In the next 5-10 years there is a major issue that has developing that will be facing the business world. This issue that is going to be a major problem for both businesses and government is surely going to be money laundering. In order to understand how money laundering is a threat to both governments and economies it is first necessary to understand what money laundering is itself. Once the definition is understood only then can we apply that definition to the business world through analyzing how this white collar crime effects commerce, government involvement in the business world, and the rise of terrorism. This paper will analyze these forces and how they are majorly shifting the culture of the global corporate landscape.
First, it is necessary to define money laundering because many people read the term yet they have no idea what money laundering is. Money laundering is when a criminal tries to make the money they made through criminal activity look legitimate. To see the gravity of money laundering, consider the following quote: “criminal enterprises and terrorist financing operations succeed largely to the extent that they are able to sanitize and conceal their proceeds by moving them through the national and international financial markets. The absence of, or a policy that is too lax or corrupt, anti-money laundering regime in a specific country permits criminals and those who finance terrorism financing to operate, using their financial gains to expand their criminal endeavors by fostering illegal activities such as drug trafficking, exposition of human beings, illicit trafficking, terrorism, and arms trafficking, (Money Laundering Impacts Development). This quote is greatly indicative about how money laundering no longer only affects those government organizations fighting crime. Money laundering also affects the businessman, the family, and the state in a profound way due to how the laundering of this “dirty money” is directly facilitating the funding of many threats in the global business world, (Directorate on Corruption and Economic Crime).
One way in which the United States has tried to respond to the effects of money laundering is that they have attempted to start a movement that forces United States citizens to be more fiscally responsible with the money that they are transferring overseas. As a result, the Foreign Corrupt Practices Act was passed that makes it much more difficult for the United States citizens to open bank accounts in foreign jurisdictions that they are not a legal permanent resident or citizen, (Layton, J.). Even though many United States citizens take their wealth outside of the United States for tax purposes, international banks have greatly cracked down on United States citizens opening accounts. In fact, this measure has also started a global movement to curtail who is opening bank accounts.
The way that opening a bank account regardless of whether it is personal or business abroad has greatly changed. For example, the host bank is going to want to see proof of where your funds came from, (Layton, J.). Additionally, the bank is going to want to see proof of domicile and positive references from your host bank in your home country, (Layton, J.). Particularly if you have an amount that is $10,000 USD or more, you are going to have a great deal of problems transporting this money for business or personal reasons.
Even though on the surface it appears that money laundering provisions and the overt act itself do not affect commerce, think again. Money laundering is causing a great deal of stress on the global business economy because the money that is being made fro criminal activity is trying to be hidden of its origins and this is giving individuals who are very corrupt more fiscal power in the global marketplace. Where money laundering corrupts the business world is pertaining to the concept of global development in third world countries, (Money Laundering Impacts Development). The reason for this is that this “dirty money” that is able to be transported over many borders finds its way into poorer countries that have less fiscal regulation, (Money Laundering Impacts Development). This becomes a major issue because it allows terrorism to flourish in the world due to the lack of regulation in these countries to stop it.
Particularly if your business is domiciled in the United States and you are a United States citizen or one of your partners is a United States citizen, these regulations will have a major effect on your business. In the next 5-10 years, American businesses are going to be greatly hindered by the legislation that has gone through. Particularly if your business conducts their operations overseas, you are going to have to make sure that you follow these anti-money laundering provisions religiously in order to avoid potential conflicts with the SEC. The SEC has closed many businesses in the United States for corruption reasons. Thus, if there is any suspicion of your company’s activities, it is best to invest in hiring a lawyer to ensure that you are compliant in every aspect of your business. The important thing to remember when dealing with this new legislation is that you are better off investing in a professional opinion regarding your compliance than facing potential jail time or severe fines later on.
One part of money laundering that is greatly dangerous is pertaining to terrorist networks such as ISIS that largely do not come from one single country. This is crucial because money laundering allows these organizations to breathe and have life because the way they are getting their money to cause their destruction is from money laundering, (Directorate on Corruption and Economic Crime). With ISIS, it is very dangerous because their ideology is spreading a great deal throughout the world. It is unfortunately apparent with the terrorist attacks that happened in both Brussels and Paris recently that ISIS is able to get its funding into Europe in one way or another because they have members of their organizations that are citizens but that are originally from Muslim countries within the Middle East, (Directorate on Corruption and Economic Crime). This is particularly dangerous because money laundering is facilitating a way for terrorists to get funding in order to cause terrible outcomes with this money.
In looking further into how money laundering greatly hinders development in poorer countries, it is important to look beyond the terrorist networks and focus on a more domestic threat to commerce. One part of the world that has a great deal of corruption due to lack of resources is Africa. Many American companies have tried to set up partnerships with these governments in order to gain access to their oil reserves. A classic example of this is Shell Corporation who has faced several accusations of corporate mismanagement of funds and exploiting the local African population to their economic benefit. Where money laundering causes a great deal of problems is that it also can fund corrupt regimes, (Money Laundering Impacts Development). This can be a major hindrance for countries around the world because their corrupt dictators or regimes are permitted to stay in power through money laundering to keep their source of capital flowing. This is a major issue that greatly affects the economy within these countries because these dictatorships typically censor the local population and put many hindrances on commerce and businesses in general, (Money Laundering Impacts Development).
