To translate this back into a Taylor-rule world, we would need to know the so-called “shadow prices”. Of course we don’t know those unobservable prices. But we can, perhaps, get a broadbrush handle on the materiality of the tightening by using estimated equations for credit (and money) demand, holding all other influences constant. 10 There is just huge uncertainty  7  See Tucker, PMWT (2008), “The credit crisis: lessons from a protracted peacetime”, remarks given at the Chatham House conference on “The New Financial Frontiers”. These remarks are also forthcoming in the 2008 Q3 edition of the Bank of England Quarterly Bulletin. 8  See Taylor, JB., (2008) “Monetary Policy and the State of the Economy”, testimony before the Committee on Financial Services, US House of Representatives, February and Mculley, P and Touli, R (2008) “Chasing the Neutral Rate Down: Financial Conditions, Monetary Policy, and the Taylor Rule”, Global Central Bank Focus, PIMCO. 9  Another reason reflected in the Curdia and Woodford (2008) paper is the fact that borrowers and savers have different propensities to consume. Consequently a change in spreads will affect the “average rate” faced by borrowers and savers in a different way from a change in the policy rate. 10  Based, for example, on Brigden, A and Mizen, P (1999) “ Money, credit and investment in the UK corporate sector”, Bank of England Working Paper number 100. BIS Review 112/2008  5  about such estimates but, for what it’s worth, they indicate a material tightening from this source.

The financial institutions can continue to play a bigger role in contributing towards reducing crime and corruption, especially through the reporting of Suspicious Transaction Reports (STRs). To date, the STR received from reporting institutions have contributed to about 300 ML/TF investigations. The STRs, which is “trigger alert” for any ML/TF activities going through the institutions, has steadily increased (52% annually) due the overall improvement in compliance practice among reporting institutions. I wish to stress that having strong AML/CFT practice is not only pertinent to ensure the country’s AML/CFT risks are carefully managed, but it is also important for the financial institutions to lower the cost of doing business arising from AML/CFT investigations and cases. Concerted effort by law enforcement agencies has resulted in an average annual increase of 86% in cases under prosecution and forfeiture without prosecution. Without having adequate controls and system in place, financial institution will face challenges in responding to the increasing demand from law enforcement agencies. In addition, it is also observed that international financial institutions have strengthened AML/CFT monitoring of their counterparts, and are taking actions, such as enhanced due diligence or cease correspondent relationship, if the need arises. These would not only affect the cost of doing business, but also has an impact on the level of competitiveness at both domestic and international levels. Concluding remarks To conclude, I believe that the sharing of new trends and developments would tremendously benefit all of us today to have a better perspective of this global issue.