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Money Laundering

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Integration ; Layering ; Placement

Money laundering is any activity aimed to hid the origin and/or the destination of a flow of money is order to reduce the probability of sanctions.

Only recently the economic analysis has developed a peculiar focus on the financial issues related to the study of crime, thus far completely absent.

In order to describe the economics of money laundering, the starting point is the definition of its microeconomic foundations, which are based on the existence of a rational actor who derives revenues from a criminal activity and from the assumption that his expected utility depends on four key elements: expected revenues, laundering costs, likelihood of being caught, and magnitude of the sanction.

The microbasis of the money laundering can explain its macroeconomic effects. Money laundering can function as a multiplier mechanism of the weight of the illegal sector in a given territory or country. In order to prevent and combat the polluting...

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Donato Masciandaro

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Masciandaro, D. (2021). Money Laundering. In: Marciano, A., Ramello, G.B. (eds) Encyclopedia of Law and Economics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7883-6_69-2

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DOI: https://doi.org/10.1007/978-1-4614-7883-6_69-2

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Money laundering as a transnational business phenomenon: a systematic review and future agenda

Critical Perspectives on International Business

ISSN : 1742-2043

Article publication date: 14 October 2022

Issue publication date: 19 April 2023

Money laundering continues to emerge as a transnational phenomenon that has harmful consequences for the global economy and society. Despite the theoretical and practical magnitude of money laundering, international business (IB) research on the topic is scarce and scattered across multiple disciplines. Accordingly, this study aims to advance an integrated understanding of money laundering from the IB perspective.

Design/methodology/approach

The authors conduct a systematic review of relevant literature and qualitatively analyze the content of 57 studies published on the topic during the past two decades.

The authors identify five streams (5Cs) of research on money laundering in the IB context: the concept, characteristics, causes, consequences and controls. The analysis further indicates six theoretical approaches used in the past research. Notably, normative standards and business and economics theories are dominant in the extant research.

Research limitations/implications

The authors review the literature on an under-researched but practically significant phenomenon and found potential for advancing its theoretical foundations. Hence, the authors propose a 5Cs framework and a future agenda for research and practice by introducing 21 future research questions and two plausible theories to help study the phenomenon more effectively in the future.

Practical implications

In practical terms, the study extends the understanding of the money laundering phenomenon and subsequently helps mitigating the problem of money laundering in the IB environment, along with its harmful economic and societal impacts.

Originality/value

The authors offer an integrative view on money laundering in the IB context. Additionally, the authors emphasize wider discussions on money laundering as a form of mega-corruption.

• International business
• Money laundering
• Systematic review
• International mega-corruption
• Cross-border payments
• Unethical business practices

Isolauri, E.A. and Ameer, I. (2023), "Money laundering as a transnational business phenomenon: a systematic review and future agenda", Critical Perspectives on International Business , Vol. 19 No. 3, pp. 426-468. https://doi.org/10.1108/cpoib-10-2021-0088

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Copyright © 2022, Emilia A. Isolauri and Irfan Ameer.

Published by Emerald Publishing Limited. This article is published under the Creative Commons Attribution (CC BY 4.0) licence. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode

1. Introduction

In October 2021, the Pandora Paper leaks disclosed millions of documents that revealed influential individuals such as politicians using offshore business arrangements and companies to hide their wealth. Based on these documents, indications of plausible tax avoidance and money laundering have been discovered on a global level ( BBC, 2021 ).

Money laundering is a transnational phenomenon that has attracted increasing amounts of attention during the past two decades. The Financial Action Task Force (FATF) defines money laundering as the processing of criminal proceeds to disguise their illegal origin ( FATF, 2022 ). Usually, funds from illicit sources are disguised by using legitimate means such as complex business arrangements or cross-border transactions to legitimize the black money. Apart from criminal organizations and individuals, legal firms, institutions and their officials may directly or indirectly manipulate legislation or systems to facilitate the process of money laundering ( Ahen, 2022 ). Consequently, money laundering has become a severe and complex challenge for the development of global business and society ( Buchanan, 2004 ; Cuervo-Cazurra et al. , 2021 ; Dierksmeier and Seele, 2018 ).

From an academic perspective, international business (IB) literature has advanced its understanding of cross-border commerce over the past 50 years, yet the international and parallel gray economy has been largely neglected in research ( Enderwick, 2019 ). Money laundering is well represented in studies on international mega-corruption. International mega-corruption diminishes the amount of available resources for education, infrastructure, public health and so on, which ultimately affects populations across the world ( Ahen, 2022 ). The United Nations Office on Drugs and Crime (UNODC) has estimated that 2%–5% of global gross domestic product (US$800bn–2tn) is laundered annually ( UNODC, 2022 ). Due to the larger impact on business and society, money laundering is an important form of mega-corruption at the global level that requires immediate attention. This well demonstrates the transnational nature of the wicked problem of money laundering, as the vast illicit financial flows (IFFs) shift wealth from high-tax nations and emerging countries to lower-tax jurisdictions, thereby threatening the long-term development of the global economy ( Contractor, 2016 ). In terms of wicked problems, there are no infinite solutions; instead, these problems can be mitigated ( Rittel and Webber, 1973 ). In emerging countries, the origin of corrupted and illicit money is often obscured by conducting international transactions and offshore arrangements. On the flip side, developed countries suffer from loss of tax revenues as a result of international tax competition and tax avoidance conducted by multinational companies (MNCs) and wealthy individuals ( Ahen, 2022 ). To date, the wicked problem of money laundering has been largely neglected by IB scholars ( Buchanan, 2004 ; Clarke, 2021 ) and hence, we are focusing on the phenomenon of money laundering.

Overall, research on money laundering in an IB context is scarce and largely fragmented across the various business (e.g. international banking, finance, investment, taxation, corporate governance, business ethics) and nonbusiness (e.g. law, criminology, IT, social sciences) disciplines ( Canhoto, 2021 ; Van Duyne et al. , 2018 ). Consequently, there is considerable conceptual confusion in understanding money laundering from an IB perspective. Moreover, the scope and boundaries of money laundering are not clearly defined in the IB research. Such challenges restrict the ability of researchers to present policy and practical implications to better understand and combat money laundering. Therefore, a common and integrative understanding of money laundering in the IB context is required.

How has the extant research addressed money laundering as an IB phenomenon?

What are the key theoretical approaches used in the extant research?

What new avenues can be suggested for future research and practice?

