The research team assembled an original panel dataset covering 31 FATF member countries and regions, including Australia, China, Germany, India, Japan, the United Kingdom, and the United States, during the third round of FATF mutual evaluations from 2003 to 2015. Crime figures were drawn from the United Nations Office on Drugs and Crime database, Eurostat’s Crime and Justice Database, and official national statistical yearbooks, spanning seven core categories such as murder, assault, rape, robbery, theft, burglary, and motor vehicle theft, plus eight additional predicate crimes including drug offenses, corruption, fraud, forgery, extortion, kidnapping, trafficking in stolen goods, and environmental crimes. Compliance levels were quantified through a novel MER-AML index, built by converting the ratings that FATF assessors assigned to each recommendation, compliant, largely compliant, partially compliant, or non-compliant, into numerical scores and averaging them across all applicable recommendations for each jurisdiction and year.

Methodologically, the study is careful about causality. The authors employed a two-way fixed effects model that absorbs both country-specific characteristics, such as culture, geography, and legal tradition, and year-specific shocks, such as waves of economic globalization, while controlling for economic development, unemployment, urbanization, income inequality, education, gender ratios, population density, age structure, and population mobility. To address endogeneity, they turned to a two-stage least squares strategy built on three instrumental variables: the number of years since a country enacted its first anti-money laundering law, regime durability measured from the POLITY 5 database, and membership in the Egmont Group of financial intelligence units. Statistical tests rejected the possibility of weak instruments, and Hansen’s J test confirmed the validity of the over-identifying restrictions, lending credibility to the causal interpretation of the estimates.

The headline finding is striking: stronger compliance with international anti-money laundering standards significantly reduces the total crime rate. According to the fixed effects estimates, a 1 percent increase, equivalent to a 0.01 score improvement on the MER-AML index, corresponds to roughly a 0.2 percent decrease in the total crime rate, measured as offenses per 100,000 people. This result survived a battery of robustness checks, including rerunning the models with raw crime counts instead of rates and applying the instrumental variable estimation. The economics-of-crime logic behind this effect, rooted in Gary Becker’s classic deterrence framework, is straightforward: many crimes are financially motivated, and if the proceeds cannot be converted into clean assets, the expected payoff of offending falls.

However, when the researchers disaggregated crime into violent and property categories, the deterrent effect vanished. Neither murder, assault, and rape, nor robbery, theft, burglary, and motor vehicle theft showed any statistically significant response to AML compliance. The authors explain this pattern through the lens of the Walker Model, the pioneering framework developed by John Walker to estimate laundering volumes by multiplying offenses in each crime category by the average amount laundered per offense. In Walker’s original Australian estimates, an assault generated a mere 2.23 dollars in launderable proceeds and a homicide about 225 dollars, while a burglary yielded 600 dollars and a robbery 1,400 dollars. Violent and opportunistic property crimes simply do not produce the large financial flows that the AML system, which targets banks and designated non-financial businesses and professions, is designed to intercept.

The most provocative results emerged when the team examined the eight serious predicate crimes that feed money laundering. Kidnapping rates declined significantly where AML compliance was stronger, a pattern the authors attribute to the difficulty of laundering large, high-profile ransoms under intensified scrutiny. Drug crimes, forgery, trafficking in stolen goods, and environmental crimes showed no significant change. But corruption, fraud, and extortion moved in the opposite direction: higher AML compliance was positively and significantly associated with higher rates of these high-yield offenses, a result that directly contradicts the study’s initial hypotheses and echoes earlier skepticism about the regime’s effectiveness.

The authors liken this paradox to the so-called cobra effect, a term for policies that backfire by creating perverse incentives, and draw an analogy with American Prohibition, which inadvertently industrialized bootlegging. By restricting opportunities for criminals to launder their own proceeds, AML measures may stimulate demand for specialized, large-scale laundering services. Professional money launderers, whom the FATF itself has flagged as a growing threat, operate sophisticated schemes involving shell companies, false invoicing, and increasingly cryptocurrencies, spanning multiple jurisdictions. By lowering the operational risks and costs of laundering for their clients, these networks may inadvertently reduce the barriers to committing corruption, fraud, and extortion, the very crimes that generate the largest illicit proceeds.

