The Observed Effects of Money Laundering for Jamaica - Caribbean ...

Therefore if the financial institution is known to be associated
with money laundering activity then this will undeniably affect the
customer trust. Hussain (undated) further stated that this effect on
customer trust will negatively affect capital accumulation by these
institutions; he further stated that this will affect the stock of capital
which contributes to investment.
The IMF in a recent paper noted “that a problem can arise, as
seen during the international financial crises in 1997 jurisdictions
through the "contagion effect," and such financial problems can quickly
become larger, macroeconomic problems. A factor underlying the
contagion effect is the perception that whatever serious problem sparked
a liquidity crisis in one financial institution or system may also exist,
heretofore unappreciated, in another financial institution or system.
Another factor is that there are perceived to be a significant number of
interrelationships between the problem institution and to other
jurisdictions that will raise the possibility of liquidity problems in the
former being spread to the latter”. With this in mind with the case of
Jamaica if money laundering is causes a lot of hot-money flows then this
can result in a severe liquidity crisis which will result in the contagion
effect as mentioned above resulting in financial sector crises. The effects
of another financial crisis will be detrimental to the Jamaican economy.
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