Criminal Law Forum (2013) 24:565–567 DOI 10.1007/s10609-013-9210-z
Ó Springer Science+Business Media Dordrecht 2013
Book Review
M. MICHELLE GALLANT*
BOOK REVIEW
Reviewing: J. C. Sharman, The Money Laundry: Regulating Criminal Finance in the Global Economy, Cornell University Press, Ithaca, 2011, 216 pp., ISBN 9780801450181. The often-stated claim that money laundering generates its own industry applies as much to the booming business of anti-money laundering (AML) consultancy as it does to the business of writing about money laundering. Books on the topic abound, appearing at a particularly frenetic pace in a post-September 2001 world awakened to a presumed link between dirty money and terrorism. Very few of these works offer much insight and very few qualify as scholarship. Sharman’s work The Money Laundry: Regulating Criminal Finance in the Global Economy is an exception.1 The work begins with the banal question of what, if anything, does the regulation of money laundering achieve? This is not a new question. It is one that is recurrently asked in the criminal finance discourse yet it is rarely answered or systematically investigated. It is banal because it is assumed that any strategic approach to a problem, whether local, national or international, would be subject to the inquiry as to what the strategy accomplishes. From its initial forgings in the 1970s through to the present-day, AML regulation has attracted much acclaim but has alluded any robust analysis of its effectiveness. Sharman spends the first part of his book demonstrating that AML regulation achieves very little. He spends the second exploring why, in * M. Michelle Gallant, Ph.D., Associate Professor, Faculty of Law, University of Manitoba. 1 J. C. Sharman, Cornell University Press, Ithaca, 2011.
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the absence of evidence of achievement, the regulatory apparatus continues to spread rapidly around the globe. The need to demonstrate the effectiveness of AML regulation is inconvenient because it poses methodological difficulties. After all, if one of the ambitions of AML regulation is the protection of the financial system, the recent global collapse points towards something in the regulatory apparatus being not quite right. Although The Money Laundry does not purport to resolve the merits analysis, it innovatively conducts empirical tests of regulatory effectiveness. One aspect of AML regulation is the prohibition of anonymous bank accounts and shell companies. Sharman tests these norms by seeking to establish anonymous accounts in different jurisdictions as well as attempting to set up shell companies, that is, companies whose precise ownership is unknown, or at least, very difficult to ascertain. As much as advocates of increased regulation of money laundering might speak of winning the war against criminal finance, the direct test of effectiveness suggests otherwise. Current rules may have made the Swiss-style numbered bank accounts merely matters of ancient lore but the capacity to conceal one’s identity through the creation of an intermediate corporate entity remains a viable laundering tool. In the absence of evidence of the effectiveness of money laundering regulation, why does the apparatus continue to grow and to galvanize even the most innocuous of states into enacting extensive anti-money laundering laws, often at the expense of competing national interests? An example is the micro state of Nauru which, while barely possessed of any financial services industry, was forced to pass a slate of AML laws much thicker than its entire annual legislative agenda.2 Formalized international shaming, orchestrated by the Financial Action Task Force (FATF), the global actor tasked with overseeing the implementation of AML laws, is one explanation.3 To encourage, cajole or coerce the enactment of regulation, the FATF began to publically list countries whose laws fell below international standards, warning others not to deal with any listed offenders. While such processes are known to propagate the global AML edifice, this work points out that that propagation has no factual underpinnings. Growth does not happen because AML laws stave off the vicious forces of criminal finance. As the case of Nauru illustrates, countries 2
Ibid. at pp. 55–56 and 116–117. The Financial Action Task Force was created in 1989 by the (then) G-7 group of countries to protect the integrity of the financial system from threats posed by money laundering: www.faft-gafi.org. 3
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are blasphemed for failing to adopt AML policies despite a nonexistent risk of exposure. Beyond the shaming, Sharman argues that socialization plays a distinct role in disseminating AML policy. Unlike listing, there is no formal instrument of socialization. Rather, it results from constant pressure exerted in discrete formal and informal forums to conform to international standards, to identify with the policies of successful, powerful nations. Sometimes following the path of peers is prudent. With socialization however, states adopt policies because the course of action becomes what decent states do, not because a particular course of action actually achieves a particular end. Accordingly, money laundering law spreads not because it is effective but because it has become the bulwark of a modern progressive state. As Sharman and many others would agree, a strategic, functional regulatory structure attune to domestic exigencies would be preferable.