The study also identifies institutional dynamics that may amplify these unintended consequences. Compliance fatigue can set in as regulatory burdens expand, pushing institutions toward box-ticking exercises that prioritize formal adherence over substantive enforcement. Enforcement fragmentation, meaning poor coordination between financial intelligence units, police, and courts, creates blind spots that professional laundering networks exploit. And symbolic compliance, the strategic performance of regulatory rituals without addressing structural risks, has been documented by scholars such as Riccardo Pol, Michael Levi, and Eleni Tsingou, who argue that a compliance industry has grown more focused on process than on impact. Scandals like the Panama Papers and Paradise Papers have reinforced concerns that financial secrecy persists despite the global regime.

Importantly, the authors do not conclude that the FATF framework has failed. The regime has built a shared normative foundation for financial integrity, raised the economic and reputational costs of illicit finance, and created an unprecedented platform for intergovernmental cooperation, with participation now approaching universal. Uneven implementation across jurisdictions, driven by differences in legal infrastructure, institutional capacity, and political will, remains a key constraint, but the absence of deterrent effects on some predicate crimes reflects the fact that crime is motivated by many factors beyond the need to launder money.

The policy implications are pointed. The authors argue that the FATF Recommendations should be recalibrated to target high-yield predicate crimes such as corruption, fraud, and organized crime more directly, that specialized operations against professional money laundering networks must be prioritized, and that future mutual evaluations should incorporate standardized, disaggregated indicators of crime trends and enforcement outcomes rather than relying on procedural metrics. They also call for integrating AML enforcement with anti-corruption initiatives, tax justice efforts, and organized crime suppression. The study’s limitations, including a sample restricted to FATF members and the absence of harmonized data on police density, judicial independence, and drug market size, point toward a natural next step: retesting these relationships once the fourth round of global mutual evaluations is complete. For now, the message is clear: the world’s financial defenses are working in aggregate, but the smartest criminals have found ways to turn those defenses into a business opportunity.

Subject of Research: The effect of FATF international anti-money laundering standards on national crime rates and predicate crimes

Article Title: Do the international anti-money laundering standards reduce crimes? Evidence from FATF members

Article References: Zhang, G., Gao, Z., & Wang, D. (2025). Do the international anti-money laundering standards reduce crimes? Evidence from FATF members. Global Public Policy and Governance, 5(3), 229-250. https://doi.org/10.1007/s43508-025-00120-0

Image Credits: AI Generated

DOI: 10.1007/s43508-025-00120-0

Keywords: anti-money laundering, FATF, financial crime, predicate crimes, corruption, fraud, money laundering, global governance, crime rates, policy effectiveness, professional money launderers, mutual evaluations

The theoretical engine of the study is hegemonic transition theory, a structural realist framework rooted in Organski’s power transition model and later elaborated by Robert Gilpin. Gilpin argued that a dominant state’s relative capabilities inevitably erode as the costs of maintaining global commitments rise while rising states benefit from faster growth, generating pressure along three pathways: negotiated accommodation, hegemonic conflict, or managed adjustment, in which the declining power slows its relative erosion without fully arresting it. The Biden administration’s pivot away from the ideologically selective unilateralism of the Trump years toward economic pragmatism and multilateral institution-building is, in the authors’ reading, a textbook attempt at that third pathway. Latin America is an especially revealing test case precisely because it is the region where U.S. hegemonic prerogative was historically most assumed and least contested.

