Trillions of dollars in fines, millions of suspicious reports, and over 30 years of global oversight — yet criminals still easily launder their profits. New studies, including report #FATF and research from the University of Chicago, show that the anti-money laundering system (#AML ) creates only an illusion of effectiveness, having turned into an expensive bureaucratic machine.
From drug dollars to global bureaucracy
In the late 1960s, the USA first faced a massive flow of drug dollars. The response was the Bank Secrecy Act of 1970, which required banks to monitor large transactions. By 1989, at the G7 meeting in Paris, the international Financial Action Task Force (FATF) was established — an organization meant to protect the global financial system from criminals.
Today, FATF brings together 40 countries and oversees more than 200 jurisdictions through regional branches. The organization has issued 40 recommendations that have become the international standard for AML. After the September 11 attacks, the mandate expanded to combat the financing of terrorism, and later tasks related to the control of the proliferation of weapons of mass destruction were added.
The principle of the system's operation seems logical: banks identify suspicious transactions and report them to national financial intelligence units (FIU), which analyze the data and pass it on to law enforcement. They must investigate cases and confiscate criminal proceeds.
Millions of signals, thousands of convictions
Reality turned out to be different. In the USA, the number of reports of suspicious transactions grew from 50,000 in 1996 to 4.6 million in 2023. Meanwhile, the number of convictions for money laundering has hardly changed: it was 827 in 1996, now it is 1,312 in 2023.
The effectiveness of the system has collapsed: if in the mid-1990s there was one conviction for every 63 reports, now there are two per 2,900. US financial intelligence is overwhelmed: one analyst handles over 14,000 reports per year.
European statistics look similar. The UK receives over 460,000 reports annually, Germany — 265,000, France — 215,000. Banks prefer to send reports 'just in case' because the penalty for underreporting is real, while for 'false alarms' it is not.
Confiscations at the level of statistical error
The situation is even worse with the seizure of criminal proceeds. According to the UN, only 0.2% of the total volume of laundered funds can be confiscated worldwide. Europol estimates this figure slightly higher — about 1% of frozen assets.
In the USA, the volume of confiscations ranges from $414 million to a record $1.6 billion in 2019. With an estimated annual volume of laundering at $715 billion — $1 trillion globally, these figures look like a drop in the ocean.
FATF honestly acknowledges: only 19% of countries demonstrate a high level of asset confiscation. Meanwhile, no one counts the social costs of the system.
Recidivist banks and toothless fines
High-profile scandals in recent years highlight systemic failures in AML. Danske Bank processed €200 billion in suspicious transactions from Russia through its Estonian branch. Westpac in Australia failed to report 23 million transactions worth $7.5 billion, including payments for child exploitation. TD Bank in the USA lost track of $18.3 trillion in transactions over a decade.
Every scandal ends the same way: multibillion-dollar fines, resignations of top managers, but no one goes to jail. Banks preemptively factor in potential fines into their business plans, viewing them as a cost of doing business.
HSBC laundered $800 million in cartel money — a fine of $1.9 billion. Deutsche Bank processed $10 billion through 'mirror trades' — a fine of $630 million. ING in the Netherlands received a record national fine of €775 million for missing hundreds of billions of 'dirty' transactions.
Simple schemes in the age of complex technologies
Paradoxically, laundering schemes have not become more complex over 30 years of AML development. Most criminals use primitive methods: spending cash, transferring funds between accounts, buying gold and real estate.
Professional money launderers exist, but they charge high fees — from 2% to 17%. Therefore, criminals often engage in self-laundering. Chinese networks offer 'mirror transactions' for just 2-5% fees, which are cheaper than traditional schemes.
Cryptocurrencies have created new opportunities. Chinese-Asian syndicates organizing cryptocurrency frauds caused $5.6 billion in damages to Americans alone in 2023. Regulators are trying to close loopholes with new rules, but criminals easily adapt.
The system lost focus
Initially, AML was created to combat drug cartels. The logic was simple: make laundering more expensive and risky, deprive criminals of capital through confiscations, and increase the likelihood of capture.
Today, the system has dozens of goals — from corruption to cybercrime and sanctions. The blurred focus reduces effectiveness. Meanwhile, the precise scale of the problem remains a mystery: estimates range from 2% to 31% of global GDP.
Mutual evaluations by FATF show formal compliance, ignoring real results. 97% of countries have low or medium effectiveness according to their own criteria. Scandals are often downplayed in reports, and years pass between audits.
The global AML system has turned into a bureaucratic conveyor belt that provides vast amounts of data to intelligence agencies but hardly hinders criminals. It protects the reputation of financial centers more than it fights real crime. Costs are rising, rules are becoming more complex, while effectiveness remains at the level of statistical error.
