Challenges of money laundering for sovereign states that uses the US dollar

Abstract

PurposeThere has been almost no scholarly work on the challenges of money laundering in sovereign states that use the US dollar as their currency of choice. This study aims to break the silence by highlighting how money laundering thrives in these situations mainly due to lack of or weak regulation of the US dollar by both the adopting states and the USA.Design/methodology/approachThe research depended on various secondary data sources. It is an adapted academic version of a shorter piece for a professional magazine for professionals in the Anti-Money Laundering (AML) Field.FindingsPreliminary findings show that due to the lack of regulation of the US dollar in dollarized economies, unscrupulous politicians, organized criminal gangs and multinational corporations among others can use a variation of the Black Market Peso Exchange (BMPE) to counteract money laundering controls and launder ill-gotten gains from crimes such as corruption, transnational crimes and tax evasion. Furthermore, ordinary citizens, migrant workers and small businesses avoiding stringent exchange rates are also using the black market, posing a further challenge to the law enforcement authorities.Practical implicationsThe practical implications of this paper relate to how the mutations of money laundering techniques, as they are adopted by criminals, to operate in different conditions are making it difficult not only to dictate but also to address using traditional AML techniques.Social implicationsBMPE has far reaching social consequences. Hence, this study is significant to instigate a search for solutions and for further detailed studies into the money laundering techniques in countries that do not have a sovereign currency.Originality/valueTo the best of the authors’ knowledge, this is the first paper to discuss the unique challenges faced by countries that have adopted the US dollar for domestic use. The paper also shows how dollarization is a modest reminder that money laundering technique such as the BMPE can evolve to counter the legislative and regulatory environment of the various jurisdictions in which they are laundered.