University Business Law Report: Money Laundering and Consequences

This report delves into the multifaceted issue of money laundering, defining it as the concealment and legitimization of funds derived from criminal activities. It highlights the diverse levels of sophistication involved and its significant role in organized crime. The report meticulously examines the adverse impacts of money laundering on a nation's economy, emphasizing its detrimental effects on financial sectors and overall economic growth. It discusses how money laundering redirects funds from legitimate investments to illicit activities, potentially leading to financial instability and loss in affected industries. The report further explores the damaging effects on financial institutions, the artificial inflation of prices due to excessive payments, and the distortion of market dynamics caused by bulk purchases. It concludes by emphasizing the negative consequences of money laundering, including its encouragement of illegal businesses, promotion of corruption, and its potential to undermine political institutions, making it a critical issue in the realm of business law.

Running head: BUSINESS LAW
BUSINESS LAW
Name of the Student:
Name of the University:
Author Note:

1BUSINESS LAW
MONEY LAUNDERING:
Money laundering refers to the concealing, disguising as well as legitimizing the source
and ownership of any some of money which is used in for committing crimes (Hicks and
Graycar 2019). It is a very diversifying act which is conducted at different sophistication levels
and it plays a significant factor in organized crime.
Money laundering has various ill effects on the economy of the nation and it is highly
hazardous to the economic growth (Villa, Misas and Loayza 2016). It directly affects the
financial economy together with financial sector. It affects the economic growth pace of the
country negatively. Funds from successful and healthy activities are redirected to dangerous
activities, from international productive and healthy investments to the criminal investments.
When the money launderers do not find any industry or company suitable for their activities,
they try to abandon it resulting into potential loss in these types of companies or industries which
indirectly affect the economy (Bajada 2017). It also has a damaging impact on the financial
bodies that play a significant role in the economic growth. Moreover the money launderers are
interested in investing their money in an illegal manner to show it in a legitimate manner. Due to
this, they are eager to pay in excess for the purchases they made exceeding the actual value. This
causes disequilibrium in prices due to an increase in the price artificially. They are further
involved into bulk or huge purchases because of huge availability in funds affected the interests
and businesses of honest buyers. For hiding their illicit money, they often make payment much
more than the original value creating an artificial increase in the rate of purchase due to which
the honest buyers find them unaffordable.

2BUSINESS LAW
Money laundering is often described as an evil act as it has many negative impacts which
are discussed as follows. It encourages illegal businesses for which legitimate businesses are
highly affected. Many legal businesses turn less attractive for the investors due to their doubts
that they might be involved in money laundering. This occurs mainly because if an investor gets
involved into illegal activities, other agents connected with the business will mistrust as well as
alienate the investments. Corruption together bribery is not only promoted by money laundering
in the financial institutions but also in other economic zones. It directly affects the financial
bodies where illegal income is processed. Moreover, it also acts as a multiplier of crimes as it
gives economic strength to the criminals (Harvey 2019). The criminals use their illicit incomes to
commit crime. Lastly it also inflicts ill effects on the political institutions. If a money launderer
succeeds to retain an important part of economy, he will try to enhance his political control
thereby extending his goals. Such goals are sought by bribery, corruption or interfering with the
election procedures and votes that can affect the democratic process of the country. From this
discussion, it can be concluded that money laundering can be aptly called as an evil act.

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References:
Bajada, C., 2017. Money laundering activities in Australia—an examination of the push and pull
factors driving money flows. In The Changing Face of Corruption in the Asia Pacific (pp. 127-
147). Elsevier.
Harvey, A.I., 2019. A New Crime Type: Defining Money Laundering. In Anti-money
Laundering and Counter-terrorism Financing Law and Policy (pp. 58-98). Brill Nijhoff.
Hicks, D.C. and Graycar, A., 2019. Money laundering. Cambridge University Press.
Villa, E., Misas, M.A. and Loayza, N.V., 2016. Illicit activity and money laundering from an
economic growth perspective: A model and an application to Colombia. The World Bank.