Globalization has emerged with people, goods, and capital to travel freely around the universe. Improvements in engineering and communicating have changed the universe to go more planetary. This globalisation has created chances for organized condemnable mobs and members of extremely sophisticated to implement illegal activities in the universe and back up the multinational condemnable activities. This paper will discourse approximately ways to command multinational condemnable activities such as money laundering, illicit trade, and corruptness. There will be an account about the impact of the corruptness particularly for development and economic public presentation. Last, there will be a state survey of Indonesia in commanding its corruptness.

The Description of Transnational Criminal Activities

Multinational offense activities are activities occurred from the globalisation of condemnable activity such as corruptness, money laundering, illicit trade and many others. Those activities are supported by multinational felon web which is defined as “ a structured group of three or more individuals that exists over a period of clip, the members of which act in concert aiming at the committee of serious offenses in order to obtain a direct or indirect fiscal or other material benefit ” ( United Nations Convention against Transnational Organized Crime, 2000, Art. 2a ) . Multinational offense has become a planetary job and convincing United Nations to denote multinational offense as its highest precedence and declare it as one of the major challenge in the universe throughout twenty-first century.

Looking back to the history the organized offense took portion traditionally in illegal activities such as illegal gaming, harlotry, loan- sharking and drug trafficking by commanding specific districts. Presents, the organized offenses are non limited merely for specific districts but have widened their activities in corruptness, bank fraud, illicit trade, environmental offense, migratory smuggling and many others. Transnational condemnable mobs have been working globally in any state where there are bureaucratic or legal loopholes that allow them to take advantage from the system. Multinational offenses carry a deep menace to the security of economic of the state where their activities will ache the free market economic system. There are three chief multinational activities that will be discussed here and that are money laundering, illicit trade and corruptness.

Money Washing

2.1 Definition of Money Washing

Harmonizing to Financial Action Task Force ( FATF ) , “ money laundering is defined as the processing of condemnable returns to mask their illegal beginning in order to legalize the dirty additions of offense ” . The illegal activities by multinational offense groups gain a big sum of money which needs to be laundered. Money laundering is needed because most of the illegal minutess are with hard currency and because hard currency foliages about no hint for the bearer ‘s information such as grounds or paperss. This big sum of money will hold impact on the minutess of legitimate fiscal establishment which in long term may convey negative effects on revenue enhancement gross, investing clime, and consumer assurance. Insider trading, graft and computing machine fraud strategies may besides make immense net incomes and back up the dirty additions through money laundering. Money laundering may weaken the constitution of free and competitory markets and the development of national economic systems.

The Control of Money Washing

It is a fact that commanding money laundering is non easy and need the cooperation from authorities, fiscal establishments and citizens. Aside from that, a transparence bureaucratic, anti corruptness act besides needed to back up the control of money laundering. It ‘s rather of import to hold international organisations that may assist to command the money laundering. One of the organisations is the Financial Action Task Force ( FATF ) which has been an inter-governmental organic structure with a intent to develop and advance policies both at national and international degrees to contend against money laundering. FATF tried to convert those non-cooperative states by printing a “ black list ” with aid of “ name and shame ” policy ( Friedrich Schneider and Ursula Windischbauer, 2008, pp. 400 ) . It has besides contending the money laundering by puting international criterion and creates necessary political will for national legislative and regulative reforms.

Illicit Trade

3.1 Definition of Illicit Trade

Illicit trade means illegal trade which can besides be agencies smuggling, undeclared local production and imitative points. The roots of illicit trade are corruptness, poorness, and unequal income. Illicit trade has increased the danger in political effects, money laundering, and corruptness.

Illicit trade brings bad impact for industry and other sectors such as:

It hurts industry repute ;

It undermines investing in distribution web ;

It amendss trade name equity ;

It promotes the forgery production.

It supports consumer to unregulated merchandise ;

It supports funding terrorist act and organized offense ;

It motivates the widespread criminalism ;

It destroys the market for distributers, providers, and retail merchants ;

It undermines authorities financial aims.

