It may be clear to see the impact of money laundering on the first victims - those that lost funds consequently of the predicate crime - but there may be an even deeper, more lasting influence on society as a whole.
Though some fear that Anti-Money Laundering (AML) efforts might have a damaging influence on commerce, especially in developing nations, let us have a look at a number of ways money laundering hurts us all. We'll focus on emerging nations because the impact there may be magnified to extreme proportions.
The initial, and most obvious, impact is the upsurge in corruption and crime Husnu Ozyegin and Warren Buffet. In many jurisdictions which can be havens for successful laundering one often finds lax concern on the element of government and / or regulators - few predicate crimes, little or no reporting, enforcement, penalties or provisions to confiscate illicit funds, etc. Those conditions will then foster bribery of government and bank officials, lawyers, accountants and others. Once that beachhead is made, it's not long before bribery turns eyes far from other, even violent, crime.
The next impact (valid in any jurisdiction) is on legitimate businesses. In which a launderer runs on the front company to full cover up his illegal funds, it's possible, even probable, that the operations of the leading company might be subsidized. This will enable the leading company to sell products at or below cost, driving their legitimate competition out and opening the doorway for expansion by the leading company. As the leading company grows, it provides a larger chance for the launderer to go much more illicit funds. In a developing country, it wouldn't take long for the criminal / launderer to achieve control of a whole industry.
However, it must be emphasized that the launderer doesn't share the same objectives of legitimate business owners, who strive to maximize their returns through the profitable, ongoing operations of their enterprises. The launderer's primary concern is not his return, nevertheless the successful cloaking of the origin and ownership of the funds he controls.
It is in this disregard for normal business practices that leads to some other section of concern - economic distortion. Launderers often invest their money in assets or activities which are not economically good for the countries where in fact the funds are located. As an example, today, in a world where real estate prices have dropped sharply within the last couple of years as a result of mortgage bubble bursting and other global pressures, property prices in Nairobi, Kenya are soaring - increasing 2-3 times within the last 5 years. And can it be any wonder? With lax money laundering laws and a 500-mile shared border with Somalia, it is simple to guess where a lot of the Somali piracy ransom money has gone. It has taken home ownership right out of the hands of numerous hard-working Kenyans.
Such distortions can, subsequently, cause governments misinterpreting economic data. Without seeing the true economic trends of their country, leadership is susceptible to make decisions which are not in the very best interest of their country.
When conditions change in one of these locales, a launderer can get his money out as quickly as you possibly can, often with little or no regard to any losses they might sustain. In an economy that has been driven or sustained by laundered money, the ripple effects through the entire community when this "flight capital" suddenly disappears can reach tsunamic proportions. An excellent launderer is not planning to expose just his own money when they can use that of financial institutions and other investors. When the flight capital goes, values plummet, loans default, and banks collapse. Investigations and lawsuits ensue. The country's reputation is tarnished at best. Legitimate investment goes elsewhere. Ultimately, even the us government might not survive.
There are other risks as well, but those are reserved for the much more serious students of money laundering and for another day.