Beyond the Shadow Economy : Anti-Money Laundering and Combating the Financing of Terrorism

George C. Georgiou

Published: September 2017

Money laundering is illegal world-wide and constitutes a significant economic inefficiency. Current anti-money laundering and combating the financing (AML/CFT) efforts are primarily driven by the threat of terrorism and drug-trafficking, but the majority of illicit money flows is due to fraud. This paper assesses the costs and benefits of controls on the efficiency of the financial system in modern advanced economies and the less developed economies of the world. The significant costs imposed on financial institutions, increasing levels of regulation and the minuscule illicit money flows intercepted has resulted in moral hazard and significant conflicts of interest.