About money as water, meaning and numbers ... and why Beaufort Solutions exists

December 18, 2019

What makes you tick? Making money, or doing something meaningful? For us in Beaufort Solutions, both. We want Beaufort to be financially successful. But also we want to have a job that produces more than just financial benefits. For us, making sure that the Anti- Money laundering systems function better is, if not a higher calling, then at least something that contributes to the financial stability of our societies. It improve our ability to fight financial crime, and then by implication all kinds of ailments: Human trafficking, environmental problems, financial inequality amongst others. 

There is an opinion out there that the compliance workers of the world do not client sufficient value, that the current AML regime do not work, we need something completely different. And that the proof for that lies in the numbers.  So let's look at those numbers. 

Those are so large they move into the abstract realm. The most reliable figure for the extent of money laundering is between 2 and 5 percent of the Global GDP. 

How much, exactly, is that? That number corresponds neatly to the share of the world GDP contributed by the United Kingdom. So if you stand on a London street and imagine that everything in the United Kingdom, that is England, Scotland, Wales, Ulster and all those tiny populated rocks around in the oceans of the world, and every service, everything bought, made, taxed - the value of all that corresponds to the sums of money laundered through a year. 

The cost of hindering money laundering is equally impressive. About 10% of all operating costs of the worlds banks go to cover some sort of compliance or regulatory issue. Not all of that is related to Money Laundering, but it is a useful guide. 

But the one figure that is not so impressive is the result of all those efforts. Probably less than 1% of all the values cycled through the worlds money laundering machines are intercepted. Does this mean that the efforts are futile? 

We argue against that. The way we fight money laundering and corruption needs continuous improvement, but the result of the global efforts are clear. Because without it, we would all have been much worse off. KYC, ODD, the identification of ultimate beneficial owners and source of funds contributes to making money laundering more difficult and costly.  As getting access to the proceeds of crime is a fundamental reason for performing those crime in the first place, AML contributes to making our- all that drives financial transparency. It does not hinder money laundering completely. It makes it much more difficult. 

Hidden in a recent article about the reunification of Germany in The Economist lies a fact that is a  strong encouragement to everybody who is part of the AML Workforce. East Germany, while being the richest of all countries in the former East Block that since has joined the EU, has seen significantly higher growth than all the other former East Block countries. If all other things had been equal it should have been the other way around. 

Why is this so? They have seen minimal corruption and no growth of oligarchs. And this is down to having strong financial transparency, strong institutions and strong system. 

But money is like water. It tends to find the easiest route from the lake down to the ocean. If you strenghten the river bank at one place, it will push its way somewhere else. That is why AML is an arms race. 

But fighting AML have real, strong results, even though it is a continuous fight. 
It is a fight Beaufort Solutions is very proud to join. 

Sources: Estimating Illicit Financial Flows Resulting from Drug Trafficking and Other Transnational Organised Crimes, United Nations Office on Drugs and Crime (UNODC), October 2011Germans still don’t agree on what reunification meant, The Economist, October 31 2019