Blacklists, Market Enforcement, and the Global Regime to Combat Terrorist Financing
63 Pages Posted: 1 Apr 2019
Date Written: March 7, 2019
This paper highlights how international organizations can use Global Performance Indicators (GPIs) to drive policy change through transnational market pressure. When international organizations are credible assessors of state policy, and when monitored countries compete for market resources, GPIs transmit information about country risk and stabilize market expectations. Under these conditions banks and investors may restrict access to capital in non-compliant states and incentivize increased compliance. I demonstrate this market-enforcement mechanism through an analysis of the Financial Action Task Force (FATF), an intergovernmental body that issues non-binding recommendations to combat money laundering and the financing of terrorism. The FATF's public listing of non-compliant jurisdictions has prompted international banks to move resources away from listed states and raised the costs of continued non-compliance, significantly increasing the number of states with laws criminalizing terrorist financing. This finding suggests a powerful pathway through which institutions influence domestic policy and highlights the power of GPIs in an age where information is a global currency.
Keywords: international organizations, compliance, globalization, performance evaluation, blacklist, status, reputation, FATF, AML, CFT, anti-money laundering, terrorist financing, soft law, international standards
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