Those bad impacts of illicit trade have significantly undermined states development.

3.2 The Control of Illicit Trade

Illicit trade in economic activities seems to be occurred by deficiency of province control and it is a direct challenge for province authorization. High rate of corruptness is related with province powerlessness and bad effects of illegal markets because condemnable groups frequently bribe province to execute illicit trade. The control of illicit trade has to get down with reforming the authorities ‘s actions and policy shapers with the aid from international and regional organisations. State has to back up with the signifier of more expansive, intensive, technologically advanced international policing, and surveillance attempt. Some selective re-regulation aiming illicit fiscal flows must be implemented to diminish the terrorist funding ( Peter Andreas, 2004, p. 647 ) .


4.1 Introduction to Corruption

The word “ corruptness ” is taken from Latin adjectival “ corruptus ” which means spoiled, destroyed and broken. Based on Concise Oxford Dictionary, the significance “ to pervert ” is to corrupt and “ corruptness ” leads to moral impairment ( Geoffrey M. Hodgson and Shuxia Jiang, 2007, pp.1044 ) . Corruptness is a phenomenon that has more than individual definition. “ Corruption is defined as the abuse of public office for private fiscal addition by an elected functionary. ” ( Rose-Ackerman, 1999 ) Corruptness has been identified as “ the individual greatest obstruction to economic and societal development. ” ( The World Bank, 1997 ) The Transparency International as the planetary alliance against corruptness defined corruptness as “ the abuse of entrusted power for private addition ” ( Transparency International, 2000, p.2 ) .

There are two factors which may hold impact on corruptness ( Vito Tanzi, 1998, p. 563 ) . First is the development of free international trade and concern. The growing of international concern and trade has given chance of many state of affairss utilizing the payment of payoffs. These payoffs may give benefit to companies which pay them to acquire an entree to profitable contracts over rivals. Aside from that the payoff may give entree to acquire foreign contracts or market or to peculiar benefits such as revenue enhancement inducements. Second are some alterations in the economic systems in many states particularly the passage economic systems. Denationalization has a close relationship with corruptness in the economic alterations. State or public endeavors have been an indispensable beginning of corruptness. One of the major beginnings of corruptness is political corruptness because it is frequently used to finance the political parties ‘ activities. The denationalization procedure of public or province endeavor has made state of affairss whereby persons such as curates or high functionaries have the right to make determinations while others such as directors or other insiders have information that unavailable for foreigners and they may utilize denationalization to profit themselves.

4.2 The Impact of Corruptness on Development and Economic Performance

4.2.1 The Relation between Corruption and Development

Corruptness has many signifiers and may impact the development growing in many ways. The consequence of corruptness has altered the markets and the allotment of resources and it ‘s likely to cut down the economic growing and efficiency ( Vito Tanzi, 1998, p.583 ) .

Corruptness distorts the ability of authorities to set up the necessary regulative reviews and controls to amend the market failures. Because of corruptness, the authorities does non execute optimally on its regulative criterions over many facets such as Bankss, nutrient distribution, fiscal markets, infirmaries, transit activities and many others. Corruptness motivates authorities intercession such as making monopolies for private additions and will take to market failures.

Corruptness may besides cut down the authorities function in countries such as protection of belongings rights and enforcement of contracts. In the illustration when citizens may purchase their manner out of at contractual duty so the primary function of authorities is ruined and the growing will be negatively affected.

Corruptness reduces inducements. In the corruptness environment persons may apportion their power to pervert activities and non to productive activities and these corruptness activities have a negative value for the development.

Corruptness brings down the legitimacy of democracy and market economic system. Based on fact that raised by many states particularly in passage economic systems states, the unfavorable judgment voiced against democracy and market economic system that are supported by the presence of corruptness. Corruptness may be the barrier for state ‘s motion toward democracy and a market economic system.

Corruptness may execute as an arbitrary revenue enhancement with rather high public assistance costs. The random nature of corruptness makes high loads because the cost of seeking to whom the payoff must be paid has to be added with the cost of negociating and paying the payoff. The duties by contract secured by bribe payment are tend to be violated when corruptness is decentralized.

