Two summers ago, Alida, a retiree from Western Maryland, was buying groceries when her card was declined. On the phone, a bank official explained that $10,000 had suspiciously been deposited into her account under her name, and that it was being closed as a result, she recalled.
“They said, ‘Lady, you’re a criminal,’” recounted Alida, whose last name is being withheld.
As she fought the bank for a year, Alida watched her credit rating sink until she found a lawyer, who determined that she was a victim of identity theft, and likely of money laundering.
Her case is not isolated. With increasingly diverse ways to launder dirty money—1980s-style drug dealers approaching tellers with cash-stuffed duffel bags have lost ground to electronic malfeasance—jittery banks are deploying aggressive countermeasures that can harm innocent accountholders, freezing their assets without explanation.
That’s one takeaway from a University of Maryland study published this month in Crime and Justice exposing banks’ stunning failures to thwart money laundering. Co-led by criminologist and Distinguished University Professor Peter Reuter, the study analyzed reams of financial documents and news articles to produce the first empirical assessment of the world’s anti-money laundering system since Reuter coauthored a similar study in 2005.
Among the study’s many other conclusions, Reuter found that banks’ policing efforts have become more sophisticated, expensive and intrusive, but there is no evidence that money laundering has declined since 1989, when the oversight system was established. Countries that pushed to create it—particularly the United States—haven't implemented critical elements of the plan, and while some banks overreach on enforcement tactics, others turn a blind eye to dubious transactions.
“The results of the global effort to control money laundering are somewhere between disappointing and wretched,” said Reuter, who has a joint appointment in UMD’s School of Public Policy and Department of Criminology and Criminal Justice.
The study is also co-led by Mirko Nazzari, a postdoctoral research fellow at Università degli Studi di Sassari, Italy, and described by University of Cambridge politics professor Jason Sharman as “a landmark in the broader study of money laundering.” It challenges scholars and policymakers to ramp up scrutiny: “This is a critical area of study that criminologists, economists and political scientists can no longer afford to ignore.”
Illustration via iStock
