Quora Answer: Why is Money Laundering Bad for the Economy?

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.