The world’s largest, most ineffective anti-money-laundering system
Key topics:
AML/KYC systems are costly, intrusive, and largely ineffective globally.
Compliance prioritises process over actually stopping criminal flows.
Citizens and businesses bear economic, privacy, and liberty costs.
Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.
Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.
If you prefer WhatsApp for updates, sign up to the BizNews channel here.
By Dr Brian Benfield*
“The largest, most ineffective bureaucratic apparatus in recorded history”
Money laundering rarely manifests so literally, yet in Thailand, police recently discovered millions of Baht hidden inside a washing machine. This grotesque scene is emblematic of the global anti-money-laundering apparatus – a system that spins endlessly, expends vast resources and political capital, and achieves well-nigh zero. This is according to a growing number of academic studies, some of which are quoted below.
Across the world, headlines trumpet enforcement actions: UBS fined in Italy, New Zealand finance companies penalised for administrative failures, Australia’s Crown Casino exposed as a conduit for some illicit cash. Yet any metric of genuine success, of disruption of criminal flows, is illusory. The Anti-Money Laundering / Know Your customer (AML/KYC) system counts alerts, reports, audits and fines, but not the meaningful interception of illicit capital. According to the United Nations Office on Drugs and Crime (UNODC), less than 0.1% of illicit financial flows are seized and frozen globally. In South Africa, two decades after the implementation of the Financial Intelligence Centre Act (FICA), the result is no different: A grand compliance theatre with risible results.
To understand this systemic failure, we must return to 1989 when the G7 established the Financial Action Task Force (FATF). Its ostensibly noble initial purpose was the straightforward combating of the laundering of narcotics proceeds. By the 1990s KYC had been expanded “to counter drug cartels” and post 9/11 to “combat terrorism financing”. After the 2008 financial crisis the rhetoric shifted once again, this time to include “preserving the integrity of the global financial system”. Today, these tumescent frameworks have metastasised to every corner of Western influence and are said to target corruption, tax evasion and “beneficial ownership transparency”. Suspected monitoring of tax avoidance measures is however, not openly said to be an objective of what has become a global bureaucratic leviathan.
Each new crisis produces a new justification. Each justification widens the net. Each expansion moves the regime further from its original moral purpose, transforming a scalpel for criminal activity into a dragnet ensnaring almost every ordinary citizen. This evolution, critics argue, is not merely accidental. It reflects bureaucratic self-interest and the entrenchment of global surveillance mechanisms that privilege process over outcome.
The human and economic price of compliance is staggering. Globally, the private sector is required to spend hundreds of billions of dollars annually on AML compliance, whilst states spend derisively little. Every bank, insurer, broker, attorney, accountant, and fintech firm now employs armies of compliance officers, auditors, consultants and software contractors. Mistakes invite fines for often vague, ever-changing rules. These are structural, permanent costs that are not one-off and add to the cost of doing business, ultimately passed on to customers and to already strained national economies.
Yet the empirical record is catastrophic. UNODC estimates that 2–5% of global GDP, roughly $1,5 to $3 trillion annually, is laundered. It laments the fact that these figures have remained unchanged since 1989. In South Africa, FICA has neither dismantled illicit networks nor reduced high-level corruption. The Gupta brothers and a large contingent of others identified by the Zondo commission illustrate the futility of compliance-heavy regimes. What has been achieved is the creation of the largest bureaucratic apparatus in recorded financial history; hugely costly, massively intrusive and almost completely ineffective.
This analysis comes from numerous internationally renowned academics: Dr Peter Alldridge (UK) critiques AML law as conceptually effete. He points out that definitions of “benefit” and “proceeds” are at best vague, and legal expansion frequently occurs without revisiting foundational assumptions. Dr Paul Michael Gilmour highlights the structural focus on the “what” rather than the “who” or “where” of laundering, leaving systemic vulnerabilities unaddressed. Dr Verena Zoppei, through a German lens, demonstrates that much AML effect is symbolic rather than substantive. Dr Ronald Pol describes AML as “the world’s largest yet least effective policy experiment”. These laws keep authorities occupied with administrative busy-work, he says, while criminal networks adapt unhindered.
The moral and social cost
The tragedy extends beyond money. AML laws have a moral and social cost. They have quietly dismembered the personal privacy and financial liberty people have sought for centuries and almost achieved. Every citizen is today presumed suspect, subjected to endless disclosure of financial, residential and relational data. Information is duplicated, transmitted across borders, and often collected and disseminated without its owners’ knowledge or consent.
Of this one may be certain: Once this treasure trove of personal data is in the system, abuse and misuse by a wide variety of actors is as inevitable as death and taxes.
We have already seen chilling precedents. In Canada, bank accounts of peaceful protestors were frozen. Across Africa, journalists and opposition figures have been blacklisted under opaque compliance regimes. In numerous cases politicians have surreptitiously exploited these rules for personal or partisan advantage. What was designed to prevent crime has become the very infrastructure for surveillance and abuse.
What once required a judicial warrant now requires a mere spreadsheet. This is not financial integrity; it is the normalisation of state intrusion.
Collateral damage in Africa and the developing world
The economic consequences are devastating, particularly in Africa. The World Bank has documented how “de-risking”, the withdrawal of banking services from clients or entire countries deemed inconveniently risky, has severed migrant workers from remittances, obstructed NGOs in fragile contexts and suffocated start-ups, the engines of economic and employment growth. Carol Williams (South Africa) and William Gaviyau & Athenia Sibindi document how these global AML/CTF frameworks are unevenly implemented, creating a disconnect between law and real-world capacity.
