“Compliance and Non-Compliance with the FATF Recommendations: Policy Transfer in Areas of Limited Statehood” explains how national anti-money laundering (AML) policies develop in relation to the international policy standard of the Financial Action Task Force (FATF). The literature holds that both money laundering and AML policies are highly relevant for public security, integrity of the international financial system as well as for anyone interested in effective international regulatory regimes. Money laundering is mostly linked to profit oriented transnational organised crime. Estimates of its total annual volume stand at around 3.6% of global gross domestic product (UNODC, 2011, p. 9). Many observers therefore see preventing and controlling money laundering as a worthwhile investment in combatting organised crime. The FATF’s approach of AML policy as financial market regulation makes it a relevant factor in international financial market governance. The interest of scholars of international regimes stems mainly from the FATF’s alleged high capacity to create rule compliance, despite the voluntary nature of its 40 Recommendations.
Yet the available quantitative data on compliance with the FATF Recommendations at country level shows a picture that does not support the narrative of an overall highly effective compliance regime. There is plenty of empirical variance between countries that has yet to be explained. Measures for levels of statehood, understood as “the ability of the state to enforce collectively binding decisions” (Börzel & Risse, 2010, p. 118), reveal a wide scattering of FATF compliance, particularly in the middle-ground between countries with highly consolidated statehood and those with particularly low levels in closely related policy fields like public security and bureaucratic capacity.
This work engages with this observation by developing a bespoke analytical toolkit of AML governance configurations that takes account of actors and institutions as well as governance as a process shaped by power differentials. In this approach, the state is only one of many potential actors that influence policy transfer from the international to the national level. These actors can either apply hierarchical or non-hierarchical governance modes. These are expected to be more or less effective in fostering compliance, depending on their institutional embeddedness and resource endowments of governance actors. In addition to the state, in particularly financial and non-financial market actors appear as additional key AML governance providers that are at the same time recipients of governance services.
The resulting picture is a strongly intertwined mesh of external and domestic actors, institutions and power sources. To adequately reflect this in a generalizable model of a governance configuration explaining AML policy transfer that is specific for areas of limited statehood, the existing typology is expanded to include: Transnational Delegation. This model acknowledges the empirical result that AML governance is transnational in nature by involving public and private actors, both external and domestic. They are woven together at the same time by organised crime using transnational financial markets to launder their money as well as the attempts of different actors to provide AML governance services for this market. AML might thus be understood by definition as an area of limited statehood as long as no transnational state exists that has “the ability to enforce collectively binding decisions” (Börzel & Risse, 2010, p. 118) on transnational financial markets. While the FATF delegates AML governance to state and non-state actors, it lacks hierarchical enforcement power for this task. It depends on governance provision by third parties in order create a credible shadow of hierarchy. What emerges instead as a function equivalent to statehood is a distinctive mix of hierarchical and non-hierarchical governance modes that can lead to a more complete policy transfer. This seems most promising by connecting transnational financial market regulation with domestic organised crime centred enforcement policies.
