The recent seizure of a cargo ship owned by JP Morgan, a vessel loaded with 20 tons of cocaine according to latest accounts, highlighted the risks of banks’ involvement in illicit activities, inadvertent or otherwise. And although U.S. authorities released the MSC Gayane after the owner, JP Morgan’s asset management arm, and the operator, Mediterranean Shipping Company, paid a $50M in cash and surety bond, the stain remains and this is not the only stain. Money laundering for drug cartels and moving funds for terrorists, arms dealers and dictatorial regimes are among the sins banks have accumulated through the years. However, court settlements and billions of dollars in fines often help major financial institutions avoid prosecution, conviction, and labels like ‘Drugbanks.’
Money Laundering Pandemic
According to a study conducted by the International Monetary Fund (IMF) and the United Nations Office on Drugs and Crime (Unodc) in 2017, up to $2.1T dollars is being laundered by criminals each year. Although it remains extremely difficult to estimate the exact amount, Unodc believes it’s between 2 and 5% of the global gross domestic product (GDP).
The advancement of financial technologies, including cryptocurrencies, has undoubtedly increased the speed and ease with which money moves around the world. However, the organization singles out developments related to the traditional financial system to explain why finding, freezing and forfeiting criminal assets have become harder. Unodc says the “dollarization” of black markets, financial deregulation, and the spread of financial havens are the main factors.
Many banks have invested in implementing expensive transaction monitoring systems that should by design detect suspicious behavior on the part of their clients.