NCPA - National Center for Policy Analysis


January 26, 2006

The anti-money laundering laws that many governments enacted after September 11, 2001, have changed little, says Moises Naim, editor of Foreign Policy. Indeed, according to Edwin Truman and Peter Reuter's study for the Institute for International Economics, in the United States, where these new protections are most stringent, money launderers face only a 5 percent chance of being convicted in any given year.

Laundered money is, of course, not the only illicit international trade that governments are unable to stop. Governments have failed to stop a wide range of illegal commerce, according to Naim:

  • Despite a long-standing war on drugs, the total size of the global drug trade probably doubled between 1992 and 2002.
  • Fifteen years ago, the trade in pirated goods was almost insignificant; today, it is valued at $400 to $600 billion a year.
  • International human trafficking comes to another $10 billion.

The criminals are becoming more sophisticated, says Naim. As illicit industries become big business, they naturally adopt the strategic thinking of big businesses everywhere by diversifying, politicizing and legitimizing:

  • Like any normal corporation, traffickers diversify to reduce the risk of having all their revenues come from just one -- in this case, illegal -- enterprise.
  • Traffickers also spend vast sums to gain the support and protection of politicians and government officials.
  • Lastly, they invest heavily in reputation enhancing activities -- churches, sports, teams, art exhibits, social work, and media.

Criminals have always tried to grow their businesses, influence politicians, gain social respectability and buy into legitimate enterprises. The difference is that they are now able to do it on a scale and with consequences that are without precedent, says Naim.

Source: Moises Naim, "It's the Illicit Economy, Stupid," Foreign Policy, November-December 2005; and Peter Reuter and Edwin M. Truman, "Chasing Dirty Money: The Fight Against Money Laundering," Institute for International Economics, November 2004.

For text:

For IIE study:


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