draining development.pdf - Khazar University

How Well Do Anti–Money Laundering Controls Work in Developing Countries? 387funds are prelaundered by placement in a real business venture (ratherthan a shell company, the beneficial ownership of which may not betransparent), then how they may be identified as proceeds of corruptionor any other form of crime is not obvious. This is yet another note ofcaution: it would be unwise to assume that the within-country identificationof the proceeds of corruption is easy whether the country is apoor one or a rich one. It may be that the families of corrupt politiciansin developing countries find it easier than corresponding families in richcountries to integrate the proceeds of corruption (including politicaland economic extortion) into their businesses. This issue will requiremore analysis.Alternatively, one might adapt Levi’s typology (2008) of bankruptcy(and other) frauds to the involvement of individuals and businesses inmoney laundering. The typology is as follows:• Preplanned frauds, in which the business scheme is set up from thestart as a way of defrauding victims (businesses, the public sector,individuals)• Intermediate frauds, in which people start out obeying the law, butconsciously turn to fraud later• Slippery-slope frauds, in which deceptions spiral out of control, oftenin the context of trying—however absurdly and overoptimistically—to rescue an essentially insolvent business or set of businesses, therebyescalating the losses of creditorsBy analogy, some schemes are set up principally for the placement,layering, or integration of the proceeds of crime; some existing businessesknowingly hire themselves out or are pressured into selling out towould-be launderers; and others drift into occasional part-time launderingby assisting large corporations or full-time criminal enterprises ifthey need the business to keep going, but never intending to becomefull-time launderers. Given the absence of systematic data collection andthe low probability that laundering schemes will be detected and actedagainst, it is plausible that intermediate and slippery-slope launderingwill occur more often during economic downturns. In short, the motivationto defraud and the motivation to launder are heterogeneous ratherthan a single phenomenon.