A perfect example of this can also be seen in Venezuela. Money laundering has helped corrupt officials such as Chavez and Maduro stay in power for far too long. Now, what was the success of these leaders based on? Lack of education to the lower and middle classes and restricting what capital can enter and exit the country. What this has created is an economic mess that is too complicated to explain here; however, it is a great example of how the government interfering with foreign direct investment can greatly hinder a country. Thus, as a result, many wealthy individuals have found alternative ways to transfer their wealth outside of Venezuela. This has become a major issue for the Venezuelan country as a whole because their wealth has left and the cost per barrel of oil has plummeted, which has made the country had to be bailed out by Russia and China, which could arguably foster more crime in the years to come. Venezuela’s case is a classic example of how these transfers of moving wealth from the country can also lead to corrupt foreign practices such as money laundering.
Narrowing in more on how money laundering can affect that actual business world, the impact is apparent everywhere we look. There is a great deal more scrutiny on international commerce, which arguably hinders progress. This is going to be an enormous issue in the years to come because it is going to hinder how global business operates and flourishes across borders. The reality is that money has to be moved between jurisdictions every single day. This reality is not going to change regardless of the threat that money laundering has on the safety of the international public. Thus, where businesses and banks are greatly challenged is their role in facilitating commerce while also simultaneously protecting the public from the criminals that do launder money.
Where these issues are really going to have major issues in the international economy in the next 5-10 years is going to be seen in how the international community decides to combat terrorism. The reason for this is that terrorism is a variable and enemy that has developed a great deal since the terrorist attacks on September 11, 2001. These acts have greatly changed how the world operates and has created a new enemy to fight and that enemy is terrorism. In the coming years, major corporations are going to have to find healthy ways to conduct commerce with developing countries in order to take those businesses opportunities away from the terrorists, (Directorate on Corruption and Economic Crime). This is going to be the only way to prevent terrorism because it is going to end up cutting off the funding of the source for these terrorist organizations. In order to remain competitive with these terrorist organizations, it is going to cause a major shift in the business world that is absolutely necessary to avoid the horrific terrorist attacks that have been transpiring in Europe recently.
Where the corporate world is going to have to revise their day-to-day practices is directly linked to how they transfer currency across borders on a daily basis. For instance, it is likely that we are going to see a decline of individuals and businesses using banks to facilitate international money transfers. The reason for this is that banks charge very high fees. As a result of these high fees, banks are losing customers to a new form of business on the financial market and that business is currency transfer companies. An example of one of these companies is called MoneyCorp or TransUnion. These companies are creating a new medium for both businesses and individuals to transfer money; however, they are also creating a new avenue for terrorists to transfer money as well. Thus, it is no surprise that within the financial industry in the past two years one can observe a major crack down on these institutions so much so that it greatly hinders efficiency. The global business economy is going to have to continue to find creative ways to combat these inefficiencies while still fighting corrupt practices such as money laundering that directly funds terrorism. Keeping these two realities in check is going to be a major issue for both the international business community and also the international political community.
What is crucial to understand in the next 5-10 years is that terrorism is going to have a major impact on commerce because the war is getting bloodier and people are getting even more enraged. How the global corporate landscape shifts will be a determinant in how this war is one. If business people see the effect that terrorism has on their companies and the global political landscape, perhaps more innovation will be fostered as to how to combat this enormous problem in society that will affect global economies for years to come. If this issue is addressed properly, it will be fascinating to see how the global business landscape progress and ultimately, fights terrorism. Additionally, it is important to see how the war against terror is combated by increased security measures towards money laundering. This will have a major effect on businesses all over the world. Thus, the corporate landscape within the next 5-10 will be crucial to the fight against terrorism and the provisions that are implemented in order to combat the international problem head on.
Lastly, it will be important to see how the anti-money laundering provisions affect foreign policy in the coming years in the major global super powers. In the war that we are engaging in to combat terrorism, there are some nations that will not sign on. This legislation could also affect various treaty agreements that the United States has with other countries. Where business owners of multinationals have to be careful is how this legislation is perceived in the countries that they are working in . Particularly those companies that have subsidiaries in areas where members of ISIS are, for example, have to be very careful about how their image within those countries changes in the field of commerce. In the next 5-10 years, we are going to see a major shift in international legislation regarding money laundering and terrorism in the business world in order to accommodate those who are trying to fight terrorism. What will be interesting to see is how the United Nations, United States, China, Russia, and major players in the Middle East respond to this issue and see what side they take to protect their interests in the business world.
Works Cited
Directorate on Corruption and Economic Crime (DCEC). Republic of Botswana. Retrieved from: http://www.gov.bw/en/Ministries--Authorities/Ministries/State-President/Department-of-Corruption-and-Economic-Crime-DCEC/Money-Laundering/How-Does-Money-Laundering-Affect-Business/.
Layton, J. How Money Laundering Works. How Stuff Works Money. Retrieved from: http://money.howstuffworks.com/money-laundering5.htm/.
Money Laundering Impacts Development. The World Bank. Retrieved from: http://www1.worldbank.org/finance/assets/images/02-chap02-f.qxd.pdf/.
