, both mechanisms tend to exert more pressure the more countries adopt the AML policy. It first considers developing countries' initial contact with the AML regime (excluding those blacklisted in 2000–2001) through their encounters with outreach programs conducted by international organizations. It suggests that socialization enables individuals to play an appropriate role given dominant cues. In the context of the global AML regime, the most important drivers of socialization are argued to be the evaluation process and participation in the plenary meetings of the Financial Action Task Force (FATF) and the other regional AML bodies. The chapter also distinguishes the conception of competition from that used by other scholars: competition is a manifestation of structural power that prompts symbolic responses.

Illicit financial flows (IFFs) drain state finances and economic vitality, with disproportionate impact on developing economies. IFFs—including money laundering, tax evasion, and tax avoidance—pose a transnational problem addressed so far through international regimes of coordination and cooperation. But meaningful reductions in IFFs require addressing the root of the problem: information asymmetries. Developed nations and tax havens know where money is hidden and profits are made, while developing nations do not. Since the international system of global finance creates the incentive structure and permissive environment for illicit flows, it is at this level that states must focus their policy-making attention. New information-sharing mechanisms, such as automatic exchange of tax information and public country-by-country tax reporting, can level the playing field and enable lower-income states to effectively address the IFF problem.

This chapter examines how blacklisting, and the threat of being blacklisted, helps promote policy diffusion with regards to anti-money laundering (AML). It first provides a historical background of the rise, decline, and rise of blacklisting by the Financial Action Task Force (FATF) before discussing the evidence for the effectiveness of blacklisting. In particular, it assesses the experiences of different kinds of states such as the Cayman Islands, Nauru, Austria, and two isolated and xenophobic “rogue states,” Burma and North Korea. The chapter shows that the majority of the jurisdictions in the firing line due to the June 2000 release of the first iteration of the Non-Cooperative Countries or Territories (NCCT) list were small island offshore financial centers or tax havens. The chapter also considers the effect of the blacklists on third-party states and how blacklists constitute a novel form of international coercion. It argues that the act of blacklisting has damaged the reputation, status, or standing of countries on the list in the eyes of third parties, including both states and private firms.

This chapter presents another case study illustrating lower common denominator (LCD) outcome. Offshore finance is financial activity conducted outside the beneficiaries' national jurisdiction, usually in order to take advantage of less stringent regulations and the better rates this allows. The raison d'être of offshore finance is regulatory laxity. The incentives generally involve lax process regulations on the ‘production’ of financial services. Offshore finance allows firms to both circumvent and discourage restrictive national regulations. The chapter chronicles the flight to offshore financial centres from 1957 to 1988. It presents research on British banks, the Bank of England's support, and on American banks and government support, which illuminate how this system emerged. It discusses the benefits to offshore governments, and some recent moves to regulate money laundering through the Financial Action Task Force (FATF).

This chapter charts the development at European and national levels of legislation to combat the laundering of proceeds of crime, with particular reference to those provisions which require or permit the disclosure of relevant information to the appropriate authorities. It describes the three primary money laundering offences under the Proceeds of Crime Act 2002, and how a potential defendant may escape liability by making an ‘authorized disclosure’. It summarizes the positive obligations to disclose suspicions of money laundering, and to operate customer due diligence measures, imposed on persons working in the regulated sector by, respectively, the 2002 Act and the Money Laundering Regulations 2007. The ‘tipping off’ offences are outlined. Reference is also made to comparable provisions in the Terrorism Act 2000 concerning terrorist offences and related property. Finally, the chapter addresses the interrelationship of those statutory provisions with duties of confidentiality, especially those owed by bankers and lawyers.

This chapter examines health care fraud and abuse as well as the crimes that facilitate it. It first considers the definition of fraud, how fraud differs from abuses such as price gouging or mistakes such as billing errors, and the conditions required to prove fraud. It then discusses the so-called “object crimes” such as filing phony insurance claims, making false diagnoses and unnecessary treatments, organizing a rent-a-patient scheme, or promoting the illegal off-label use of a drug. The crimes that support or enable the object crimes are known as auxiliary or facilitative crimes; examples are conspiracy, money laundering, tax evasion, mail and wire fraud, lying to federal authorities, perjury, and obstruction of justice. The chapter also explains how the Racketeering Influenced and Corrupt Organizations (RICO) Act, enacted primarily to combat organized crime, can be used not only to pursue the mob's entrance into the health care arena but also against health care institutions, pharmaceutical manufacturers, and health insurers.

This chapter provides an overview of the role of the European Union in the emergence, consolidation and development of the governance of money laundering. In particular, it identifies three sets of factors that explain the role of the European Union in the global Anti-Money Laundering (AML) regime. These are the motivation and policy content of the AML regime as driven by key states; the promotion of particular standards through global, regional, and national organizations; and the proliferation of AML practices among both regulators and the regulated. The chapter finds that European states (though no EU coalition of states) have significant influence in the shaping of global AML standards; they are also at the vanguard of the peer review process that leads to their global diffusion. At the same time, the European Commission has developed extensive expertise on AML to guide global debates and ‘translate’ the resulting rules into EU policy.