•  Third, money laundering can also affect currencies and interest rates as launderers reinvest their funds where their schemes are less likely to be detected rather than where rates of return are higher. Money laundering can also increase the threat of monetary instability due to the misallocation of resources. In this regard, money laundering may result in inexplicable changes in money demand and increased volatility of international capital flows, interest and exchange rates. The unpredictable nature of money laundering, coupled with the attendant loss of policy control, may make sound economic policy difficult to achieve. •  Fourth, money laundering could lead to economic distortion and instability. Since money launderers are not interested in profit generation from their investment but rather in protecting their proceeds, they will invest their funds in activities that are not necessarily economically beneficial to the country where the funds are located. Further, to the extent that money laundering and financial crime redirect funds from sound investments to low-quality investments that hide their proceeds, economic growth can suffer. In some countries for example, entire industries, such as construction and hotels, have been financed not because of actual demand, but because of the short-term interests of money launderers. When these industries no longer suit the money launderers’ scheme of things, they abandon them, causing a collapse of these sectors and immense damage to economies. •  Fifth, money laundering could lead to loss of revenue. Money laundering makes tax collection efforts difficult, thus leading to decline in tax revenues.

The loss of revenue means government setting higher tax rates than would normally be the case. •  Sixth, money laundering could lead to risks to privatisation programmes. Money laundering poses a threat to governments’ economic reform efforts, especially privatization of state owned enterprises. Money launderers have the financial power to out-bid legitimate investors. In addition, while privatisation initiatives are often economically beneficial, they can also serve as a vehicle to launder funds. Criminals have been known to purchase privatised banks, resorts, etc to hide their illicit proceeds and farther their criminal activities. Unfortunately, developing countries like Zambia risk being exposed to the threat of money laundering because in the process of attracting investments, they become more vulnerable to accepting laundered money. •  Seven, money laundering could expose any recipient country to reputation risk. In today’s global economy, nations cannot afford to have their reputations eroded by associating  themselves with money laundering activities. Money laundering and other crimes erode confidence in financial markets, and the negative reputation resulting from these activities diminishes legitimate global opportunities available to any country and this could slow sustainable economic growth. Ladies and Gentlemen, what I have just elaborated are the adverse effects of money laundering on any economy in the world. Allow me now to look at the effects of money laundering on the banking sector. As you may be aware, due to banks’ confidentiality principle and their capability to handle huge cashless transactions, and transmit funds efficiently, they are normally the targets of money laundering activities.