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Criminal Profits, Terror Dollars, and Nonsense

NCJ Number
Crime & Justice International Volume: 23 Issue: 101 Dated: November/December 2007 Pages: 27-33
R. T. Naylor
Date Published
November 2007
7 pages
This article describes and critically analyzes the impact on financial institutions, their clients, and criminal enterprises of laws and law enforcement that target money laundering and the forfeiture of money and items resulting from criminal activities.
The United States was the first country to implement a more or less coherent follow-the-money strategy in dealing with criminal activity. The American model has five features. First, it targets "money laundering," which is the effort to introduce crime proceeds into legitimate financial transactions through regular financial institutions. Second, it involves a new set of reporting requirements whose purpose is to feed information to law enforcement agencies about the citizenry from the financial sector and increasingly to the national security apparatus. Third, these new regulations on financial reporting are used by police and prosecutors to find, freeze, and confiscate the "proceeds of crime." Fourth, the forfeitures go to the police forces that secure these proceeds, providing them with a financial incentive to increase the labeling of citizen assets as "proceeds of crime." Fifth, it seeks uniform financial regulations worldwide in order to address international terrorism and transnational organized crime. These five features of the "follow-the-money" strategy have caused a profound shift in the relations of "bankers," their clients, and police. Such government intrusiveness into citizen’s financial transactions might be tolerable if it actually achieved its objective of shrinking the relative size of the criminal economy; however, there is no accurate measure of whether this has occurred. Absent definitive proof of the cost-effectiveness of the American model for attacking the criminal economy and given its adverse impact on financial institutions and their clients, alternatives must be explored. This article offers some suggestions. 11 notes