Money Laundering: The Global Financial Crisis

There is disturbing evidence that money derived from the illegal sale of drugs was one of the primary means through which some banks remained solvent through the global financial crisis of 2008. According to Rajeev Syal of The Guardian, “Inter-bank loans were funded by money that originated from the drugs trade and other illegal activities,” resulting in the rescue of banks that otherwise could not have stayed solvent. Although this might seem to be a benefit for society, it does not exculpate the violent crimes which occur as the result of the drug trade. Unfortunately, this means that there may be an incentive not to be fully vigilant about the sources of money still necessary for some banks to thrive and underlines the dark side of the banking industry. It may also cause banks to subtly pressure for less regulation of money laundering in general, since this is what the drug trade is dependent upon. The insecurity caused by the financial crisis may make some banks wary of regulation of any aspect of investment which has helped them extricate themselves from the difficulties they experienced in the wake of the crisis. It could also be argued that from a regulatory perspective, the primary focus of most governments was, after restoring banks to solvency, making sure that the conditions which gave rise to the crisis in the real estate market did not occur again. This could have reduced some of the pressure to enforce existing anti-money laundering statutes and creating more stringent ones. The 2008 recession also had a global effect, and the required cooperation from nations from which drug money comes may have been less forthcoming as governments were more concerned with restoring the government and society to a state of functionality, versus working with other nations and international law enforcement to spend the necessary funds and efforts into scrutinizing drug crime and money laundering.

Bibliography

Rajeev Syal, ‘Drug money saved banks in global crisis, claims UN advisor,’ The Guardian (London, 13 Dec 2009) accessed 13 September 2019