The Scale and Impacts of Money Laundering
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The Scale and Impacts of Money Laundering

Brigitte Unger

The book gives an interdisciplinary overview of the state-of-the-art of money laundering as well as describing the legal problems of defining and fighting money laundering. It then goes on to present a number of economic models designed to measure money laundering and applies these to measuring the size of laundering in The Netherlands and Australia. The book also gives an overview of techniques and potential effects of money laundering identified and measured so far in the literature. It adds to this debate by calculating the effects of laundering on crime and economic growth.
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Chapter 7: Long Term Effects of Money Laundering

Brigitte Unger

Extract

7. Long Term Effects of Money Laundering Money laundering can have short term effects, which usually happen within one or two years, and it can have long term effects which usually take more than four years. Some of the effects listed below even might take more than ten years before they are likely to occur. In the literature one can find twelve long term effects of money laundering. 7.1. THREATENS PRIVATIZATION Money laundering can have extensive detrimental effects to privatisation efforts. First, as discussed in Chapter 6 in the context of unfair competition, money launderers can outbid honest purchasers for formerly state-owned enterprises (McDowell 2001). This will result in a large-scale criminal presence in the economy. Criminals are driven by other considerations than conventional business entrepreneurs and react to different stimuli. For example, ‘the criminal proprietor will occasionally shift output and pricing patterns according to non-economic factors: like feeling a police crackdown or changing investment locations because of the passage of constraining legislation’ (Keh 1996[b], p. 11). As a result, significant sectors of the economy could become insulated from market-oriented stimuli, which can further prolong the readjustment process of the newly privatised economy. Additionally, it will also bring about a speculative and anti-competitive approach to conducting business in these sectors’ (Unger et al. 2006). Furthermore, as a result of structural change, these economies become highly susceptible to informal and illegal lending arrangements conducted by money launderers. Such developments have been extensively documented in reforming economies, Russia being a notable...

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