The following is my answer to a Quora
question: “Why
is money laundering bad for the economy?”
The purpose of money laundering is to
place funds into the economy under the guise of legitimacy. Money laundering is not necessarily bad for
the economy. Money goes into the
economy, and the GDP grows. It makes its
way back into society.
Money laundering is bad for society as a
whole, since it incentivises criminal enterprise. Money laundered from tax avoidance deprives
the government of revenue even though it benefits the wider economy. Money laundered through organised crime funds
further organised crime, which directly affects society.
Another purpose of money laundering is to
disguise the source of funds. This is
dangerous, since it allows entities, both state and non-state actors, to fund
low intensity conflicts and terrorism. It
is used as a means to corrupt public servants and others. Thus, while the economy grows due to the
influx of funds, the ordinary citizen will see no benefit from it, since the
wealth eventually concentrates at a certain, upper strata of society.
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