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Mirror trades in the stock market, mirror trade in derivatives, abuse of correspondent accounts, or investing in real estate, which in many parts of world you can pay in cash with few or no questions asked.

How should we be fighting this?

In my studies I have found that, unless you have a well-considered plan for measures aimed at reducing crime, all you will accomplish is a push-down, pop-up effect: you may displace money laundering to areas where it are harder to monitor. Therefore effective punishment and the asset recovery, when you catch someone, is a lot more difficult.

Combating money laundering actually…helps criminals?

Merely going after cash transactions is rubbish: it’s just pushing the panic button. It does not reduce crime and creates incentives for people to become better criminals. 

«We catch the stupid ones and miss the most sophisticated»

Also, we catch the stupid ones and miss the most sophisticated (with the exception of some well-executed, proactive investigations): accidents and luck help boost crime and money laundering statistics.

What’s a more sensible approach?

Aiming at the detection and reduction of crime, which produces the illegal set of assets – a demand-side approach to crime control. Banks, intermediaries, and traders need to conduct proper due diligence about their customers and partners, understand with whom they do business, and report when something doesn’t make sense.

«Sanction serious offenders, don't just go through the motions»

Authorities must give guidance on how to identify and report, so everyone can understand what they are doing. Very important: make sure we all are focused on identifying and sanctioning serious offenders, rather than go through the motions.

But compliance has been the fastest-growing area of banking since the financial crisis.

The compliance industry has become in many instances a tick-the-box exercise. Professionals are mostly concerned with keeping their company out of trouble with the law, as opposed to understanding the ultimate purpose of due diligence and compliance.

«Sometimes compliance is reduced to going by the book and avoiding trouble»

Formalism gets in the way of value and goal-based compliance; some compliance is about going by the book and avoiding trouble with authorities versus concentrating on identifying problematic people, patterns and transactions, and reporting them to authorities, so that they can do their job.

Nikos Passas is professor of criminology and criminal justice at Northeastern University in Boston as well as the co-director of the Institute for Security and Public Policy. He is also visiting professor in Europe including at the Basel Institute on Governance. Professor Nikos is a lawyer and specializes in the study of corruption, illicit financial and trade flows, sanctions, informal fund transfers, remittances, terrorism, white-collar crime, financial regulation, organized crime and international crimes.