The Money Laundry: Regulating Criminal Finance in the Global Economy by J. C. Sharman

Author:J. C. Sharman [Sharman, J. C.]
Language: eng
Format: epub
Tags: Public Policy, International, Economics, Criminology, Social Science, Political Science, Business & Economics, Law Enforcement, Economic Policy, Law, General
ISBN: 9780801450181
Google: iLRuswEACAAJ
Goodreads: 12693327
Publisher: Cornell University Press
Published: 2011-01-15T11:17:27+00:00

Historical Background: The Rise, Decline, and Rise of Blacklisting

Where did the strategy of blacklisting come from? The perceived need for international collaboration to counter money laundering has been closely linked to stories about the way globalization is said to be transforming the world. Because the defining metaphor has been that the global AML system is only as strong as its weakest link, through the 1990s there was a growing anxiety among FATF members that their efforts in this domain were somewhat wasted as long as others failed to follow suit, or they were perhaps even counterproductive if higher standards led to capital being moved to noncompliant states.3 In resolving this problem there was a desire for more robust measures than the conventional approaches of outreach, awareness raising, issuing codes of best practice, and so on.4 Publicly branding nonmembers as derelict in their money-laundering standards marked a break both with the FATF’s previous conduct and general norms of international practice in its confrontational character. In its favor, however, blacklisting initially promised a more direct and, it was hoped, effective approach, without the need for the additional authorization (for the FATF) or expense (for member states) that would be associated with applying economic sanctions. Because coordinated blacklisting was untested, the FATF did not know quite what to expect.5

Discussions of how to pressure nonmembers to improve their anti-money laundering laws had begun almost from the founding of the FATF in 1990.6 By the end of the decade, these had born fruit as the process of compiling the Non-Cooperative Countries or Territories list began in late 1998. In the first round of the process four regional review groupings (Americas, Asia-Pacific, Europe, and Africa and the Middle East) evaluated twenty-nine nonmember jurisdictions against FATF standards, releasing a list of fifteen jurisdictions that failed to measure up in June 2000. A further eight jurisdictions were added in 2001 and 2002. Delisting was conditional on the introduction and implementation of the standard package of AML regulations (summarized in chapter 1) to the satisfaction of an FATF assessment group. The decision was formalized in a plenary meeting. Delisted countries remained under special monitoring by the FATF for at least a year afterward to ensure there was no backsliding. The successive iterations of the NCCT were instantiated in a series of annual reports released beginning in 2000 after the FATF’s June plenaries. The formal consequences were contained in the activation of Recommendation 21 for member states. In concrete terms, Recommendation 21 specified “the FATF recommends that financial institutions should give special attention to business transactions and relations with persons, including companies and financial institutions” from listed jurisdictions.7

Blacklisting brought about rapid results in most cases as targeted jurisdictions rushed to meet the FATF’s demands by introducing the correct legislation and establishing the appropriate institutions. Coverage of those blacklisted expanded in 2001–2002 from the initial microstates to include major developing and post-Communist countries such as Nigeria, Indonesia, Russia, and Ukraine. The selection process gave FATF members a chance to settle old

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