The crime of money laundering is faced by almost every economy in the world which makes it a global phenomenon. The adverse effect of money laundering is mostly seen as a threat to economic activity and security matters. Money laundering basically encourages criminals to earn profits and boost the rate of crime in society. Besides its dangerous impacts on social values, it also damages the economy badly.

The very common impact of money laundering is experienced by the financial sector of the country. The money earned by crime is introduced in the banks and other financial institutions like the legal money which is not the reality. Money laundering has the ability to destroy banks if such criminal activity is identified in a bank. Eventually, banks collapse. Another major issue faced by the world because of money laundering is the fault in the economic policy that results from artificially inflated financial sectors.

Some problems are also there which are related to taxation. Money which is laundered is not taxed which means the rest of people have to make up the loss in tax revenue. Mostly, money is laundered so that these criminals won’t have to pay taxes. Secondly, money laundering is also a threat to small scale businesses as they fail to compete with the money launders in selling products for cheap prices.