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A generation ago not a single country had laws to counter money laundering; now, more countries have standardized anti–money laundering (AML) policies than have armed forces. In The Money Laundry, J. C. Sharman investigates whether AML policy works, and why it has spread so rapidly to so many states with so little in common. Sharman asserts that there are few benefits to such policies but high costs, which fall especially heavily on poor countries. Sharman tests the effectiveness of AML laws by soliciting offers for just the kind of untraceable shell companies that are expressly forbidden by global standards. In practice these are readily available, and the author had no difficulty in buying the services of such companies. After dealing with providers in countries ranging from the Seychelles and Somalia to the United States and Britain, Sharman demonstrates that it is easier to form untraceable companies in large rich states than in small poor ones; the United States is the worst offender.
Despite its ineffectiveness, AML policy has spread via three paths. The Financial Action Task Force, the key standard-setter and enforcer in this area, has successfully implemented a strategy of blacklisting to promote compliance. Publicly identified as noncompliant, targeted states suffered damage to their reputation. Subsequently, officials from poor countries became socialized within transnational policy networks. Finally, international banks began using the presence of AML policy as a proxy for general country risk. Developing states have responded by adopting this policy as a functionally useless but symbolically valuable way of reassuring powerful outsiders. Since the financial crisis of 2008, the G20 has used the successful methods of coercive policy diffusion pioneered in the AML realm as a model for other global governance initiatives.
J. C. Sharman is Sir Patrick Sheehy Professor of International Relations at the University of Cambridge. He is the author of The Despot's Guide to Wealth Management: On the International Campaign against Grand Corruption, The Money Laundry: Regulating Criminal Finance in the Global Economy, and Havens in a Storm: The Struggle for Global Tax Regulation, all from Cornell, and coauthor most recently of International Order in Diversity: War, Trade and Rule in the Indian Ocean.
"J. C. Sharman's The Money Laundry should be required reading for those interested in the politics of global governance. The book shows us the central importance of the anti–money laundering (AML) regime as a site of global power. Sharman has done some exceptional primary research, including using some very innovative (even audacious) methods of testing the AML system. This book is an engaging read, beautifully written in a way that is accessible to a wide audience."
Loretta Napoleoni:
"Well documented, well structured and with plenty of interesting examples, The Money Laundry takes readers through the complexity of the post-9/11 global AML policy drive.... Sharman not only provides a much needed constructive critique of anti-money laundering (AML) policy but shows how we can build on its few successful aspects."
Michael Levi, Cardiff UniversityCardiff University author of The Phantom Capitalists :
"The Money Laundry is an important work of extraordinary compass that turns an ultra-skeptical, informed lens upon the global anti-laundering movement. It poses some fundamental questions for the rationality of current approaches to serious crime control, both in the developed and, especially, the developing world."
Daniel W. Dreznerthe, Fletcher School of International Politics, Tufts University, author of All Politics is Global: Explaining International Regulatory Regimes:
"In The Money Laundry, J. C. Sharman burrows deeply into the effort to combat money laundering. Through a combination of exhaustive research, interviews, and the groundbreaking approach of direct testing, Sharman demonstrations the comprehensive and dysfunctional nature of the anti–money laundering (AML) regime. This well-written book will be of interest for anyone working on global governance or global political economy. The nuggets of detail, like the perversity of attacking Nauru's nonexistent financial sector and the incompatibility of spreadsheet software for AML purposes, are gold."
Tim Hall:
"In the context of work on the contemporary illicit, J.C. Sharman's book, The Money Laundry: Regulating Criminal Finance in the Global Economy, stands as a major contribution. Sharman sets out to look at the rapid and virtually unchallenged global diffusion of anti-money laundering (AML) policy and standards through the work of international organizations.... The book is written with an insider’s insight, coupled with an academic detachment.... It will be a shame if his work does not attract a wide audience."
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