Why London Becomes One of the Centers of Money Laundry, Essay Example

Introduction

Within the last two years, London has been assigned the title “The Money Laundering Capital of the World” due to the frequency with which this type of crime is committed in this municipality. When one conducts a simple browser search of “London” and “money laundering”, a long list of articles appear that describe recent perpetrators of this crime, and the list of examples is quite long.  Ultimately, the municipality has gained this title as a consequence of the leniency in law that fails to charge criminals appropriately and causes them to be more confident in their beliefs that they will be able to succeed with their intentions. It is essential to gain a better understanding of these illegalities and the context in which they have been committed in order to uncover the root cause of this criminal industry. There have been few academic studies that have attempted to analyze this pressing issue in addition to providing a reasonable solution that will restore law and order to London. This research paper will aim to determine why money laundering is a prevalent crime in London compared to other regions of the world. I hypothesize that the policies and laws currently in place in this city are not sufficient to deter criminals from participating in this crime. To determine whether this is the case, English financial law will be compared to financial law in other parts of the world with similar and lesser extents of money laundering activity.

In this essay, I will conduct a periodical search to determine the extent of money laundering crimes that have been committed in London. While this search will focus on more recent crimes, understanding the history of this criminal activity is also essential for a comprehensive approach. A literature review identifying economic professionals will be performed in order to generate a hypothesis as to why these crimes occur in general, in addition to a review of the law in London to determine why money launders feel safe in this municipality. To answer these questions, a case study comparison will be conducted to identify the main differences between areas that have high rates of money laundering and those that do not. Lastly, I will use the professional opinions of economists and lawyers to determine a solution to London’s white collar crime problem. In order to answer this question, I will also refer to crime deterrence schemes that have been implemented in other regions around the world.

My first goal is to define the money laundering problem in London compared to the rest of the world. It is essential to understand this problem in the context of other nations in order to more completely understand the local issue. The percent of crimes that are considered to fall into this category will be determined, and this value will be compared with statistics from other first world countries. Next, the amount of damages incurred from these crimes will be determined and evaluated similarly. The last analysis that will be completed to answer this question will be to determine the character and position of the specific criminals that have been caught committing these crimes. The professional careers individuals will be taken into consideration in addition to the likelihood that they are members of the public eye. These characteristics will be compared to money laundering crimes that occur in other major European cities. Ultimately, I hypothesize that the type of people who typically commit these crimes are under the watchful eye of the public, but are resourceful enough to avoid notice. Individuals involved in white collar crimes are those with significant enough capital in order to invest money into the success of these endeavors.

The next component of the project will involve a thorough examination of money laundering crimes that have recently occurred in London. The legal aspects of these issues will be analyzed in order to gain a greater understanding of the steps that these criminals performed in order to bypass the law. Furthermore, specific strategies used to coordinate these crimes will be discussed. This data will be supported by gaining insight into economist’s views as to why these crimes occur in the first place. It is possible that it is the law, economic climate, or a combination of these two factors that make London a reasonable climate for white collar crime. This component of the project will determine why London is a reasonable location for money laundering compared to other European nations both in terms of legal and economic measures. I hypothesize that it is a mixture of legal and economic standards that attract criminals to commit money laundering crimes in London. Knowledge of the relationship between law and socioeconomic characteristics has allowed me to derive these hypotheses.

Significant attention will be placed on the relationship of white collar crime and its consequences. Factors that will be considered are the percentage of financial crimes that are predicted to be detected, the relationship of the local law enforcement with the criminals, in addition to potential consequences for being caught in this process. Since many white collar criminals have financial power, there are tight networks between these individuals and law enforcement, as many may have backing in local politics. This phenomenon occurs because people in places of power often achieve power due to their relationships with industry and are able to maintain wealth as a consequence of these same relationships. Therefore, I hypothesize that these individuals are unlikely to be indicted for these crimes, and when this occurs, they are able to serve a small sentence. Previous examples of these occurrences indicate that individuals with political power or are considered well known to the public are able to strike plea bargains that decrease the strength of their sentences.

A final literature review will then be conducted to assess the financial law in place in other cities and nations in which money laundering is a less common crime. Economists will be cited in an effort to determine the economic principles that have been put in place and will be used to determine whether similar policies would succeed in efficacy in London. After a thorough review, suggestions will be made to law enforcement officials to determine how the money laundering problem could be alleviated. These suggestions are necessary because officials do not effectively act in accordance with the law. The benefits of removing white collar crime from London will be discussed. I hypothesize that reducing money laundering in London will help boost its economy and increase the likelihood of foreign investment in local businesses. Ultimately, reduction of this crime will allow the world to trust the economic stability of London more greatly, which will benefit England and the United Kingdom significantly.