To meet our study’s objective, we conducted a systematic literature review, which is well suited to offer an integrated understanding ( Soundararajan et al. , 2018 ). We used a qualitative content analysis method to analyze the data extracted from 57 studies ( Booth et al. , 2012 ). We argue that the discipline of IB would benefit from future research on money laundering in the aim of broadening understandings about the dark sides of IB ( Cooke et al. , 2020 ).

Our study contributes to the literature by positioning money laundering as a transnational business phenomenon and encourages IB researchers to investigate the proposed five key streams (5Cs) of money laundering, which we label as concept, characteristics, causes, consequences and controls. The 5Cs enable a critical assessment of the money laundering phenomenon and allow suggestions for how to study the topic. We also suggest a future agenda and propose two relatively new theories to extend future research and practice.

Our study is divided into five main sections. After the introduction, we present the methodology in Section 2 used in this study. Section 3 shows our key findings. Section 4 proposes directions for future research and practice with the help of 21 research questions and two novel theoretical approaches. The final section concludes the study by showing its implications for research and practice.

2. Methodology

We conducted a systematic review of published research to meet our study’s objective ( Soundararajan et al. , 2018 ). The extant literature reviews on the topic explore various aspects of money laundering. Table 1 presents an overview of past money laundering reviews, along with their aims, methods, key findings and the main differences between past reviews and our present review.

Mostly, the data sources for past reviews were policy documents and reports related to money laundering. Moreover, past reviews tended to focus on the role of machine learning and artificial intelligence in mitigating money laundering ( Alsuwailem and Saudagar, 2020 ; Chen et al. , 2018 ; Han et al. , 2020 ), bibliometric characteristics of publications ( Mei et al. , 2014 ) and the role of nonprofit organizations ( Omar et al. , 2014 ) or shell companies ( Tiwari et al. , 2020 ) in laundering money. Alternatively, we distinguish our study by emphasizing the money laundering aspects relevant to IB. Our systematic review follows a process that includes the steps for data collection, data categorization and data analysis ( Booth et al. , 2012 ). Figure 1 explains the step-by-step process of our review.

2.1 Data collection

For data collection, we selected relevant databases to search the published material related to money laundering. We used Web of Science and EBSCO databases to enable a thorough review, as these contain extensive and reliable coverage of published research ( Short, 2009 ). Next, we defined the scope of the research by adopting appropriate search criteria ( Rojon et al. , 2021 ). Our search criteria are shown in Table 2 .

The search line 2 in Table 2 uses keywords related to the IB context (e.g. “International” OR “Global” OR “Across the border” OR “Cross the border”). Given the fact that publications related to money laundering frequently appear not only in business but also in information technology, social sciences and law outlets, we searched all the publications in business, IT, social sciences and law outlets focusing on money laundering in IB context. In this way, we can offer an integrative view on money laundering from the IB perspective.

To find the relevant studies in the databases, we used Boolean logic by applying various combinations of relevant search keywords and finding those search combinations in the title, abstract and keywords of each study ( Hjørland, 2015 ). The combinations of words were based on search criteria used in recent reviews on money laundering and IB (see systematic reviews of Bahoo et al. , 2020 ; Mei et al. , 2014 ). This helped us to identify the maximum number of studies that dealt with money laundering from the IB perspective. We further refined the search by using type, language and subject area filters. We searched all published research on the topic from the period of 2000 to 2020 since the current century pays special attention to the money laundering research ( Cuervo-Cazurra et al. , 2021 ). Money laundering research frequently appears in business and nonbusiness publication outlets, such as journals emphasizing international aspects of banking, finance, management, economics, law, social sciences, IT and so on ( Canhoto, 2021 ). Consequently, we included all peer-reviewed material published in business, management, economics, social sciences, law, computer science and IT categories of databases. We selected peer-reviewed journal articles and book chapters in our review since they provide a credible overview of published research ( Bahoo et al. , 2020 ). As an outcome, we found 126 publications.

Next, we excluded the duplicate entries and read the abstracts of the articles to remove irrelevant entries ( Rojon et al. , 2021 ). Several articles were not germane at this stage because their focus was not directly relevant to money laundering from an IB perspective. As a result, we ended up with 46 studies. Because search keywords might miss some important studies, we further looked at the reference lists of 46 studies and found seven more relevant articles ( Petticrew and Roberts, 2006 ). Additionally, large international agencies such as the United Nations, the FATF and the European Union publish money laundering related reports. As reviewing a large number of reports was not possible, we included four selective but highly credible and recent reports on money laundering in our sample ( European Commission, 2019 ; FATF, 2018 ; Transparency International, 2017 ; UNODC, 2022 ). The reports helped us to further improve the credibility and reliability of our review by providing supplementary specialist information that was not available in academic sources ( Adams et al. , 2017 ). As a result, we ultimately found 57 publications for content analysis. Regarding the selected studies, we read them throughout to conduct in-depth analyses.

Of these 57 studies, eight were published in the Journal of Money Laundering Control – the only specialist journal dedicated to this phenomenon. Despite the importance and relevance of money laundering, this phenomenon was largely ignored by the top mainstream business and management journals. The few exceptions were the Journal of Business Ethics ( Geo-Jala and Mangum, 2000 ) and Business and Society ( Maggetti, 2014 ). Also, Critical Perspectives on International Business has addressed related important topics ( Ahen, 2022 ). Given the problematic nature and scale of the phenomenon, it is surprising that the topic was under-acknowledged in top business journals.

2.2 Data categorization

We read the selected 57 studies to conduct in-depth analyses. We paid special attention to three aspects: key findings or insights; theoretical approaches; and future directions proposed by each study. We then transferred our findings into a tabular form (see Appendix ) for a systematic inspection and treatment of the data ( Cloutier and Ravasi, 2021 ). Hence, data categorization based on the three aspects guided us in our content analysis.

2.3 Data analysis

In our study, we synthesized the findings by combining forms of integration and interpretation ( Rousseau et al. , 2008 ). Accordingly, we predetermined our review questions and criteria for selecting the studies. Eventually, we assembled findings from individual studies into a patchwork. That is, we combined elements from a meta-ethnographic approach by identifying subcategories arising from the predetermined 5Cs; elements from a realist approach by emphasizing objectivism while accepting that reality is not independent from the researchers’ perceptions; and elements from a meta-narrative approach by focusing on central themes, methods and theories ( Jones and Gatrell, 2014 ). As noted by Denyer et al. (2008) , combining elements from different approaches may help to grasp multidisciplinary and fragmented literature – in our case, literature on money laundering. To avoid bias and establish a coherent framework for analyzing each study, we used a data-extraction table ( Tranfield et al. , 2003 ).

