The emergence of soft law has proved to be more effective than hard law in tackling the laundering of illicit flows of moneys across national borders.

1. Color scheme appropriate for class room presentation only

2. Treaty of Osnabruck: May 15, 1648
(Ended 30 Years’ War)
Treat of Munster: October 24, 1648
(Ended 80 Years’ War)
Ecclesiastical power vs. Temporal Power
Establishment of the nation- state system
Westphalia II (New Order) 450 years later?

3. “Five crimes of globalization”, viz. illegal trade in
drugs, arms, intellectual property, people and
money.
“Like the war on terrorism, the fight to control to
control these illicit markets pits governments against
agile, stateless, and resourceful networks
empowered by globalization.” (CM Naim)
“A new world order is emerging, …………. The state is
not disappearing, it is disaggregating into its separate,
functionally distinct parts…………………..are
networking with their counterparts abroad, creating a
dense web of relations that constitutes a new,
transgovernmental order.…………..” (Anne-Marie
Slaughter)

4. Chinese merchants, 3000 years ago,
converted their gains from trade into
readily movable assets, moving cash out
to invest in other businesses and trading
at inflated prices to expatriate funds.
(Sterling Seagrave: Lords of the Rim )
Basic principles remain the same – only
professionalized and globalized
Transition from “hand wash to
launderette” (Savona)

5. CM Naim: Extent from $800 bn. to $1.5 trillion per
annum
Illicit flows come from drugs, organized crime,
opaque financial transactions, accounting jugglery
and price manipulation
Goes through 3 stages – placement, layering and
integration
Higher insurance premia because of fraud, for
public works where corruption is endemic,
individual customers, or the institution itself,
defrauded by corrupt individuals within the
institution, reputational loss of FIs and instability
and low or no productivity + conspicuous

6. What is the role of international law
in collective legitimation for system
transformation in the context of the
anti-money laundering movement?
How does international law create
constitutive and transformative
practices at the meso and micro
levels?
Are such transformative practices
always effective?

7. Qualitative information
Adaptation of the Sandholtz
& Sweet constructivist model
Three levels related to hard
and soft law
Implementation reviewed in
reference to 3 major issues

8. Journals
Reference books
FATF, FSRB, OECD, G-7/8,
UNODC, US Govt. publications
Newspapers & magazines
Internet

9. INTL. FORA
HARD LAW INSTITUTIONS
SOFT LAW
GOVERNMENTS
DOMESTIC LAW INSTITUTIONS
POPULAR WILL

10. MACRO LEVEL MESO LEVEL
HARD SOFT
LAW LAW
MICRO LEVEL
* Sandholtz & Sweet

11. Multilateral
Macro
Meso
Hard Law Soft Law
Micro
Vienna Palermo
Conv Conv FATF FSRBs
UNSC G-7 1990 Egmont
Resolutions Convention
OAS, etc Group
G-7 2001 Basle IAIS
Directive Principles AML Notes
Domestic
Law Bilateral
AML Law Courts Soft Law Hard Law
Criminal Joint Other
Legislature Commissions
MLATs
Law Treaties
Governments

12. Positive Negative
Increase in seizures Mainly US-led and confined
to Latin America
Frozen bank accounts & Confiscation growing slowly
cash seizures leading to as all governments are not
higher laundering cost cooperating
Closer controls enforced by Phenomenal growth in # of
FATF OFCs and low cooperation
by host countries
More regulation in havens Developed countries find it
by peer pressure difficult to dismantle
instruments such as flags of
convenience
Est. of Kimberley Poor controls mainly on
Certification Process account of popular demand
UNGA Resolution Poor awareness of origins

13. Westphalia system took over 450 years to
grow and stabilize
Institutional infrastructure for enforcement
and law-making weak
Body of laws for non-state criminal actors in
infancy
Capacity building in originating nations will
take several decades
Increasing awareness of transnational
crimes limited by various other parameters
such as literacy, political regimes, etc.

14. Enforcement machinery in non-
developed nations skeletal and poorly
trained
Huge returns, particularly on drugs,
keeps it a very attractive proposition
Synchronized international cooperation
at all levels gradually spreading
Therefore it may be too early to pass
judgment on the success or failure of
either hard law or soft law or both