Money laundering is highly damaging to the nation’s economy and in particular, to financial institutions. It is harmful to economic growth and promotes further crime and corruption. When money laundering is successful, more crime and violence occurs as the criminals are making money and getting away with it.
Money laundering also creates volatile changes in money demand, as well as fluctuations in exchange rates and capital flow across borders. Therefore, it is not just the national economy that suffers but financial crimes have far reaching consequences for global markets too.
Problems experienced by the financial sector have a knock on effect on the rest of society. One area where this is most obvious is income distribution. When one group becomes wealthy with black money, the other groups in society will suffer from a decrease in income and the social damage this leads to. This, in turn, increases the tendency to enter a life of crime purely because it is so profitable. For details on AML IDENTITY VERIFICATION to fight the harms of money laundering, visit w2globaldata.com/regulatory-compliance-solutions-and-software/aml-id-checks
Risk is experienced by financial institutions due to changes in their assets and liabilities. When money laundering cases are identified, the company will attract reputational harm, come under increased pressure of regular auditing and attract the attention of public authorities.
Banks are made up of both domestic and foreign capital which ultimately benefits the economic development of the host nation. Money laundering directly harms this development, as well as undermining customers’ trust. Therefore, the stability of the economy and the public’s trust is eroded over time.