Aligned with the qualitative content analysis method, we performed the analysis based on an iterative process ( Ryan and Bernard, 2000 ). The key streams (5Cs) emerged from the qualitative analysis of the data. We reviewed the data table several times and analyzed the new key insights, theoretical approaches and future research areas presented in the existing literature ( Gaur and Kumar, 2018 ). By looking at the similarities and differences, we found the key themes and subthemes in the data. In sum, the systematic inspection and treatment of the data helped us to identify five streams of research in money laundering, future research directions related to each stream and the theories used in the extant research ( Bahoo et al. , 2020 ; Rojon et al. , 2021 ).

3. Findings

3.1 the 5cs of money laundering.

Our review reveals five streams of research on money laundering in the IB context. We call them the 5Cs of money laundering, namely, the concept, characteristics, causes, consequences and controls of money laundering (see Figure 2 ).

3.1.1 Concept of money laundering.

By synthesizing the reviewed studies, we found that the concept of money laundering has been explored in the extant research mostly by introducing the phases of money laundering processes and the role of various actors in executing them. Money laundering can be defined as an illicit process involving various actors and as an extension to crime in most countries ( Wechsler, 2001 ). The ultimate aim of money launderers is to integrate illicit funds into the global economy ( Maggetti, 2014 ). The illegality of money laundering as a process delimits the concept in many of the reviewed studies, yet its role as an unethical arrangement used in processing funds from criminal activities such as despotism or corruption through legal business arrangements ( Maggetti, 2014 ) is also ignored in many of the studies. Table 3 illustrates the key definitions used in the reviewed studies.

On one level, part of the international movements of money consists of illicit and detrimental transnational financial flows. These IFFs, varying between transnational money laundering arrangements and tax evasion, are considered illicit by nature due to their origin, the way of transferring or the destination of funds ( Collin, 2020 ). On another level, transnational organized crime (TOC) serves as an initiator to money laundering. Profits generated from criminal activities such as drug trafficking or smuggling luxury items ( Charles, 2001 ) need to be laundered into seemingly legal and usable funds. Based on this, TOC represents the demand side of the problem of money laundering. On the flip side, powerful actors and professional money launderers (e.g. third-party professionals) supply the means for money laundering and IFFs via offshore and company arrangements.

There are some differences between the definitions used in relation to the illicit versus the unethical nature of the money laundering phenomenon. Multiple studies highlight the processual nature of money laundering ( Drezner, 2005 ; Sadeghi et al. , 2018 ; Windsor, 2013 ). Some definitions, such as that of the United Nations (“placement, layering, integration”), incline toward viewing money laundering as a demand problem and emphasize TOC as the initiator of the process. From this viewpoint, money laundering can be seen as a global value chain for illicit funds. Other definitions, such as the Australian Transaction Reports and Analysis Centre’s definition of IFFs, are vaguer in defining which stage of the money laundering process illegal or unethical activity takes place. As mentioned by Collin (2020) , IFFs may vary between money laundering for the purpose of laundering criminally acquired profits or money laundering for evading taxes from legitimate business activities.

Existing literature highlights the importance of transnational organizations and their leading role in defining money laundering (see Table 3 ). To demonstrate, most global economies follow the definitions, guidelines and regulative structures of institutions such as the FATF, the UNODC and the European Union which define money laundering as a process that helps criminals to disguise illegal profits without compromising the criminals’ benefits from the proceeds. The literature also indicates country-level definitions of money laundering. For instance, the UK and the USA definitions were used.

3.1.2 Characteristics of money laundering.

The key characteristics of money laundering include the aspects of illegality and concealment. On the one hand, revenues as the object of laundering are generated via illegal activities. On the other hand, legal funds may be used for illicit purposes. Consequently, the aim of money laundering is to conceal the actual origin or owner of funds. The European Commission (2019) has identified sectors and products that are potentially vulnerable to money laundering risk. These include cash, the financial sector, the gambling sector, the nonfinancial sector and products, transfers of funds through nonprofit organizations and some new products and sectors. In the following section, we have analyzed how money laundering is characterized in these contexts.

In regard to the financial sector, modern technology and rapid communications have increased the level of money laundering and simultaneously put pressure on banks to detect it ( Canhoto, 2021 ). In addition to traditional wire transfers, financial institutions offer cash-related products and have adopted new technologies (including Fintech), thereby increasing the level of anonymity and exposure to the risk of money laundering ( European Commission, 2019 ). Thus, weak banking systems may lead to unsuccessful attempts to mitigate money laundering ( Defossez, 2017 ).

Professionals in nonfinancial industries such as IT, law, manufacturing, gaming, distribution and accounting might deliberately or unintentionally help criminals to facilitate money laundering. For instance, registration to online gambling platforms offers increased anonymity for criminals who wish to transfer large amounts of money ( Wechsler, 2001 ). Also, the European Commission (2019) considers collecting and transferring funds through nonprofit organizations as risky in terms of money laundering. This is due to the possibility of criminals and terrorist organizations penetrating into the operations of nonprofit organizations. This would allow criminals to hide their beneficial ownership and make it difficult for authorities to trace the origin of the funds. In their (2020) study, Singh and Lin examined how charitable organizations and fundraising may be used in money laundering. Namely, charities may enable criminals to conduct fake payments, lend funds to finance specific projects, make anonymous donations or avoid taxes.

Following the trends in money laundering, the European Commission (2019) has also identified new products and sectors that are vulnerable to the risk of money laundering. These include investor residence and citizenship schemes, professional football and free ports. In a (2002) study, Wechsler pointed out that some countries are offering economic citizenship to wealthy foreign individuals based on their notable investments. However, granting residence permits or citizenship based on investments increases the risks surrounding money laundering, corruption, tax evasion and national security ( European Commission, 2019 ). Another concerning money laundering trend relates to professional football. For instance, May (2019) described how a businessman from Hong Kong took over an English football club and was finally arrested for laundering money. Also, in regard to the use of free ports in money laundering, there is a risk of counterfeiting due to the possibility of reexporting goods without the interference of customs officials ( European Commission, 2019 ). This makes it problematic to detect the origin of products and enables future laundering of revenues generated through counterfeiting. In relation to using ports in general, Burns (2019) studied how criminals aim to enter through busy ports to conduct illegitimate business transactions and trade. The risks these sectors and products pose make them vulnerable to money laundering.

