Elgar original reference
Edited by Brigitte Unger and Daan van der Linde
Chapter 24: Dirty complexity: money laundering through derivatives
Trading in financial derivatives has increased exponentially in recent decades. This is especially true with respect to over-the-counter (OTC) derivatives. Given the relative opacity, complexity and size of the derivatives markets (particularly the OTC segments) they may be hospitable breeding grounds for money laundering. From the turn of the twenty-first century up to the global financial crisis (GFC) originating in 2007, trading in OTC derivatives between sophisticated market participants in some of the largest markets was not substantially directly regulated. Amongst other things, this generated concerns with respect to the integrity of audit trails in these markets (FATF 1999, p. 13;hereinafter 1999 FATF Report). In the wake of the GFC, proposals for regulatory reform in OTC derivatives market infrastructure have been forthcoming in many jurisdictions. Amongst developed economies, the US, in particular, has made notable progress at time of writing.
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