Reputation Risk

The reputation of a nation is vital when it comes to foreign as well as local investment. If a country has a tainted record, something like the situation with Panama in the late 1970’s, there is not going to be much genuine investment which can in turn possibly lead to long term economic growth. Coupled with the fact that the laundered funds a nation accepts will most likely not be perpetual and continuous, and will be pulled out eventually causes an aggregate economic and financial problem.

If a nation has reputation that is affiliated with laundered funds, there will not be much legitimate investment into that economy, as there is a risk factor that is clearly larger than an economy which has larger regulations placed on its investments. There is a large loss of opportunity in the global market for an economy that has affiliation with laundering in this implication. The appeal of immediate investment of a large caliber can intoxicate a governmental body, however comes with a possible pollution of a country’s character along with possible outcome of an entire economic collapse.

Launderers tend to not look for longer term investments , rather short term ones that can be filtered into the economy in a certain period of time, the desire to have liquid assets is greater than the desire to hold more concrete investments. This can lead to a decrease in economic growth, and the crumbling of an economy. The magnitude is even increased for a country which has an affiliation with laundering that wishes to increase regulations, as there is a need for increase in governmental revenue in order to implement differing legal policies, so the effect is two fold. The country will loss a great amount of money invested into the economy due to laundered balances pulling out because of an increase in regulations coupled with the initial funding these regulation policies.