In relation to geographic characteristics of the phenomenon, money laundering was mainly considered as an issue of the developed world until the 21st century. As a result of globally heterogenous standards for mitigating money laundering, criminals would shift their profits to jurisdictions with lacking anti-money laundering (AML) regulation. Nowadays, regions such as South, East and West Africa have their own regional bodies that supervise the implementation of AML policies within these districts ( Sharman, 2008 ).

Money laundering in the advanced global economy necessitates carefully planned processes and networks. These enable connected transactions to be conducted within informal transnational systems that make it difficult to distinguish between illicit and legitimate activities. Often, these networks consist of wealthy individuals, MNCs, offshore financial centers, brokers, advisors, third-party professionals and financial institutions ( Cooley and Sharman, 2015 ). In terms of payment transactions and money laundering techniques, it is also worth noting that wire transfers are often preferred in organization for economic co-operation and development (OECD) jurisdictions. In contrast, emerging countries tend to rely on cash as a payment method ( Sharman, 2008 ).

3.1.3 Causes of money laundering.

Our analysis displays three main levels in the causes of money laundering presented in the existing literature (see Table 4 ). These causes can be divided into micro- (individual level) , meso- ( country level ) and macro- level ( global ) causes.

On an individual level, perceptions about ethics and what is right and wrong ( Gaughan and Javalgi, 2018 ) influence the likelihood of a person conducting or being involved in money laundering. Related to this, the deliberate assistance of third-party professionals within the fields of law, accounting and finance facilitate international transactions, the aim of which is to hide the criminal origin of funds ( Lord et al. , 2018 ). In addition to such intended assistance, employees of MNCs may unintentionally help their customers to conduct international monetary arrangements with money laundering aims.

Country-level causes often stem from a lack of resources or political will to mitigate money laundering ( Ahmed, 2017 ). Furthermore, the political climate within a country affects the tolerance and occurrence of crime. Weak AML structures, regulation and supervision, invite criminals to move capital into these countries ( Clarke, 2021 ; Hameiri and Jones, 2016 ; Perez et al. , 2012 ). One major country-level enabler of money laundering stems from variance in the efficiency of AML mechanisms between different countries. Additionally, low levels of engagement in cooperation between countries to resolve the wicked problem of money laundering enable launderers to benefit from regulatory arbitrage. Varying state regulations might provide institutional voids for criminals to take advantage of while laundering money ( Hameiri et al. , 2018 ). Researchers have also recognized state-level corruption as one of the main country-level causes ( Ahmed, 2017 ; Bojnec and Fertő, 2018 ; Halliday, 2018 ; Marat, 2015 ), as this generates a need for laundering corrupted funds. Furthermore, national interests ( Gaughan and Javalgi, 2018 ) related to receiving laundered funds into the country’s economy ( Alldridge, 2008 ), as well as sociocultural elements ( Lord and Levi, 2017 ), shape domestic legal standards and affect the tolerance of corruption.

Societal phenomena such as TOC affect the occurrence of money laundering ( Charles, 2001 ). Money laundering processes are generated by other crimes such as drug offenses, fraud, smuggling, counterfeiting, human trafficking and tax evasion ( Abu Olaim and Rahman, 2016 ; Warde, 2007 ), the proceeds of which become the object of laundering. In some cases, informal fund transfer networks have been used in money laundering. Namely, as a consequence of increased regulation of formal financial flows, transfers of illegally obtained funds have been partly pushed underground by using informal transaction networks, especially in developing countries ( Warde, 2007 ).

Global developments related to networks, monetary transactions and international mobility of capital have an impact on the frequency of money laundering. Many of the analyzed articles identify globalization as one of the main moderators for money laundering ( Alldridge, 2008 ; Defossez, 2017 ; Estellita and Bastos, 2015 ). Moreover, globalization accelerates the evolution of new techniques used in money laundering by providing possibilities for rapid and international capital movements. By using cryptocurrencies, for instance, criminals are guaranteed enhanced anonymity and speed, raising the odds of not being caught ( Kaygin et al. , 2019 ). As a result, legitimate forms of monetary transactions may be used for unethical purposes related to hiding the origin of financial benefits received by committing crimes. International mobility of capital ( Grabosky, 2009 ), offshore financial centers ( Mugarura, 2017 ; Sadeghi et al. , 2018 ), lack of transparency ( Hülsse, 2009 ) and insufficient information exchange make it more difficult for authorities to trace the proceeds of crime, detect suspicious transactions and determine the parties involved in laundering. Consequently, mitigating the problem becomes highly challenging.

When considering the causes of money laundering, the power aspect cannot be ignored. Wealthy individuals, non-governmental organizations, MNCs, government bureaucrats and other powerful actors may act as facilitators of money laundering. Aggressive wealth optimization – even when the origin of funds is legal – may sometimes end up in a conflicting gray area and finally veer toward tax evasion. Establishment and misuse of legitimate companies or other corporate vehicles and directing funds to offshore financial jurisdictions are quite common when the aim is to maintain clandestine assets ( Lord et al. , 2018 ). In addition, criminals aim to conceal profits generated through illegal activities by using these arrangements. These operations are often enabled by third-party professionals such as financial and nonfinancial advisors or consultancies who have a significant role in assisting powerful actors in transferring funds to the West ( Sharman, 2008 ). For instance, private banking services that provide options for offshore investments, international transactions and discrete dealings with customers are prone to money laundering risk ( Maggetti, 2014 ).

3.1.4 Consequences of money laundering.

In relation to the consequences of money laundering, our review identifies five main categories, which are summarized in Figure 3 .

These include political, economic, social, security-based and AML-based consequences. From an economic perspective, money laundering may cause capital flight ( Sica, 2000 ). This results from investors’ cautiousness as they weigh the risks while considering where to invest ( Mugarura, 2017 ). As the lack of money laundering controls causes economic instability ( Ahmed, 2017 ) and poses risks to bank soundness, this also has negative effects on lawful financial transactions, exchange rates and international capital flows ( Alldridge, 2008 ). Indeed, money laundering creates an unjust commercial advantage for criminals and weakens the position of legal businesses ( Clarke, 2021 ). Therefore, money laundering acts as an impediment to the growth and prosperous development of local economies ( Cooley and Sharman, 2015 ).

