Money laundering, Tax havens, Transparency and Board of Directors of Banks

Among other characteristics, money laundering notably occurs across national borders and primarily through banks, and mainly because banks, which are both legitimate and ‘ubiquitous’ financial services institutions, engage primarily in financial intermediation. We ask, are the levers of control over banks’ involvement in money laundering and other financial crimes, more effective when pulled from the outside by government agencies or is there a less arm’s-length role for banks’ board of directors, by way of appropriately nuanced corporate governance? To answer this question, we first attempt to understand money laundering, its antecedents, its support mechanisms, and then how it may be tamed; with emphasis on the potential productive role of banks’ boards. At a general and/or high level, we recommend that the intervention of banks’ boards must focus (i.e., insist) on: (i) the primacy of transparency and upholding of both real and perceived reputational capital of the bank, and (ii) ascertaining that their banks’ relations with corresponding banks distributed across several national borders or association with banks domiciled in notorious tax havens, are demonstrably above board.