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Testimony

S. 1241: Modernizing AML Laws to Combat Money Laundering and Terrorist Financing

Testimony for Senate Judiciary Committee
28th November 2017

Download the full testimony here.

Chairman Grassley, Ranking Member Feinstein, and members of the Senate Committee on the Judiciary, thank you for the opportunity to testify today. It is an honor for me to be here.

 “Anti-money laundering legislation is the least effective of any anti-crime measure, anywhere.”[1]

Why does Ron Pol, a respected anti-money laundering researcher, make such a stunning statement? Because the bottom-line metrics suggest that money-laundering enforcement fails 99.9 percent of the time. Or as longtime financial crime expert Raymond Baker notes, “Total failure is just a decimal point away.”[2]

This failure to successfully combat money laundering has dramatic impact. Outside crimes of passion – for example, murder committed in a jealous rage – criminals, criminal organizations, kleptocrats, and some businesses and corporations are typically motivated by greed. In today’s increasingly interconnected world, the manifestations of unfettered avarice impact all of us – politically, socially, economically, and culturally. Around the world, people see it in their communities. In the United States and elsewhere, the opioid, methamphetamine, and cocaine epidemics are devastating. Gang violence, financial fraud, government contracting fraud, corruption, internet scams and ransom-ware attacks, identity theft, and other crimes affect our daily lives.

We intrinsically know that the global range and magnitude of organized criminal activity that generates illicit proceeds is increasing. Intellectual property rights violations, human trafficking, wildlife trafficking, and environmental and natural resource degradation and exploitation are all unfortunate manifestations of greed facilitated by our increasingly interconnected and borderless world. There is also entrenched criminality that is resistant to enforcement. The trade in illicit tobacco, for example, has existed for generations. It affects every country in the world. So does customs fraud.

Financial crimes and abusive tax evasion contribute to the deterioration of social compacts. Worldwide, distrust in the privileged class has seemingly reached epidemic proportions, coupled with (if not driven by) a corresponding absence of “accountability.” Corruption is the great facilitator and is also fueled by tainted money.

Terror finance – a corollary of money laundering – and sanctions busting threaten national security.

Law enforcement, policy makers, and the media can get so distracted with the immediacy of the criminal behavior. It is easy to forget the aim of these criminal activities is not the crime itself, but the proceeds of crime. Many have questioned the efficacy of the “War on Drugs.” But why do we not acknowledge that our inability to stop the laundering and seize the proceeds fuels the greed behind the drug trade and perpetuates the narcotics trafficking we are trying to eradicate?

In other words, many of the ills we face “come back to money.” And money laundering is the essential component of transnational crime. It is part of the greed equation because it turns criminal proceeds into seemingly clean money that can be freely spent.


[1] Ron Pol cited in: Hamish Fletcher, “Dirty cash: The fight against money laundering - should NZ do more?” The New Zealand Herald, September 10, 2015. (http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11510931)

[2] Raymond Baker, Capitalism’s Achilles Heel, (Hoboken, New Jersey: Wiley & Sons Publishing, 2005), page 173.