Corruptness will increase poorness because it will sabotage the possible income earning of the hapless.

4.2.2 The Relation between Corruption and Economic Performance

There are some ways in which corruptness may impact the economic public presentation:

Corruptness may raise public investing because public investing undertaking are easy to be manipulated by high functionary to acquire payoff ( Tanzi and Davoodi, 1997, p.11 ) . Due to that fact, corruptness is frequently linked with measure of public investing and non the quality of the public investing. High corruptness states tend to hold low quality of substructure such as paved roads, railroads, and power outages. It is assumed that corruptness so lower the productiveness of public investings and cut down the operation and care of states ‘ substructures ( Tanzi and Davoodi, 1997, p. 18 ) .

Corruptness may cut down investing and reduces the development of growing ( Mauro, 1995, p.695 ) . The decrease of investing is caused by higher costs and uncertainness created by corruptness. The diminution on the investing rate leads to decrease of rate of growing. Mauro ( 1995 ) found that corruptness have negative effects with investing together with the position that corruptness will take down the private fringy merchandise of capital and for illustration corruptness can be functioned as a revenue enhancement on investing.

Corruptness may besides cut down the influx of Foreign Direct Investment ( FDI ) . Based on the corruptness theory, by paying payoffs to pervert the authorities administrative officials to acquire benefits such as investing licence, constabulary protection, revenue enhancement appraisals and licenses is viewed as extra cost for making concern. Corruptness may diminish the expected profitableness of the investing undertaking. Investors will see the degree of corruptness in the host state as a usher to do determination to put abroad. Corruptness may take down FDI because corruptness has similar consequence as a revenue enhancement. If there is an addition in either the corruptness degree or the revenue enhancement rate on transnational houses in the host state so it ‘s likely to cut down the influx of FDI ( Wei, 2000, p.8 ) . There is no uncertainty that establishments may impact the economic public presentation. However, the negative impacts on corruptness is vanished if the host state ‘s institutional quality is good and proposing that the investors value the establishment ‘s quality instead than the degree of corruptness in the host state ( Ali Al-Sadig, 2009, p.289 ) .

Corruptness may cut down the authorities outgo on wellness and instruction ( Paulo Mauro, 1997, p. 88 ) . Government takes function on the budgetary determinations and if the authorities is corrupted so the budget for outgo to good sectors are besides decreased. It may besides cut down the revenue enhancement gross because corruptness has impact in the imposts and revenue enhancement disposal ; therefore the ability of authorities to pass for public outgo is besides decreased. ( Tanzi and Davoodi, 1997, p.9 ) .

In context with fiscal liberalisation corruptness may take down the rate of return of capital and lower the betterment of engineering. If the rate of corruptness rather high, it can take down the growing and do domestic rates of return to capital before liberalisation bead below the other states. In that instance by opening capital history will take to capital flight which reduces the rate of technological alteration and upset the economic system ‘s invention sector. On the contrary if the rate of corruptness rather low, it will back up the growing and state ‘s technological alteration ( Fransisco L. Rivera -Batiz, 2001, p.728 )

4.3 The Control of Corruption

Corruptness trades with the public goods analysis and the model of public goods have helped to understand several troubles in commanding corruptness. Corruptness has prevented markets to work decently, turns gifted people to unproductive activities, reduces private or public investing, and prevents the maximal direction of natural resources. With those bad affects, the corruptness must be controlled to be able to back up the development. States have to develop anti-corruption policies that are engaged in administration nucleus and public sector reform. The chief aims from these policies are to increase the effectivity, answerability, and transparence of public sectors through developed fiscal, administrative and control systems ( Marie Chene, 2008, p.4 ) .

There are several ways to supervise authorities steps in contending corruptness ( Marie Chene, 2008, p.7 ) :

Public Financial Management ( PFM )

This PFM may assist to forestall and observe the corrupt patterns by supplying proper direction of public resources, support audit maps and let trailing of improper outgo.

