Even clubs can’t do without legitimacy: Why the anti-money laundering blacklist was suspended

Authors


Rainer Hülsse, Geschwister-Scholl-Institut, Ludwig-Maximilians-Universität, Oettingenstrasse 67, D-80538 München, Germany. Email: rainer.huelsse@lmu.de

Abstract

This article uses the case of anti-money laundering regulation to investigate international club organisations’ efforts to secure compliance with their rules. As these rules can hardly claim much legitimacy, one would expect that they are complied with only if the club organisation uses side-payments or coercion. Indeed, the Financial Action Task Force against Money-Laundering (FATF), the international standard setter in that field, has used blacklisting to force non-members into compliance. But although it had greatly improved compliance, the blacklist was suspended again after a short period of time. Why? This article argues that this was due to allegations of the blacklist being illegitimate. The FATF reacted by withdrawing the blacklist and also by engaging in various legitimatory practices, because even club organisations need legitimacy if they want to achieve results. Only if the rules are considered legitimate, will there be actual, and not just formal compliance. Hence this article denies the existence of a dilemma between legitimacy and effectiveness (the conventional view), suggesting that only legitimate rules can be effective.

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