In regard to the social dimension, the consequences of money laundering reflect on the well-being of citizens ( Burns, 2019 ), the public’s trust in the financial system ( Sadeghi et al. , 2018 ) and the reputation of a jurisdiction. For instance, countries with a reputation for inadequate regulatory standards do not appear lucrative in the eyes of most prospective investors ( Hameiri, 2020 ). In the bigger picture, it can only take a single country to destroy the accountability of the international financial system by providing a safe haven for criminals due to a lack of supervision ( Gnutzmann et al. , 2010 ). Furthermore, international strategic interests may be compromised as a result of money laundering ( Wechsler, 2001 ).

In terms of security-based consequences, money laundering poses a threat to national and global security and increases the level of crime ( Demetis, 2018 ). National borders often become entry points where legitimate trade becomes mixed with illegal trade. As money laundering is used as a tool to enable criminals’ further usage of illicit funds, it may guarantee continuity of operations for terrorists, drug cartels and illegal loggers to name a few groups ( Burns, 2019 ; Ozinga and Mowat, 2012 ).

In regard to political consequences, tolerance for illegally obtained money to be laundered into a country’s economy weakens the level of democracy and rewards corrupt and criminal actors ( Alldridge, 2008 ). Additionally, money laundering can erode diplomatic relations ( Wechsler, 2001 ). Consequently, money laundering causes political tensions among jurisdictions in terms of regulating the phenomenon ( Cobb, 2009 ). Perceptions about money laundering vary in different countries. Therefore, politicians and governments, especially in emerging markets, may not be as enthusiastic about supporting AML or participating in international initiatives to mitigate the problem as in some more developed countries.

The rapidly growing phenomenon of money laundering has provoked AML as an array of combined efforts to mitigate the problem. Country-specific laws and intergovernmental codes of conduct have been established as a consequence of money laundering. These are touched upon in multiple studies in the scope of our systematic review. As an example, the FATF is focused on enforcing international standards to mitigate actions against money laundering ( Alldridge, 2008 ). Also, industry- and firm-specific investigation units and policies for detecting and investigating money laundering have been established ( Maggetti, 2014 ; Naheem, 2015 ).

Based on our findings, the social problem of money laundering affects a country’s society, local economies, government and citizens, and creates an overall sense of insecurity. One of the most fundamental consequences of money laundering is the establishment of international AML regimes that set a foundation for mitigating the problem worldwide. Next, we will inspect more closely the controls of money laundering.

3.1.5 Controls of money laundering.

Our analysis discloses six control dimensions that help mitigate money laundering ex ante and can become important for further development of controls in ex post situations. These include education and training, international cooperation, power, politics, supervision and reporting, along with the use of technology (see Figure 4 ).

In international organizations, educating employees about the “red flags” of money laundering is important for raising awareness ( Ahmed, 2017 ). Referring to the causes of money laundering (see Table 4 ), this can help individual employees on microlevel to detect and, consequently, intervene to stop suspicious business activities from continuing. Additionally, cooperation across national borders in terms of advancing learning between countries supports the spread of awareness. Especially in the case of developing countries, adopting regulation and prevention practices that have proven to be effective in other countries could be more cost-effective than coercion-based policy transfers that have taken place in many of these countries ( Sharman, 2008 ). Additionally, the vulnerability of MNCs to criminal exploitation has been widely acknowledged. Criminals use both financial and nonfinancial companies to launder money due to the companies’ cross-border operations ( Lord et al. , 2018 ). Therefore, while conducting risk analyses of international markets, organizations and institutions should increase their allocation of resources toward the supervision of risky transactions ( Naheem , 2015, 2016 ). This could result in continuous improvement of controls and amendments in possible compliance gaps ( Friedrich and Quick, 2019 ).

Mitigating country level causes of money laundering, such as lack of resources or weak AML structures, calls for international cooperation and the harmonization of processes between various stakeholders ( Burns, 2019 ; Transparency International, 2017 ) on mesolevel. International treaties, agreements and conventions set a good foundation for systematically mitigating the problem of money laundering ( Estellita and Bastos, 2015 ). For instance, AML recommendations presented by the FATF advance legal and operational mitigative measures. Additionally, the United Nations Convention against Corruption provisions highlight the importance of international cooperation and information exchange in terms of mutual legal assistance and the extradition of criminal proceeds ( Clarke, 2021 ; Collin, 2020 ). Intergovernmental bodies such as these support global AML and play a key role in recommending actions for national legislators to undertake. Intensifying international cooperation in terms of enforcement may lead to the future establishment of a global AML regime ( Clarke, 2021 ; Gaughan and Javalgi, 2018 ).

All in all, efficient international information exchange between authorities and organizations helps in detecting money laundering and in adopting a more proactive approach toward its control. Here, the role of financial intelligence units as government agencies becomes important in cooperating with actors from the private sector and with law enforcement agencies. In addition, the cooperation and information exchange between financial intelligence units of different countries supports international AML ( Bellomarini et al. , 2020 ).

A transparent ( Bojnec and Fertő, 2018 ) and democratic ( Charles, 2001 ) environment provides fewer opportunities for money laundering. As mentioned by Windsor (2013) , democracy and the competitiveness of markets could be enhanced by adopting a strong sense of business ethics within organizations, their stakeholders and governmental institutions. As a result, tolerance toward and the level of money laundering in a country may decrease. Powerful actors such as the European Union, the United Nations, the FATF and Transparency International emphasize the significance of adopting a risk-based approach in mitigating money laundering and distinguishing between legitimate and illicit transactions. The political role of influential states and intergovernmental institutions is also important in terms of controlling money laundering. For instance, if a member country does not comply with the AML standards set by the FATF, its jurisdiction could be “blacklisted” ( Sharman, 2008 ). Blacklisting negatively affects the reputation of a country and, consequently, economic cooperation with other countries may become more difficult. From a regulative aspect, central actors for preventing money laundering include national regulators, government officials and transnational organizations focusing on AML. In the existing literature, country-level controls and domestic compliance are frequently mentioned as key means of mitigating money laundering ( Transparency International, 2017 ). As money laundering is an international issue, national regulators ought to systematically implement efficient mechanisms to constrain laundering ( Abu Olaim and Rahman, 2016 ; Defossez, 2017 ; Halliday, 2018 ) and to aid tackle global causes and consider accelerating factors of money laundering (see Table 4 ) on macrolevel.

Being transparent and discovering the beneficial owners at the background of corporate vehicles have been highlighted as important controls in the existing money laundering literature. In relation to the financial sector, improving the sufficiency of regulation within offshore financial centers has aroused debate among scholars as many see offshore financial centers being separated from crucial regulating entities ( Cobb, 2009 ). To detect the actors behind money laundering operations and trace illicit transactions, such initiatives become strategically important ( Lord and Levi, 2017 ). As weak domestic money laundering controls may lure criminals, they simultaneously harm the efficiency, trustworthiness and stability of the international financial system.

