09/03/2023 Alexander

Money Laundering – the World’s Third- Largest Business

Did you know that money laundering is the world’s third-largest business, with an estimated $2 trillion laundered annually?

This is an eye-watering amount which directly finances global criminal activity. Money laundering contributes to wars, drug trade, human trafficking, and political corruption – the cancer of modern society.

Money laundering is a global issue which affects economies across the world. It is estimated that up to 5% of global GDP is laundered each year, amounting to $2 trillion. According to a report by the United Nations Office on Drugs and Crime, the bulk of this money, ranging between $200 billion and $500 billion, is generated from drug-related activities and is circulated through various channels looking for good “laundromats”.

One of the easiest ways to launder money is by setting up an offshore company, either real or fictitious, that can control bank accounts anywhere in the world. Creating such a company only takes less than 24 hours and $100. Casinos, brokerages, and banks are also popular channels for laundering money, with banks being the ultimate “laundromats” due to their ability to carry out international transactions quickly. Moreover, banking regulations in many nations are made to appeal to people and organizations who demand total secrecy for their deposits.

Despite the magnitude of this problem, money laundering is rarely curtailed. Many countries, particularly European countries, do little to prevent money laundering as it is strictly up to banks to report “suspicious” deposits. Even when they do, such reports are rarely investigated and sanctions are typically mild.

Some people believe modern technology will make the fight against money laundering virtually useless, but this is different. Instead, technology can aid in tracking suspicious transactions and identifying the individuals behind them.

As money laundering is crucial for many crime operations, it’s a persistent problem plaguing global economies.

Money Laundering Statistics

  • The estimated global success rate of money laundering controls was a mere 0.2% (according to the UN and US State Department)
  • Authorities intercepted USD 3.1 billion worth of laundered money in 2009, over 80% of which was seized in North America (UN estimate)
  • The estimated global spending on AML compliance-related fines is USD 10 billion annually
  • Banks and other financial institutions were fined almost USD 5 billion for “anti-money laundering” infractions, breaching sanctions, and failings in their “know your customer” systems in 2022
  • The level of fines for financial institutions since the global financial crisis is almost USD 55 billion [1]
  • FIU has categorized 9,500 non-banking financial companies (out of an estimated 11,500 registered) as ‘high-risk financial institutions’, indicating non-compliance as of 2018
  • As of 2020, the USA was deemed compliant for nine and largely compliant for 22 out of 40 FATF recommendations
  • The estimated amount of total money laundered annually around the world is 3-5% of  global GDP (USD 1– 2 trillion) excluding tax avoidance
  • Mexican drug cartels launder at least USD 9 billion (5% of the country’s GDP) each year
  • Money laundering is about 1.2% of the EU’s total GDP, which could be spent elsewhere