While nation-states often possess substantial legal powers to punish transnational crimes such as money laundering, terrorism, drug trafficking, and international corruption, they frequently lack the capacity to focus such powers on the most serious offenders and threats. Power reflects a nation-state’s authority to legitimately coerce individuals or organizations in an attempt to achieve some objective desired by policymakers. The hallmarks of power are expansively-worded criminal statutes that can be applied domestically or extraterritorially and extensive regulatory powers that can be imposed with minimal judicial intervention to detain people, effect forfeitures of bank accounts, freeze assets or impose civil penalties. Capacity, meanwhile, describes the nation-state’s ability to detect the most serious offenders and to effectively focus its extraordinary legal powers specifically on them.
This article uses the global attack on criminal finance to highlight some of the agency problems created by the separation between power and capacity in transnational law enforcement, where the public (acting as “principal”) may have trouble evaluating the work of government officials (the “agent”). “Criminal finance” refers to financial activity associated with funding or profiting from crime. The global attack on criminal finance is the most ambitious legal response to transnational crime: the conduct targeted in this attack includes both willful and also merely negligent conduct, the tools used to wage the attack include criminal penalties as well as regulation, and the predicate offenses range from drug trafficking to public corruption to terrorism.
While there are principled reasons to pursue a global attack on criminal finance, in practice the attack may demonstrate a pattern of separation between state power and state capacity. (1) The offenses most likely to be punished may often be the ones that can be most easily detected, which are rarely “serious” in any defensible sense. Interest groups may oppose regulatory policies designed to enhance detection capacity. (2) Given their incentives, policymakers in developing countries may adopt new laws and regulations without changing underlying patterns of non-enforcement against criminal financial activity. (3) Some kinds of criminal financial activity – whether impelled by intrinsic objectives or a craving for profits – will remain extraordinarily difficult to deter, because of offenders’ motivations and their ability to substitute among different types of transactions. (4) Executive officials often have incentives not to make the investment in creating capacity. Instead they may prefer to use their powers to create an impression of greater security, even in the absence of the capacity to impose substantial costs on the most troubling offenders, or to detect them.
As with other challenges in transnational law enforcement, the global attack on criminal finance evinces a trend toward growth in state legal power – a trend as clear as the extent of capacity is opaque. I explain how the gap could be narrowed in specific and rare circumstances, such as when swing voters are disproportionately sophisticated, or when exogenous shocks dramatically improve the efficiency of investigative methods and technologies. Without these developments, the seductive scenario where the nation-state actually augments its capacity by expanding its legal powers will remain on the horizon, tantalizingly close – but perhaps relentlessly out of reach.