Issues In The Legitimate Economy
There are also distinctive adverse microeconomic effects that happen due to money laundering throughout an economic sector. These effects throughout the private sector are mainly caused due to increasing investment in small, high-risk front companies. The front companies can provide goods and services at a lower market rate than other trade in the same industry. This causes legitimate businesses to need a change in pricing mechanisms, causing a loss of revenue throughout the private business sector. Due to the amount of funds at the disposal of the illegitimate companies, there is not a real genuine concern to make a profitable stance. They can subsidize their companies in order to cover up illegal gains, not to generate legitimate profits. This in turn decreases economic growth in a country because there is not a authentic production sector coming to fruition which could recreate investment in the business sector.
Due to the fact that the companies that are funded by illicit gains can offer prices that are way below the market level, they have a substantial advantages over other firms. This can be extreme, making it so that these companies can actually offer prices that are lower than what the product costs to manufacture. This competitive advantage can cause large scale economic implications, undermining aggregate legitimate business sectors.