Unger, Brigitte; van Waarden, Frans --- "How to dodge drowning in data? Rule- and risk-based anti-money laundering policies compared" [2013] ELECD 934; in Unger, Brigitte; van der Linde, Daan (eds), "Research Handbook on Money Laundering" (Edward Elgar Publishing, 2013) 399

Book Title: Research Handbook on Money Laundering

Editor(s): Unger, Brigitte; van der Linde, Daan

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9780857933997

Section: Chapter 29

Section Title: How to dodge drowning in data? Rule- and risk-based anti-money laundering policies compared

Author(s): Unger, Brigitte; van Waarden, Frans

Number of pages: 27

Abstract/Description:

In the past decade, anti-money laundering policy has switched both in the US and in Europe from a rule- to a risk-based reporting system in order to avoid over-reporting by the private sector. However, reporting instead increased in most countries, while the quality of information decreased. Governments were drowned in data because private agents feared sanctions for not reporting. However, unlike in other countries, this ‘crying wolf problem’ (Takats 2007) did not happen in the Netherlands, where the number of reports diminished, but the information quality improved. The reasons for this can be found in differences in legal institutions and legal culture, notably the contrast between US adversarial legalism and Dutch cooperative in formalism. The established legal systems also provide for resistance to change. Thus, lowering sanctions in order to reduce over-reporting may not be a realistic option in a legal system which traditionally uses deterrence by fierce criminal and private legal sanctions. Furthermore, a risk-based approach may not be sustainable in the long run, as litigation may eventually replace a risk-based approach again by a rule-based one, now with precise rules set by the courts.