Essay On Money Laundering

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2.3 Negative Effects of Money Laundering on the Economy
The following section gives an overview of the literature on the potential effects of money laundering. The first is the direct effect of crime on the victim and the perpetrator. The following (2-8) refer to effects on the real sector, i.e. on business activities, on relative prices, consumption, saving, output, growth. The next two (9-10) refer to effects on the public sector (revenues, privatization efforts). The next ones (13-17) refer to effects on the monetary economy and the financial sector. Then the social effects (18-21) are discussed such as increased crime, corruption and contamination of legal activities through illegal activities. The political effects (22-24) are mentioned, …show more content…
fraud, theft, drugs, tax evasion etc). This entails that resources are illegally and unfairly transferred from the control of the victim to the offender. The illegal nature of the proceeds of crime renders the laundering activity necessary in order to make the wealth appear as if it was derived by legitimate means. Thus, money laundering contributes to the process of unfair reallocation of wealth from the good to the bad by rendering detection extremely difficult and allowing criminals to enjoy the fruits of their crimes undisturbed. As MacKrell (1997, p. 3) points out, “money laundering helps make crime worthwhile. It helps give legitimacy and even respectability to some of the most unworthy in society. It gives economic power to criminals and takes it from the law abiding tax payer” (see also Camdessus 1998, Walker 1995). That is to say, as a result of money laundering, crime pays off.
This direct effect of money laundering, the losses to the victims of crime and the gains to the perpetrators of crime are also mentioned by the IMF (Camdessus 1998, p. 2) and by AUSTRAC (the Australian FATF organization, see Walker (1995). The costs and gains of money laundering have been estimated by Walker (1992) in a survey for
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