In cash-based economies, typical AML regimes are poorly fitted, and their limited monitoring capacity severely undermines effectiveness (Mynhardt & Marx, West Africa). Erasmus & Bowden show that South African AML laws have failed to adapt to cryptocurrency and other new laundering vehicles, leaving significant gaps.
The result is perverse: The law-abiding are punished with cost and complexity. The corrupt adapt and thrive. Start-ups, NGOs, and remittance networks: entities AML is ostensibly designed to protect, bear the brunt of cost, inconvenience and lost time. AML regimes, in effect, create a fortress against the innocent.
Why does this manifestly expensive and ineffective system persist? Because AML frameworks have become instruments of financial geopolitics. FATF standards, enforced through public “black” and “grey” lists, compel over 200 jurisdictions to adopt them. Compliance is not justified by efficacy, but by access: Conform, or be financially isolated. Through this mechanism, US and European powers project extra-territorial influence over global finance, entirely subordinating local law, culture and circumstance. Compliance has shifted from crime prevention to citizen control and global hegemony.
In this regulatory theatre, every local regulator and private institution becomes an unwitting thespian. Nations, financial institutions and ordinary citizens are enlisted into a global monitoring apparatus under the guise of crime prevention, while the real goal is surveillance, influence, coercion and reputational leverage.
Meanwhile, criminal networks seamlessly adapt and stay several steps ahead. Trade-based laundering, cryptocurrencies, opaque corporate structures, and offshore intermediaries routinely evade detection. Banks, insurers, lawyers and brokers demonstrate procedural compliance, filing millions of possible alerts that regulators cannot possibly meaningfully process. As Samuel Aidoo and colleagues (2025) note, AML regulations struggle to detect, deter, or even disrupt illicit flows. The measure of success has thus shifted from reducing crime to the volume of reports filed. The moral logic of enforcement has given way to mechanical “tick-box” compliance. The show of compliance is now more important than the system being shown to be effective.
The cumulative empirical evidence is overwhelming: Failure across the board. Less than one-tenth of one percent of criminal proceeds are seized. AML/KYC and FICA have not disrupted criminal finance, dismantled global laundering networks, or made the world safer or more transparent. What they have achieved is the erosion of individual liberty and privacy, colossal economic harm, diversion of productive resources, a framework for political and economic fraud, the introduction of cyber and criminal risk, and the institutionalisation of suspicion as the default financial condition.
Compliance without impact is not virtue; it is vanity.
The answer is not deregulation but intelligent, proportionate reform:
Risk-Based Oversight: Focus on genuinely high-risk entities and transactions, not ordinary citizens or start-ups.
Data Sovereignty: Individuals must control their digital credentials, permitting verification without surrendering ownership.
Technology-Driven Enforcement: AI and analytics can discern genuine risk patterns, replacing endless “busywork”.
Harmonisation and Cooperation: International standards must reduce duplication and focus on enforcement effectiveness.
Moral Reorientation: Compliance must serve commerce, not impede it. It must protect citizens, and ensure respect for liberty and privacy.
Until G7 policymakers and the FATF find the intestinal fortitude to confront the empirical weakness of the system, billions will continue to be squandered to catch a fraction of criminal capital, whilst the hard-won liberties of advanced civilisation are eroded. The washing machine in Thailand is a metaphor for the system itself: Endlessly spinning, consuming vast resources, leaving the stain, criminal proceeds, untouched.
It is time to abandon illusion and embrace evidence, proportionality and liberty. Only then can finance regain its integrity, regulation regain its purpose and the citizen regain the presumption of innocence.
The AML experiment has delivered bureaucracy, not justice. Process, not impact. The world must decide whether it values ritual compliance or meaningful enforcement. Compliance without effectiveness is not a virtue. It is a grand, vainglorious illusion.
References:
UNODC. Global Report on Money Laundering, 2020.
Pol, R.F. Anti-Money Laundering: The World’s Least Effective Policy Experiment, Policy Design and Practice, 2020.
Alldridge, P. Money Laundering Law: Forfeiture, Confiscation, Civil Recovery, 2003; What Went Wrong with Money Laundering Law?, 2016.
Gilmour, P.M. Re-examining the anti-money-laundering framework, 2022.
Zoppei, V. Anti-Money Laundering Law: Socio-Legal Perspectives on German Practices, 2017.
Williams, C. Critical Shortcomings in South Africa’s Anti-Money Laundering Legislation, 2017.
Gaviyau, W., Sibindi, A.B. Global AML/CFT Regulatory Framework: A Critique, 2023.
Mynhardt, R.H., Marx, J. *Anti-Money Laundering
World Bank. Report on De-Risking and Financial Inclusion, 2018.
Canadian Civil Liberties Association. Press Release on Financial Freezes during Freedom Convoy Protests, 2022.
Samuel Aidoo, Adriano Venditti, Hartmu Döhner et al. – “Evaluating the Effectiveness of AML Regulations: A Critical Review” (2025) ResearchGate.
*Dr Brian Benfield, a retired professor in the Department of Economics at the University of the Witwatersrand.
*This article was first published by The DailyFriend and is republished with permission.