The review distinguishes carefully between efficacy, meaning the degree to which a policy achieves its own stated objectives, and effectiveness, meaning its broader impact on the strategic environment. On the efficacy side, the diplomatic record is genuinely positive. The administration restored functional relationships with left-wing governments that had been actively antagonized under Trump, navigating Colombia’s transition from conservative President Ivan Duque to leftist Gustavo Petro in 2022 without any disruption to security, energy, or climate cooperation. Biden held five bilateral meetings with Mexican President Andres Manuel Lopez Obrador between 2021 and 2024, compared with a single meeting under Trump, and sustained engagement with Brazil after Lula’s 2022 electoral victory through summits in February and September 2023. Crucially, the authors note, this flexibility ran in both ideological directions: the administration maintained workable ties with libertarian President Javier Milei in Argentina alongside left-wing governments in Bogota, Brasilia, and Mexico City, indicating a genuinely bidirectional shift toward interest-based engagement.

Public opinion data reinforce the diplomatic gains. Favorable views of the United States among Brazilians rose from 26 percent under Trump to 37 percent under Biden, a change the authors judge plausibly attributable to policy recalibration rather than confounding factors. Yet the same section of the review documents the limits of normalization. Limited sanctions relief for Venezuela, extended in October 2023, was suspended just six months later after the Maduro regime disqualified opposition candidates. Relations with Cuba barely moved, with the embargo structure intact, and Nicaragua’s withdrawal from the Organization of American States in November 2023 represented outright deterioration of the multilateral framework. Accommodation, the authors conclude, persuades disaffected partners far more readily than governments already embedded in a rival power’s orbit.

The economic pillar reveals the sharpest gap between ambition and outcome. The Americas Partnership for Economic Prosperity, launched at the June 2022 Summit of the Americas, was deliberately built as a soft framework of memoranda of understanding and technical cooperation rather than binding commitments, because negotiating new free trade agreements faced insurmountable congressional opposition. By late 2024, APEP’s concrete achievements remained limited to those memoranda, and the absence of Brazil and Argentina significantly constrained its regional scope. The Inflation Reduction Act did generate measurable nearshoring momentum: U.S. automobile and parts imports from Mexico rose 15.6 percent, from 153.88 billion dollars in 2022 to 177.84 billion dollars in 2023, driven by electric vehicle battery tax credit provisions that incentivized regional manufacturing while excluding Chinese producers. The USMCA Rapid Response Mechanism was deployed 27 times, resolving 22 cases, including one in which workers at a Goodyear plant received over 4.2 million dollars in retroactive wages.

But the aggregate trade numbers complicate any story of success. U.S. Census Bureau data show total goods trade with the region averaging 839 billion dollars annually under Trump and 1,113 billion under Biden, an increase of roughly 33 percent, though much of that gap narrows once the pandemic-depressed 2020 baseline is set aside. The growth was driven disproportionately by imports: the U.S. merchandise trade deficit with the region more than doubled, from an average of 47.6 billion dollars annually under Trump to 78.8 billion under Biden, reaching 123.4 billion dollars in 2024, the highest in the eight-year series. The U.S.-Mexico goods deficit grew from an average of 89.4 billion to 148.6 billion dollars, hitting 168.6 billion in 2024, more than double the 2017 level. A services surplus of 24.24 billion dollars in 2023, while real, remained an order of magnitude smaller than the goods deficit. The widening gap, the authors argue, is not a single-year anomaly but a sustained four-year trend running directly counter to APEP’s stated goal of balanced regional integration.

The infrastructure contest tells a similar story of structural asymmetry. U.S. foreign direct investment accumulated to 1.04 trillion dollars in Latin America by 2022, but 61 percent of it flowed through British Overseas Territories, reflecting financial intermediation rather than productive manufacturing. China’s accumulated FDI of roughly 520 billion dollars remains half the U.S. total, yet its growth rate is far higher and its projects concentrate in high-visibility infrastructure that shapes how regional governments perceive partnership value. The 3.6 billion dollar Chancay Port in Peru, majority-owned by COSCO Shipping Ports, marked the first time a Chinese state-owned enterprise held majority control of a hemispheric seaport. The Partnership for Global Infrastructure and Investment committed to mobilizing 200 billion dollars globally, but actual disbursed capital by late 2024 remained limited and deployment lagged far behind China’s Belt and Road Initiative. Former Treasury Secretary Larry Summers captured the asymmetry in a remark the review cites: developing-country governments reported receiving an airport from China and a lecture from the United States. On critical minerals, despite memoranda with Argentina, Chile, and Brazil and a 62.5 million dollar U.S. investment in the Pastos Grandes lithium project, Chinese firms still control 60 percent of global lithium production, 85 percent of processing capacity, and 70 percent of battery production.

