Any economic policy requires a specific plan to be implemented during a particular period. The significance of that policy can be summarized as ensuring knowledge of the reality of the economic situation to develop it to a better position and status that contribute to the renaissance of the state and society in general.
Undoubtedly, money laundering operations negatively affect the mechanisms used in formulating the country’s economic policies.
As a crime, money laundering operations, in particular, take place on a large scale and are difficult to measure due to their secretive and discrete nature, which leads to a distortion of the economic data necessary for the formation of these policies, as mentioned above.
Due to the inaccuracy of the data and information needed to prepare these policies, they result in incorrect calculations that will not lead to achieving the objectives of these desired policies, such as overestimating inflation rates, tax, and unemployment.
Many countries, especially those with free-flowing exchange rate economies, faced numerous obstacles due to the influx of large amounts of laundered money resulting in the high exchange rate or the expansion of the monetary base.
In response, economic policymakers have wrongly responded to the data by adjusting fiscal or monetary policies, eroding the effectiveness of both financial and fiscal policies.
Moreover, work is currently under progress at the international level to develop the best mechanisms to counter the harmful impact of money laundering crimes on financial systems and the real economy.
Perhaps modern financial technologies used in economic transactions will make the innovators and developers of these technologies face a more significant challenge and policymakers.
But what is the most appropriate way at present to deal with the impact of money laundering on policymaking?
Sparing or allocating space for incorrect data is reasonable and safe when designing economic policy research responses.
These policy measures consider essential topics such as the role of prudential supervision of the financial systems in each state and regional and international cooperation between states and institutions.
In addition to forgoing greater diligence in setting, developing the legal framework, and determining the institutional obligations to implement the measures and procedures that would contribute to countering money laundering and combating its implications, it would ensure that the risks associated with this crime are reduced as well.
Dimah Talal Alsharif is a Saudi lawyer and legal consultant.
This article was originally published on Arab News. Views in this article are author’s own and do not necessarily reflect CGS policy.