Administrative and Civil Service Reforms

Anti-corruption scheme can be supported by administrative and civil service reforms. A good motivated, professional and good paid civil service may assist to cut down corruptness. Public functionary studies have been implemented to study the public presentation and quality of institutional environment, include the informal restraints and formal constrains.

Tax and Revenue Functions

Customss and Tax sections are sectors that probably connected with corruptness and reform in this sector will hold to include steps such as separation of maps, rotary motion, and decrease of discretional powers.

Parliamentary Reform

Parliaments have a chief function to contend corruptness since they contribute the constitution of appropriate anti-corruption legal models. The reform should be focused on transparence by doing parliamentary activities open to public entree and making public audience to back up the parliamentary control and authorities activities particularly with budget activities.


Decentralization holds a chief public sector reform in many states. Governments have to deconcentrate their activities and do determination in local degree to advance authorities answerability, public engagement and public policies.

Civil society organisations have important function to command corruptness. Transparency international is one of those who fight against corruptness by constructing “ national, regional, and planetary alliances that embrace the province, civil society, and the private sector to contend domestic and international corruptness ” ( Galtung, 2000, p.26 ) .

A State Survey: Dutch east indies

Dutch east indies

Indonesia is a biggest state in South East Asiatic but being the biggest state does n’t intend Indonesia has a successful economic systems compared with the other South East Asiatic Countries. One of the important factors that prevent Indonesia from the economic growing is corruptness. Based on the Corruption Perception Index 2009, Indonesia ‘s rank is 111 and that is truly high rate of corruptness compared to other neighbor states such as Singapore, Malaysia, and Brunei Darussalam. Indonesia has been indistinguishable with these three phrases such as corruptness, collusion and nepotism. Those phrases have been suppressing Indonesia ‘s development and demand to be fought. Since 1998 Indonesia had been implementing the reform plan to contend the corruptness ( Natasha Hamilton Hart, 2001, p.69 )

Political Reform

The most obvious alterations from Soeharto epoch is the coming of electoral democracy. The house of representative or DPR ( “ Dewan Perwakilan Rakyat ” ) has introduced the free and just election in 1999. For the first clip after the independency, the citizens have ability to back up their political histrions.

Social and Press Freedom

This societal and imperativeness freedom have supported the rise of wide civil associations, and organisations which focused on corruptness such as Indonesia Corruption Watch and Transparency International Indonesia. The imperativeness and civil associations have important function to supervise the authorities activities.

Fiscal Transparency and Financial Monitoring

These financial transparence and fiscal monitoring have increased transparence to supervise the authorities operations and cut down the irregular usage of authorities financess.

Legal reform

There has been legal reform particularly the tribunal system and corruptness Torahs. National Law Commission has been established to rede legal reform and legal jobs.

Foreign Involvement in the Reform Procedure

Multilateral establishments, foreign houses and foreign persons have played function in reform procedure of corruptness. World Bank and IMF have monitored the corruptness through their ability to give fiscal aid. The plans of both organisations have closely related with administration and anti-corruption standards.

Civil service reform

In audience with World Bank, civil service reform scheme has been established. For illustration higher rewards are necessary for anti corruptness attempts, therefore the populace sector wages need to be improved to avoid corruptness.


Globalization has widened multinational condemnable activities around the universe. Multinational condemnable activities such as corruptness, illicit trade, and money laundering have been a planetary job that may convey negative impacts for economic public presentation and economic growing. Corruptness may convey bad effects in economic public presentation such as cut downing public investing, FDI, authorities outgo, lower rate return of capital, and lower the engineering alteration. Therefore it may forestall states to accomplish development growing. In order to command these multinational felon activities, authorities, private histrions, national and international organisations have to collaborate together to face this planetary job. Indonesia is one of the states that have high degree of corruptness and demand to contend this corruptness to accomplish its development. Some reforms have been implemented in contending corruptness and those may assist Indonesia work out corruptness but still Indonesia needs to better its policies with the support of authorities and citizens.