The defense-security pillar is where the United States retained its clearest first-mover advantage, and the operational numbers are striking. The 64th UNITAS exercise in July 2023 assembled 7,000 military personnel from 27 countries, SOUTHCOM planned 1,014 cooperative operations during 2023-2024, the International Military Education and Training program trained roughly 800 students from 28 countries in fiscal year 2023, including three defense ministers and thirteen chiefs of staff, and the State Partnership Program conducted 426 events in a single fiscal year. Joint Interagency Task Force South disrupted 361 smuggling events, seizing nearly 308 tons of cocaine and 78 tons of cannabis worth 7.7 billion dollars, with partner forces conducting 79.5 percent of operations. Yet containment failed at the strategic level. China established at least ten space facilities across five countries, including a deep space station in Argentina that SOUTHCOM Commander General Laura Richardson warned could support surveillance, tracking, and targeting of U.S. forces. Huawei’s entrenched position across 24 countries, built over fifteen years of price advantages and preferential financing, proved resistant to U.S. advocacy for Open RAN alternatives, and Russia maintained active military cooperation with Venezuela, Cuba, and Nicaragua throughout the period.

The review also documents a persistent contradiction that undermined the administration’s democracy-promotion rhetoric. Washington secured the release of 357 Nicaraguan political prisoners and allocated 453.1 million dollars in aid to Colombia in 2023, though that figure represents only a modest increase over late Trump-era baselines of 391.3 to 447.9 million dollars, suggesting bipartisan congressional continuity rather than a distinctive Biden initiative. Meanwhile, the administration maintained security and migration cooperation with El Salvador despite President Bukele’s authoritarian consolidation and unconstitutional re-election in 2024, and sustained strong relations with Peru after the controversial removal of President Castillo. Prioritizing relationship preservation over normative conditions, the authors observe, inevitably narrows the credibility gap between what the hegemon claims to stand for and what it tolerates.

The study’s central lesson is carefully framed. The authors do not conclude that managed adjustment failed; rather, they find that managed adjustment without the underlying structural capacity to match a rising challenger’s terms of engagement can slow a hegemon’s relative decline without reversing it. Congressional opposition to new trade agreements, slow administrative procedures for capital deployment, the asymmetry between U.S. conditionality-laden engagement and China’s unconditional financing model, and two decades of entrenched Chinese commercial penetration all constrained any administration regardless of ideological posture. The authors also acknowledge limits of their own analysis, including the difficulty of isolating the Trump-to-Biden shift as a causal variable and the framework’s hegemon-centric neglect of Latin American agency, exemplified by Brazil’s deliberate decision to stay outside APEP while deepening BRICS engagement. For future research, they point toward bottom-up analysis of how regional governments actually perceive U.S. versus Chinese partnership value, longitudinal tracking of Biden-era frameworks under subsequent administrations, and subnational studies of nearshoring that separate policy-induced gains from structural trends.

Subject of Research: Evaluation of Biden administration policy effectiveness toward Latin America through hegemonic transition theory

Article Title: Reassessing Biden administration policy toward Latin America between multilateral ambition and geopolitical constraints

Article References: Van, T. T. T., Loi, T. T. H., & Kiet, L. H. (2026). Reassessing Biden administration policy toward Latin America between multilateral ambition and geopolitical constraints. Discover Global Society, 4(1), Article 227. https://doi.org/10.1007/s44282-026-00591-4

Image Credits: AI Generated

DOI: 10.1007/s44282-026-00591-4

Keywords: Biden administration, Latin America, hegemonic transition theory, managed adjustment, great-power competition, China, nearshoring, APEP, trade deficit, U.S. foreign policy, SOUTHCOM, policy effectiveness