Financial institutions play a key role in blocking criminal transactions; hence, supervising and reporting suspicious activities are necessary to increase transparency and detect criminal operations. Many countries have established financial intelligence units that investigate and analyze information on suspected money laundering and cooperate with competent local and foreign authorities to solve these cases ( Defossez, 2017 ). Money launderers continuously devise new techniques and channels to conduct international transactions ( Demetis, 2018 ) and as a result, new software that helps authorities to raise red flags and detect possible money laundering cases ( Naheem, 2016 ) has been and should continue to be developed.

3.2 Employed theoretical approaches

Our analysis highlights that the money laundering phenomenon has been addressed in research from six main theoretical perspectives (see Table 5 ). The six categories for theoretical perspectives include normative standards , business and economics , law and governance , regional development , information technology and others . Some studies referred to multiple theories or concepts.

Our results show that the money laundering literature is rich in borrowing theories from several disciplines, including business, economics, law, regional development and many others. Our results also indicate that out of the 57 studies, 22 used normative frameworks to explore the money laundering phenomenon. For instance, dominant in explaining the concept of money laundering, along with its characteristics and controls, were normative frameworks proposed by the FATF; domestic AML legislations; international treaties and conventions (see Table 5 ).

Business and economics theories and related concepts were also popular in the extant research. Altogether, 16 studies used business and economics theories, as shown in Table 5 . For example, Windsor (2013) studied the corporate social responsibilities of MNCs in terms of controlling money laundering. Gnutzmann et al. (2010) adopted the beggar-thy-neighbor theory to point out vulnerabilities some countries generate in terms of money laundering prevention by providing a safe haven for criminals. Alternatively, Naheem (2015 , 2016 ) used agency theory to investigate how AML could be carried out more effectively within international organizations. Notably, some of the theories have their origins in other disciplines, but they have established dominance in business and economics. For instance, institutional theory and agency theory have their roots in sociology but are dominant in organization studies.

Law and governance-related theories and concepts were used in five studies (see Table 5 ). As an example, Sharman (2008) used policy diffusion to explain the introduction and implementation of globally homogenous AML laws and policies under different circumstances. Likewise, Grabosky (2009) used routine activity theory to explain why transnational crimes take place, whereas Halliday (2018) applied plausible folk theories in assessing the validity and effectiveness of AML regulations.

Six of the 57 studies were related to regional development theories and associated concepts. Understanding and controlling money laundering is important from the perspective of sustainable development; consequently, state transformation theory was used in three studies to explain the governance and control of money laundering (see Table 5 ). The extant research shows that state transformation is shaped by local sociopolitical forces ( Hameiri and Jones, 2016 ). As another example, Hameiri et al. (2018) were of the view that international controls of money laundering should be implemented through transforming domestic institutions.

Six studies used IT-related theories or concepts (see Table 5 ). For instance, Singh and Lin (2020) focused on IT concepts in explaining how artificial intelligence could be used to detect and prevent money laundering in charitable organizations. Finally, two studies adopted other theories or related concepts that were not linked to the rest of the five categories. Among these, Hülsse (2009) studied the impact of metaphors on the reputation and attractiveness of jurisdictions as financial centers or destinations where money could be laundered.

4. Future agenda and theoretical approaches

Our review highlights that several aspects of money laundering as a transnational business phenomenon are still underexplored. By synthesizing the future research areas proposed in the extant research ( Bahoo et al. , 2020 ), we propose an agenda for future research and practice (see Table 6 ). The proposed research questions help to understand the five identified streams of money laundering research in the IB context.

We further advocate for greater use of two theoretical approaches relatively seldom used in money laundering research, namely, an institutional view and a network view. Both theoretical views are important to explore the concept, characteristics, causes, consequences and controls of money laundering. They serve as powerful analytical tools to uncover formal and informal assumptions, complexities and contingencies around money laundering and to explore the suggested future research questions.

4.1 Institutional approach

The institutional approach as a theoretical lens enables an understanding of the money laundering phenomenon based on informal as well as formal institutions. This view emphasizes the broader and more resilient aspects of social structures ( Di Maggio and Powell, 1983 ). Institutions denote collectivism that shapes and reshapes the values and norms of society through three pillars, namely, regulative, normative and cognitive pillars ( Scott, 2001 ). Hence, an institutional approach could be used to explore the nature of pressure arising from institutionalized money laundering practices and organizational responses toward such pressure ( Oliver, 1991 ). For instance, the institutional pillar framework ( Scott, 2001 ) helps to explore how regulative, normative and cognitive aspects affect microlevel money laundering practices of a society or country. This could enable investigation into how IFFs are defined ( Collin, 2020 ; Sharman, 2008 ) and how sociopolitical aspects facilitate money laundering ( Charles, 2001 ), which may be perceived as “business as usual” rather than as an illegal activity in a specific country context.

Our review reveals that two conceptual studies ( Naheem , 2015, 2016 ) have introduced agency theory – a strand within the institutional approach – to control money laundering. However, no empirical evidence has been provided in the extant research. This approach could also be powerful in explaining the causes and consequences, along with the controls, of money laundering. For instance, investigating the roles of different actors – including individuals, organizations, regulators and enforcement authorities – in creating, maintaining or disrupting institutions ( Cooley and Sharman, 2015 ; Lawrence and Suddaby, 2006 ) could help in understanding why or how money laundering is socially performed or controlled. Furthermore, investigating the money laundering facilitation practices of offshore financial institutions (such as generating unfair taxation and providing opportunities for money laundering) from the institutional perspective could offer valuable theoretical and practical insights ( Cobb, 2009 ).

4.2 Network approach

The network approach assumes markets as a web of interdependent relationships where actors, their activities and resources are the key elements ( Ford and Håkansson, 2006 ; Håkansson, 1992 ). This approach is powerful in explaining the diffusion or spread of money laundering practices via interactive relationships. Our review shows that only one study ( Varese, 2012 ) used a network approach in explaining how criminals operate across territories for mutually beneficial money laundering interests.

We argue that the network approach could also be used in defining the concept and structures of money laundering networks and the positions of the actors involved, along with their resources ( Håkansson et al. , 2009 ). Based on the identification of the aforementioned relationships and networks, it could be possible to examine group outcomes and controls. For instance, under what kind of circumstances do businesses engage in money laundering and what are the roles of powerful actors in spreading and controlling money laundering processes ( Cooley and Sharman, 2015 ). Furthermore, it could be useful to investigate how and why money laundering spreads or evolves in the global context ( Lord et al. , 2018 ; Varese, 2012 ).

