draining development.pdf - Khazar University

How Well Do Anti–Money Laundering Controls Work in Developing Countries? 375committed outside a jurisdiction, but also from crimes within it. Inmany developing countries, the system is new. For example, most Africancountries have only passed AML laws since 2005, usually under pressurefrom the developed world, and some jurisdictions have adoptedsuch laws irrespective of the insignificance of their financial service systemsdomestically or internationally. Examples of the latter includeMalawi, Namibia (the Financial Intelligence Act 2007), and the formerlyblacklisted (by the Financial Action Task Force [FATF]) South Pacificisland of Nauru, where, in the last few years, more than a third of thelaws passed have related to AML, even though Nauru is no longer anysort of financial services center, and there is nothing left there to regulatethat could plausibly cause serious harm. 1 The fact that a country is not afinancial center does not, of course, mean that there is no money launderingthere. All countries have domestic crime and the possibility ofboth transnational and domestic bribery in contract negotiations andmay be conduits for terrorism and the financing of terrorism. Given thebroad definitions of laundering generally in place, this creates scope forAML. The question is: How much impact can we expect in such countriesto justify the expenditure of scarce resources that AML requires?Given the recency of these laws in many parts of the developing world,it would be unreasonable to expect much evidence of effectiveness yet.Moreover, the empirical links between reductions in serious crime forgain and any measures against serious crime (including AML) are difficultto demonstrate (Levi and Maguire 2004; Levi and Reuter 2006). Thearguments about the effective implementation of AML can be tautologicalin both the developed and the developing worlds. The waters are furthermuddied by the fact that most of the grand kleptocracy cases thatare known occurred before the significant implementation of AML indeveloping countries in Africa, Asia, or Central and South America, so itwould be improper to deduce that AML failed in these regions.This chapter, then, has an important speculative element with respectto effectiveness. For example, it examines the plausibility of a kleptocraticregime allowing a local FIU to be effective and fulfilling any otherrequirement to enable this effectiveness to be translated into broaderpreventive or criminal justice action. It briefly describes the historicalevidence that anticorruption agencies that have had significant success(such as in Kenya, Nigeria, and Zambia) have generally been dismantled