After years of mounting frustration, the world is cracking down on countries that launder money and shelter funds for criminal enterprises. Several recent reports have identified primary offenders in the fight against money laundering. Sanctions are not yet on the agenda, but shame alone seems to be working: Six countries have already agreed to reform practices that won them places in the international spotlight.
Financial black boxes — places where funds enter and exit without scrutiny — are essential parts of criminal enterprises. Illicitly obtained funds have to be scrubbed clean of their origins or they are useless. Modern technologies that zip money around the globe at the push of a button have made it easier to launder funds. Some governments have learned that a willingness to look the other way when these transactions come their way can be very profitable.
It is estimated that about $600 billion in criminal funds is laundered every year. About 10 percent of that is thought to pass through Caribbean offshore centers. The Russian Central Bank reported that $74 billion left Russia and was deposited in offshore banks in 1998, a sum equal to about one-quarter of the country's gross domestic product. While $2 billion a day sounds like a lot, it is mere drop in the $1 trillion foreign-exchange bucket that is traded daily.