Commercial corruption and money laundering: a preliminary analysis

Abstract

Purpose

The purpose of this paper is to analyze the relationship between commercial corruption and money laundering. The challenge of corruption in the private sector and its relationship with money laundering are neglected subjects. Corruption and money laundering often occur together with the presence of one reinforcing the other. Corruption generates billions of dollars of funds that will need to be concealed through the money laundering process. At the same time, corruption contributes to money laundering activity through payment of bribes to persons who are responsible for the operation of anti‐money laundering (AML) systems.

Design/methodology/approach

Primary legal documentation, such as the United Nations Convention Against Corruption, the Financial Action Task Force's Recommendations on Money Laundering, and National Legislation, as well as Unpublished Government Commissioned Reports, are analysed in order to assess the links between corruption and money laundering.

Findings

Commercial corruption poses a threat to the integrity of the AML system, especially at the placement stage of the money laundering cycle. Private sector reporting entities may be bribed to actively collude in money laundering, refrain from lodging suspicious transaction reports, or tip off clients that they may be subject to a government investigation. The recursive links between corruption and money laundering suggest that policies which are addressed to fighting both corruption and money laundering may have a mutually reinforcing effect.

Research limitations/implications

There is a lack of empirical data concerning private corruption that suggests significant underreporting of this type of crime.

Practical implications

This paper is addressed to policy makers who are concerned with corporate governance and the impact of corruption on AML systems. Future research would deal with the enforcement aspects of anti‐corruption laws.

Originality/value

The paper analyses commercial corruption for the purpose of understanding the corruption/money laundering nexus.

Citation

Chaikin, D. (2008), "Commercial corruption and money laundering: a preliminary analysis", Journal of Financial Crime, Vol. 15 No. 3, pp. 269-281. https://doi.org/10.1108/13590790810882865