The Crime That Underpins All Other Crimes

A casual observer of post-pandemic life might assume that cash is on its way out. According to the Federal Reserve, cash accounted for 31% of all payments in the United States in 2016. By 2024, that figure had fallen to 14%. Digital wallets and contactless cards have become the default for buying coffee or paying the babysitter. 

And yet a very different story is playing out behind the scenes. Today, about 80% of all bills printed by the Federal Reserve are $100 notes. But, they are not circulating through diners or bars. As Oliver Bullough told an audience at The Conduit last month, they are chiefly produced to satisfy an insatiable global demand for money laundering. 

Without a way to clean dirty money, many crimes would simply not be worth committing. Drug cartels in South America, kleptocrats in Nigeria, terrorist groups in Afghanistan, tax evaders in the United States and traffickers of humans and wildlife all depend on the same thing:. They must turn illicit proceeds into assets that look legitimate. 

“Money laundering is the crime that underpins all other crimes,” Bullough explained. Theft, fraud and trafficking all generate ill-gotten gains. The central challenge, he argued, is making that money appear lawful enough to spend, invest or hide. 

By most measures, the system designed to stop this has failed. Estimates of the amount of money laundered each year have barely shifted since the 1990s, hovering between 2 and 5% of global gross domestic product. In today’s economy, that translates to roughly $2-$5 trillion a year. Despite decades of new laws, international agreements and compliance regimes, the dirty share of the global economy remains stubbornly intact. 

“Huge amounts of money have been spent trying to combat this, and nothing has changed, “ Bullough said. Governments have dramatically reduced road deaths over the past half century by applying focus and political will. With money laundering, he noted, not only has the problem not been solved, but it has also not even been reduced. “There is something quite weird there.” 

The consequences are not abstract. Laundered money pays for the drones Russia uses in Ukraine and for weapons carried by terrorist groups in the Middle East and Nigeria. It fuels corruption, distorts housing markets and entrenches inequality. Bullough described the human cost as immeasurable. 

Governments, he acknowledged, generally have good intentions. But the results tell a different story. “The purpose of a system is what it does,” he said. If the purpose of the current system is to stop money laundering, then it is simply not working. 

Global financial institutions now spend an estimated $200 billion a year on compliance. That money funds armies of analysts and produces mountains of paperwork in the form of suspicious activity reports. There is no body of law enforcement large enough to meaningfully review it all, let alone act on it. Much of the burden of policing crime has been shifted onto private banks, which are poorly suited to the role. 

This outsourcing has warped incentives. Those with little money and little power are often the easiest to target. Wealthy clients, by contrast, can hire lawyers and compliance specialists to smooth over concerns. Ordinary people running charities or transferring money overseas can find their bank accounts closed without explanation or appeal, while oligarchs continue to receive generous monthly allowances. 

At times, efforts to crack down have backfired. After the attacks of Sept. 11, 2001, the United States expanded its scrutiny of financial flows linked to terrorism. The 9/11 Commission Report of 2004-2004 concluded that the attackers had not relied on suspicious banking activity. And so, in practice, the new powers fell heavily on Muslim charities, many of which lost access to banking altogether. Bullough explained that few charities were willing to discuss publicly what had happened, and even if they had, there is no appeals court to hear them out because owning a bank account is not a legal right.  

Cash itself remains a central enabler. Two decades ago, the most commonly printed bill in the United States was the one dollar note, followed by the twenty and then the hundred. After the financial crisis of 2008, the $100 bill surged ahead. The reason wasn’t to make it easier to buy more expensive items with cash, but to satiate criminals’ desire for large bills. A wad of $1 million in $100 notes weighs only 22 pounds, which is much easier for drugs or arms dealers to transport. The same amount in $20 bills weighs five times more.   

Today it dominates production with most of these notes going overseas. Bullough noted that printing large notes is highly profitable for the federal government because it costs about 9 cents to print a $100 bill. An official for the Federal Reserve noted in 2022, “If the cash never comes back to the U.S., then Americans have just exchanged pieces of green paper—which cost almost nothing to print—for valuable goods. This is a good trade for Americans.” At the Federal Reserve’s own cafeteria in Fort Worth, Bullough noted, a $100 bill will not buy a coffee because the till won’t have enough for the change.  

Money laundering also runs through the market for luxury goods. In France, residents face strict limits on cash purchases. Non-residents, however, can spend far more in cash on items like watches, jewellery and handbags. An attempt to close this loophole a few years ago collapsed after lobbying from the luxury sector. 

One of the exhausting conclusions from Bullough’s discussion was that while the scale of the problem is so immense, little substantive effort has been put in to stop it.  Bullough pointed out that although printing large-denomination notes is highly profitable for governments, the wider cost to society, in violence, corruption and instability, dwarfs any revenue earned at the mint. 

Money laundering, he argued, is not a technical problem waiting for a clever fix. It is a political and structural one. Until governments confront the incentives they have created, and the interests they protect, the crime that underpins so many others will continue to flourish.