Fiddling - while the city burns!

Citation

Rider, B. (2009), "Fiddling - while the city burns!", Journal of Money Laundering Control, Vol. 12 No. 1. https://doi.org/10.1108/jmlc.2009.31012aaa.001

Fiddling - while the city burns!

Article Type: Editorial From: Journal of Money Laundering Control, Volume 12, Issue 1

In recent years it has become tediously commonplace to bandy about guestimates often graced by pseudo-mathematical analysis as to the extent of money laundering in the world economy or within particular domestic economies. Even our financial services authority, in an attempt to establish its intellectual credentials, has been running around trying to find academics who will take a stab at it all. Notwithstanding the complexities of definition, let alone assessment, as a simple lawyer I have often been bemused by these exercises. Money laundering is not the problem – it is what has created the illicit wealth and how it is to be used that is the problem! To focus on amounts – which are at best highly contentious solves nothing – or for that matter helps the FSA and other regulators exhibit that its strategies are cost effective. What is clear is that over the last few weeks even the most sensational guestimates of illicit wealth and its circulation have been utterly dwarfed by the amounts of money “lost” in the collapse of all significant markets. Indeed, to this extent the markets have punished those in possession or control of illicit funds far more successively than any proceeds of crime law.

While the causes of the present collapse of the markets and banking systems are many and varied, it is clear that there have been serious deficiencies in the regulatory structures and their administration. Readers of this journal and the Journal of Financial Crime will be well used to the grave concerns that have been expressed particularly in these editorial pages over many years. The choice of name and theme for the Twenty Sixth International Symposium on Economic Crime, held at Jesus College, Cambridge in the first week of September – “Banking on Trouble” had been selected the previous September. Obviously, not all of us were taken by surprise! The extent of the problems now facing the financial system were appreciated not only by odd academics but also the intelligence services. Reports were consistently ignored and concerns downgraded, particularly in the USA. Unlike other recent disasters, the collapse of our financial system is not a failure of intelligence, but a failure of government to listen – let alone do anything.

Writing in 1990 I commented:

[…] little attention has been given to the implications of internationalisation of the securities markets on what are essentially domestic structures of regulation […] even Professor L.C.B. Gower in his review of investor protection in Britain, barely mentioned the impact of internationalisation, devoting only a few paragraphs to the “off shore problem” […] this somewhat parochial approach is not confined to Britain […]

While the extent to which the current regulatory system is based on Professor Gower’s recommendations may be debated, few would question the significance of its relevance. Indeed, when the Securities and Investments Board was first established it appointed a 23-year-old Dutch law student to develop its overseas relations! Of course, things have improved and now rather more mature officials spend a lot of time going to meetings and fostering in particular our approach to regulation. Indeed, only a month ago, with the backing of the regulators and the Corporation of the City of London, a centre was established to promote as an international standard the excellent way in which we do things in Britain.

What is certain is that as Prime Minister Brown has already emphasised there will be a lot more regulation. Not only will the academic guestimaters who have been assisting in the quantification of the dark side have to find a new area, but also their colleagues who have made an industry out of governance. Those who have held sway in many recent debates, even on such issues as corruption that soft forms of control work in the face of greed and self-interest, are likely to be though less convincing. While it is certainly the case that the crash was not caused by self-dealing, this has contributed to lack of investor confidence and whatever the truth, governments will revert to what they do best – regulate. It is probable that the way in which we monitor and protect the integrity of the financial markets will change and in this we may well see a rather more realistic approach to the perceived ills of issues such as money laundering. Instead of an obsessive concern to generate information which is of dubious intelligence value, we might see rather more concern being focused on how wealth is used and the impact that it has on stability.

Barry Rider29th September 2008