5. Conclusions

Our study achieved its objective by offering an integrative view on money laundering as a transnational business phenomenon and by proposing a future agenda and two relatively new theoretical approaches to advance the field. Along with the legal aspects, money laundering poses a moral dilemma relevant for wider discussions of international mega-corruption ( Ahen, 2022 ) and unethical business practices ( Apel and Paternoster, 2009 ) in IB. Besides criminal activity, money launderers infiltrate into otherwise legitimate business transactions in the aim to continue criminal and unethical practices at the background of these business activities ( Christensen, 2011 ). Our review offers four important implications for research and practice.

First, we integrate the extant knowledge on money laundering that is scattered across multiple disciplines ( Canhoto, 2021 ; Van Duyne et al. , 2018 ) and position this phenomenon into the IB literature. By definition, money laundering is a transnational phenomenon and a form of mega-corruption in IB. However, mega-corruption in IB literature mainly focuses on offenses such as corruption and neglects money laundering as a form of international mega-corruption ( Ahen, 2022 ; Bahoo et al. , 2020 ). Alternatively, our study positions money laundering as a practically significant IB phenomenon that requires immediate attention from academics and practitioners.

Second, our review introduces five key streams of money laundering literature in the IB context. The 5Cs integrate money laundering literature and draw connections among common and distinct elements of the phenomenon. This 5C categorization ameliorates the largely fragmented conceptions on money laundering and will facilitate future comparison and integration that may help advance future IB research and practice. As shown by our review, money laundering has various definitions, along with complex micro-, meso- and macro-level contexts and dimensions for the development of this field. Regarding this, integration of past research is important ( Palmatier et al. , 2018 ). This is particularly true in the case of money laundering literature, which is scattered and fragmented across various disciplines ( Canhoto, 2021 ; Van Duyne et al. , 2018 ). The 5C dimensions proposed in our study will facilitate the development and generalization of money laundering research by speaking the same language and by clearly outlining the key aspects of the wicked money laundering problem.

Third, money laundering has harmful effects on global business and society. Therefore, we offer a future agenda for the advancement of this area that will help to understand and subsequently mitigate money laundering in the global business environment (see Table 6 ). Our agenda may help IB scholars to study the wicked problem of money laundering in the future. Wicked problems have numerous causes, which no unambiguous solution can solve. However, these problems can be tamed by careful planning, deep understanding and effective remedies ( Camillus, 2008 ). In relation to this, our future agenda points out some important questions that need to be addressed. The areas of future research suggested provide a platform for building propositional inventories and hypotheses to advance scholarship on money laundering in IB. We also suggest two plausible and useful theories (namely, institutional and network approaches) for future studies on money laundering in the IB context.

Finally, from a practical perspective, our study is equally important for local as well as global organizations, regulators, law enforcement authorities and society. The 5Cs view on money laundering helps draw the phenomenon together with different angles to explain the collection of practices used in transforming illicit funds into legal ones. This could help practitioners to design and apply more effective means to mitigate the causes and consequences of money laundering and subsequently assist them in effective remediation of money laundering in IB environments. Nevertheless, with the help of the 5Cs framework, we illustrate that solving some aspects of money laundering creates issues elsewhere. Consequently, this wicked problem needs to be addressed in a holistic manner.

Methodological approach

5Cs of money laundering in the IB context

Consequences of money laundering

Controls of money laundering

Overview of past reviews on money laundering

Search criteria for data collection and scope of research

Causes of money laundering

Theories and related concepts used

Future agenda for research and practice

Overview of published research on money laundering

Publications included in our systematic review are indicated with an asterisk.

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Acknowledgements

The authors gratefully acknowledge the grant support from the Foundation for Economic Education, Finland; Employee Foundation, Finland; Säästöpankki’s Foundation, Finland; TOP-foundation, Finland and Paulo’s Foundation, Finland. The authors thank Professor Niina Nummela and Adjunct Professor Peter Zettinig for their helpful and insightful comments on earlier versions of this manuscript.

Corresponding author

About the authors.

Emilia A. Isolauri, MSc, is a Doctoral Researcher of International Business at the Turku School of Economics at the University of Turku, Finland. Her major research interests focus on social problems and business ethics through phenomena such as money laundering and white-collar crime.

Dr Irfan Ameer is working as a Lecturer in International Business at the University of Plymouth, UK. He is also associated with the University of Turku, Finland as a Post Doctoral Researcher in the Department of Marketing and International Business. His areas of interest include CSR, sustainability, and governance-related issues in marketing and international business.

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Sam Bankman-Fried Sentenced to 25 Years in Prison

Mr. Bankman-Fried, who was convicted of stealing $8 billion from customers of his FTX cryptocurrency exchange, faced a maximum sentence of 110 years.

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By David Yaffe-Bellany and J. Edward Moreno

David Yaffe-Bellany and J. Edward Moreno have covered the collapse of FTX extensively.

Sam Bankman-Fried, the founder of the FTX cryptocurrency exchange who was convicted of stealing billions of dollars from customers , was sentenced to 25 years in prison on Thursday, capping an extraordinary saga that upended the crypto industry and became a cautionary tale of greed and hubris.

Mr. Bankman-Fried’s sentence was shorter than the 40 to 50 years that federal prosecutors had sought after a jury found him guilty of fraud, conspiracy and money laundering — charges that carried a maximum penalty of 110 years behind bars. But the punishment was far above the six and a half years requested by his defense lawyers.

Mr. Bankman-Fried, 32, did not visibly react as Judge Lewis A. Kaplan handed down the sentence in Federal District Court in Manhattan. His parents, the law professors Joe Bankman and Barbara Fried, sat two rows from the front, staring at the floor.

“He knew it was wrong. He knew it was criminal,” Judge Kaplan said of Mr. Bankman-Fried’s actions.

Before the sentence was delivered, Mr. Bankman-Fried, cleanshaven and wearing a loosefitting brown jail uniform, apologized to FTX’s customers, investors and employees.

“A lot of people feel really let down, and they were very let down,” he said. “I’m sorry about that. I’m sorry about what happened at every stage.” He added that his decisions “haunt” him every day.

Mr. Bankman-Fried was also ordered to forfeit about $11 billion in assets.

