The UK Government is 'talking up' money laundering figures to justify further legislation, according to a finance expert at Newcastle Business School.
Dr Jackie Harvey, who has gained access to asset recovery data made available by the Home Office, says there is absolutely no evidence to back up the data on the volume of money being laundered - but it suits the authorities to keep it as high as possible. Dr Harvey believes that as long as compliance officers are personally liable they will continue to report everything to cover their backs.
Dr Harvey, who has also analysed published annual corporate reports from a number of UK banks, including those fined for non-compliance, said that Government statistics are being "fudged".
"The UK Government quotes that 2.5% GDP is laundered, but where do they get these numbers from?," Dr Harvey said.
"The evidence I've seen from the Home Office and the Asset Recovery Agency suggests that criminals are far from financially sophisticated and that money does not appear to be entering the financial system on anything like the scale that is being talked about."
Decision making within this arena is based on "imagery and rhetoric", Dr Harvey added. "My research indicates that in order to justify expansion of legislation and the associated costs spent on anti-money laundering systems and procedures, the Government is using 'threat' rhetoric to imply a problem of significant magnitude that it endangers the entire financial system. But the facts don't back this up."
Dr Harvey, who presented her findings at the Cambridge International Symposium on Economic Crime on September 7, also questions the effectiveness of anti-money laundering legislation. "To what extent, over the period 1992-2005, do 660,973 SARs, 3088 prosecutions, 1272 convictions and £425.34 million in assets recovered justify the costs incurred of legislation?," she said.
"In the absence of any valid measure of performance the Government relies on these 'second best' measures of effectiveness. What is evident is that costs fall clearly onto the financial sector and related professions, whilst the benefits, aside from the so-called notion of 'integrity', fall to law enforcement.
Consider this - when it cannot be demonstrated that benefits exceed costs, would the removal of regulation actually impact on the amount of money laundering activity?"
Dr Jackie Harvey, Finance expert at
Newcastle Business School
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Date posted: 10.09.2007