Introduction To Economic and Financial Responses

With the financial significance that money laundering holds, it is clear that there are going to be multiple economic effects. Some of these affect the microeconomy, whereas others are a macroeconomic concern. All of these effects are imperative, and without understanding the economic consequences of laundering, the full matter can not be completely understood.Money laundering can firstly put currencies as well as interest rates into a prevalent disarray, causing large economic instability. This can be focused onto a specific country, although more likely than not, the laundered monies will eventually flow into the global economy, affecting world-wide financial systems. Therefore, there can be outsized concerns caused between foreign economies different than the country where he monies originated from.

Some countries are more open for laundered investment, specifically countries that are desperately seeking any nature of venture. The most prevalent markets for this are emerging economies, ones that are not completely developed as of yet and are welcoming to extraneous investment. Countries that are more open to foreign investment and are just beginning to enter the global economy are clearly the most pursued for laundered investment, as they will not have strict laws concerning investment.

There are also clear examples in history of countries that have established laws and regulations that deterred laundering, however fell victim to corruption.

Lately, there has been more attention being paid to laundering. With the public taking more notice of it’s existence, there has been an increase in policies to decrease it’s prevalence in multiple countries. Law enforcement agencies (mainly governmental) have been making legal strides to combat it with new methods, however not evolving as quickly as the laundering process has. The issue is agencies are concerned with extinguishing present methods, however when they finally achieve a way to cease it, the process has already evolved into a more efficient routine.

Due to the increase in prevention policies, beginning markets are a prime candidate for a money laundering base, they most likely do not have the funding to support prevention and regulation policies (please refer to graph). However, due to the economic situation of many emerging markets, it makes them a unstable environment for this type of activity to reside in. For a majority of them, due to the unsound economic scenario, the problems which money laundering causes are amplified and cause major financial breakdowns throughout the entire economic sector of the country.