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Joras Ferwerda

The fight against money laundering and terrorist financing has shifted the traditional responsibility of security partly away from the public. Commercial entities like banks were asked to monitor their customers and report potential money launderers and terrorist financiers. This move is not illogical: the gatekeepers of the financial system might be better suited to distinguish regular from irregular financial behaviour. But the involvement of private parties has not been an undisputed success. The main problem is that these entities are serving the public good with private costs. The private parties have been pushed into compliance with threats of sentences for non-compliance. This external motivation is vulnerable to strategic behaviour. Just to prevent any claims of non-compliance, banks and other entities might start reporting way too much, eventually crippling the overall effectiveness of the policy. Without the right incentive structure for the parties involved, success cannot be guaranteed. This chapter suggests that supervisors can play an important role here, since they could have the knowledge and data required without the incentive problem.

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Joras Ferwerda

Although the FATF 40 Recommendations, the Third Directive, and other international conventions all require various essential elements of money laundering to be criminalized, there remains a considerable divergence between the criminal provisions in the Member States in practice. This chapter reveals numerous significant differences between EU Member States in the definitions of money laundering in practice and classify them accordingly.
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Joras Ferwerda

Statistics on AML policy can be classified into two types: input statistics, which are the resources invested in AML policy like the budget of the FIU and other relevant institutions, and output statistics, which are the result of the AML policy, such as the reports disclosed to the FIU and the number of prosecutions and convictions for money laundering. It is very hard to use output statistics as an actual indicator for AML policy, because an increase in the number of reports can be the result of a greater anti-money laundering effort or an increase in the amount of money laundering. In this chapter we explore to which extent the differences in statistics between EU Member States can be explained. Moreover, these data form the basis for a cluster analysis, which shows that in terms of AML policy the 27 EU Member States consist of four groups which have their own distinct characteristics.
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Joras Ferwerda

The lack of hard data makes any country-by-country cost-benefit analysis of AML policy impossible at the moment. But by using the estimates that are available, and correcting these estimates for the price level and size of the countries, the chapter is able to estimate almost all cost components and some benefits for each EU Member State. This study estimates that the total costs of the 27 EU Member States are about 2 billion Euros, together with an immeasurable reduction in privacy and some inefficiency in the operation of society. Since most of the benefits of AML/CTF policy are hard or impossible to estimate, the cost benefit dilemma is basically reduced to the question: Does the EU want to spent about 2 billion Euros to obtain potential benefits, which include an unquantifiable reduction in money laundering, less crime in general, a reduced damage effect on the real economy and less risk for the financial sector?
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Joras Ferwerda

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Brigitte Unger and Joras Ferwerda

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Brigitte Unger and Joras Ferwerda

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Brigitte Unger and Joras Ferwerda

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Brigitte Unger and Joras Ferwerda

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Brigitte Unger and Joras Ferwerda