AML POLICY
Foreign direct investments
and money laundering trends
T
his article examines the relationship between Foreign Direct Investments (FDIs) and money laundering
on a global scale. There has been debate
about whether money laundering centers
attract foreign investments for the purpose
of concealing the illicit origins of funds or if
there is a global trend of decreased foreign
investments to money laundering jurisdictions with lax money laundering controls
due to the reputational risks that the money
laundering centers pose. The examination of
this issue will be based on the FDI literature
Money Laundering as Motives for FDIs and
on an analysis of nearly 60,000 FDI projects
that took place globally from 2003 to 2008.
Illicit money flows as motives for FDI
There are a few empirical studies in the FDI
literature that focuses on the illicit money
flows as a determinant of FDIs. One of the
58 ACAMS TODAY | MARCH–MAY 2011 | ACAMS.ORG
most outstanding working papers on this
topic in terms of its conclusions is Illicit
Money Flows as Motives for FDI by Joseph
C. Brada (Arizona State University), Zdenek
Drabek (World Trade Organization and M.
Fabio Perez (Wilfrid Laurier University),
which examines the role of FDI in facilitating
money laundering and capital flight using
transition economies’ FDI outflows show
the extent to which FDI is caused by these
motives. Their finding is of high interest, as