At the sentencing, Judge Kaplan pointed to testimony from Mr. Bankman-Fried’s trial that showed the FTX founder’s extreme appetite for risk, saying it was his “nature” to make colossally dangerous bets. “There is a risk that this man will be in a position to do something very bad in the future,” he said.

Judge Kaplan also said Mr. Bankman-Fried had lied on the witness stand and failed to take responsibility for his crimes. “He regrets that he made a very bad bet about the likelihood of getting caught,” he said. “But he’s not going to admit a thing.”

Mr. Bankman-Fried, currently housed at the Metropolitan Detention Center in Brooklyn, will be sent to a low- or medium-security prison, the judge said, very likely near his parents’ home in the San Francisco Bay Area.

The sentencing signified the finale of a sweeping fraud case that exposed the rampant volatility and risk-taking across the loosely regulated world of cryptocurrencies. In November 2022, FTX imploded virtually overnight, erasing $8 billion in customer savings. At a trial last fall, he was convicted of seven counts of fraud, conspiracy and money laundering.

His sentence ranks as one of the longest imposed on a white-collar defendant in recent years. Bernie Madoff , who orchestrated a notorious Ponzi scheme that unraveled during the 2008 financial crisis, received a 150-year sentence in 2009. He was in his 70s and died 12 years later. Elizabeth Holmes , who was convicted of defrauding investors in her blood-testing start-up, Theranos, was sentenced to 11 years and three months in 2022.

A representative for Mr. Bankman-Fried declined to comment. In a statement, his parents said, “We are heartbroken and will continue to fight for our son.”

Ira Lee Sorkin, the defense lawyer who represented Mr. Madoff, said he was not surprised Mr. Bankman-Fried got a stiff sentence, albeit a shorter one than his own client.

“He is 32 years old, and he will see the light of day,” he said of Mr. Bankman-Fried. “But he is going to spend a lot of time in a cell.”

Just 18 months ago, Mr. Bankman-Fried was a corporate titan and one of the youngest billionaires on the planet. With his face plastered on billboards and magazine covers, he could raise money seemingly at will. He hobnobbed with actors, musicians and superstar athletes, cultivating an image as a nerdy do-gooder who intended to donate all his wealth to charity.

Based in the Bahamas, FTX was one of the largest marketplaces for cryptocurrencies — an easy-to-use platform where investors could exchange dollars or euros for digital coins like Bitcoin and Ether. Its valuation was north of $30 billion.

But over less than a week in November 2022, a run on deposits exposed an $8 billion hole in FTX’s accounts. Mr. Bankman-Fried resigned, handing over power to a team of lawyers who promptly filed for bankruptcy. The next month, he was arrested at his luxury apartment in the Bahamas and charged with stealing from customers to finance billions in political contributions, charitable donations and investments in other start-ups.

The investigation moved with startling speed for such a complex case. Within months, three of Mr. Bankman-Fried’s top deputies, including a former girlfriend, pleaded guilty to fraud charges and agreed to cooperate with prosecutors. Mr. Bankman-Fried was initially granted home detention, but the judge revoked his bail in August after ruling that he had tried to intimidate witnesses, and sent him to the Brooklyn detention center.

At the trial in October, Mr. Bankman-Fried’s former colleagues testified for the prosecution, telling a jury that they had conspired with him to loot customer accounts. When he took the witness stand, Mr. Bankman-Fried seemed evasive at times, repeatedly claiming that he couldn’t remember crucial details of his FTX tenure.

“When he wasn’t outright lying, he was often evasive, hairsplitting, dodging questions,” Judge Kaplan said on Thursday. “I’ve never seen a performance quite like that.”

After he was convicted, Mr. Bankman-Fried’s lawyers and family embarked on a long-shot campaign to secure a lenient sentence and rewrite the public narrative about FTX’s failure. In a sentencing memo, Marc Mukasey, one of the defense lawyers, argued that Mr. Bankman-Fried had sometimes behaved strangely on the stand because he was autistic. He also cited the mogul’s charitable initiatives, arguing that FTX was supposed to be a force for good in the world.

But the defense’s case centered on the money that FTX users lost when the exchange went under. Since FTX’s bankruptcy, its new leaders have cobbled together billions of dollars to return to customers, partly by liquidating stashes of digital coins and selling Mr. Bankman-Fried’s stakes in other companies. Mr. Mukasey claimed those customers would eventually be made whole through the bankruptcy process, putting the losses caused by Mr. Bankman-Fried’s actions at “zero.”

The prosecutors rejected that argument. While FTX’s new leadership has predicted that customers will eventually get their deposits back, the money they receive will be equivalent to the dollar value of their holdings in November 2022 — and won’t account for a recent surge in the crypto markets that sent Bitcoin to its highest-ever price .

Mr. Bankman-Fried “demonstrated a brazen disrespect for the rule of law,” prosecutors wrote in a sentencing memo. “He knew what society deemed illegal and unethical, but disregarded that based on a pernicious megalomania.”

On Thursday, Judge Kaplan said of FTX’s victims: “The defendant’s assurance that they will be paid in full is misleading. It is logically flawed. It is speculative.”

Over the past several weeks, the prosecutors filed hundreds of letters from FTX customers that laid out how the financial losses had devastated their lives. One customer said the collapse had led to “suicidal thoughts.”

“Sam Bankman-Fried has to think for the rest of his life of the multitude of lives he destroyed with his selfishness and superficiality,” the customer wrote. “I really hope that justice will teach him the difference between life and video games.”

Another FTX user, Sunil Kavuri, who lost $2 million when the company collapsed, testified at the hearing that the implosion had wiped out money he planned to spend on a house and his children’s education.

“I’ve lived the FTX nightmare for almost two years,” he said.

When Mr. Bankman-Fried spoke, he offered a sometimes-rambling assortment of thoughts, apologizing for his mistakes while insisting that FTX had enough assets to make customers whole.

“I made a series of bad decisions,” he said, his leg shaking. “They weren’t selfish decisions. They weren’t selfless decisions. They were bad decisions.”

Mr. Bankman-Fried has vowed to appeal his conviction, hiring a lawyer from the law firm Shapiro Arato Bach to oversee that effort. But in his remarks, he appeared to accept that he would be in prison for some time.

“At the end of the day, my useful life is probably over now,” he said.

Matthew Goldstein contributed reporting.

David Yaffe-Bellany writes about the crypto industry from San Francisco. He can be reached at [email protected]. More about David Yaffe-Bellany

J. Edward Moreno is a business reporter at The Times. More about J. Edward Moreno