Money Laundering in London

Money laundering crimes are committed frequently in London. Articles as recent as May 2014 report a series of financial crimes, claiming that the English establishment is to blame. This particular article claims the government has benefited significantly from failing to crack down on money laundering, and it intends to protect it to the extent that it will go to war with the United States in order to retain the money it has acquired from its association with Russian crime (Judah 2014). It is clear that the financial relationship that England shares with Russia is what it perpetuates its ability to remain involved in crime. Since this relationship is mutually beneficial to enough individuals, there is no call to action in order to reduce its prevalence.

The Extent of Money Laundering in London Compared to World Nations

According to the Ministry of Foreign Affairs of Norway, there are several international efforts in place to prevent money laundering. As a consequence, a series of organizations issued a survey to determine which nations are the most susceptible to this type of crime. The report generated information that culminated in the collection of suspicious transactions for each participating country. Interestingly, the United States exceeded the other nations by a significant amount. The data collected by the IMF collaboration is presented below in figure 1 (Ministry of Foreign Affairs 2009). While the data is present in a manner that makes the United Kingdom to appear innocent in money laundering, it is important to more carefully consider what this graph represents. Firstly, this graph lists suspicious transaction reports that have been sent to the authorities. Therefore, it accounts for only the reports that were submitted. In the case of a government that wishes to reduce the appearance of crime, it would likely work with authorities to ensure that information was not reported in a way that would make the nation look in violation of international foreign policy. Therefore, it is likely that the numbers provided in this report cannot be trusted.

“Suspicious Transactions” by Nation

Figure 1 The Ministry of Foreign Affairs report of number of suspicious transactions per country per 1 billion USD of bank assets for the most recent year

Furthermore, figure 1 demonstrates an interesting discrepancy between the United Kingdom and countries like the United States and Indonesia. These countries report significantly higher transactions that the other nations studied. Although the information presented in this graph is biased and therefore not completely reliable, it is simple to postulate that a difference in reporting is seen due to a deviation in policies when it comes to white-collar crime. The United States and Indonesia have a high influx of these criminals, but are likely to detect these crimes and take legal action against these criminals. In this case, assuming that London is in fact the money laundering capital of the world based on the opinions of both journalists and politicians, it would be so due to the fact that the government is less interested in preventing these crimes. This assumption will be proven by the end of this chapter. This is supported by the fact that the government reports less criminal activity, despite the common knowledge that the money-laundering rate in London is high.

Figure 1 is again undermined when one considers the major money laundering flows around the world. A majority of the world’s money laundering is centered around the United Kingdom, as shown in figure 2. Even though the United Kingdom government claims that the suspicious transactions that occurred within the nation were low, the data presented in figure 2 contradicts this claim (Walker 1998). It is possible to explain this discrepancy by postulating that this is due to the fact that laundered money circulates through London, but the crimes do not originate these. This is possible due to the relationship between the United Kingdom and Russia in this process, but this is difficult to confirm with certainty. It is important to emphasize the important of the Russia connection in this relationship because it is believed that a majority of these crimes are organized by Russian criminals, occasionally in partnership with English citizens. It is more likely that the government underreported these crimes to the IMF in order to enhance its image to the rest of the world’s leaders.

Money Laundering Flows Around the World

Interestingly, a report published by the UK Statistics Authority to determine the percentage of crimes that occurred in London failed to report the financial crimes that were committed (Chaplin et al. 2011). A literature search conducted in an effort to determine the precise percentage of money laundering crimes among other crimes committed in London was unavailable. Thus, it is difficult to demonstrate that money laundering comprises a large component of crime in London. However, when this aspect is considered along with the evidence that has been collected, it is possible that this was an effort by the authorities to draw attention away from this issue.

It is challenging to determine the amount of damages that have been incurred from financial crimes in England compared to other nations due to a lack of reporting. An investigation conducted by The Telegraph on The British Crime Survey determined that the overall crimes reported by British police and the British Crime Survey differed significantly (The Telegraph 2010). The results of this study are shown below in figure 3.

While the information presented in figure 3 is relevant to all crime reported in the country, it is essential to notice that police recorded crime has diminished significantly in the past few years. Since the information contrasts what is presented in the British Crime Survey, it is possible that many more crimes are being committed. Ultimately, this discrepancy demonstrates that crimes are not being committed less, they are being reported less. It is difficult to tell whether the police or the statisticians of the British Crime Survey are at fault, but it does call to the attention of analysts that accurate reports are not being generated. Thus, it is not possible to determine the precise degree of financial crime, in addition to the related monetary damages, that are prevalent in London or in the country as a whole.