Transcript Estimating the Illicit Flows – Asking the Right Questions

Estimating the Illicit Flows –
Asking the Right Questions
John Walker
CEO, John Walker Crime Trends Analysis
Principal Research Fellow, Centre for Transnational Crime Prevention,
University of Wollongong, Australia
John Walker Crime Trends Analysis
Illicit Financial Flows

Put simply, Illicit Financial Flows from Developing Countries consist of
quantities of money derived from crimes committed in those countries.

Official definitions of crime vary between countries, although there is
consensus about most forms of crime.

Contentious areas include business practices considered as fraudulent in
some countries but not in others (e.g. payments of bribes and false
invoicing), and some areas of excise avoidance (e.g. cigarette smuggling).

This paper takes a broad view that acts that would be crimes or illegal
business practices in countries with sophisticated legal systems must also
be regarded as crimes or illegal business practices in developing countries.

Illicit Financial Flows from Developing Countries are, therefore, part of the
broader issue of transnational crime and moneylaundering.
John Walker Crime Trends Analysis
Asking the Right Questions about
Transnational Crime and Moneylaundering

It is difficult to explain the importance of a problem without quantifying it.
(Neil Jensen,
Director, AUSTRAC, 2005)

FinCen’s “overriding objective” under the strategic plan is the development of a
“viable model for measuring the magnitude of moneylaundering.” “No assessment of
an agency’s or government’s anti-moneylaundering programs can be a true gauge of
its effectiveness, unless it is based on an understanding of the breadth of the
problem being addressed”. (FinCEN Strategic Plan, 2000)

“The government are very keen on amassing statistics. They collect them, add
them, raise them to the nth power, take the cube root, and prepare wonderful
diagrams. But you must never forget that every one of these figures comes, in the
first instance, from the village watchman, who just puts down what he damn
pleases”. (English economist Sir Josiah Stamp, 1929)

"Striving for perfection is the greatest stopper there is... It's your excuse to yourself
for not doing anything. Instead, strive for excellence, doing your best." (British actor, Sir
Laurence Olivier)

“…..blending dodgy data and heroic assumption and turning them into something
particularly useful” (Dutch criminologist, Max Kommer)

“Accuracy is meaningless – credibility is everything”.
John Walker Crime Trends Analysis
(Me)
The Right Questions about Transnational
Crime and Moneylaundering
How
Much
Crime
is there
?
How
Much
Profit
is there
in the
Crime
?
What
Proportion
of the
Profits
is
Laundered
?
Where
does it
go for
Laundering
?
John Walker Crime Trends Analysis
How does
it impact
on Society
?
These are Very important Questions
$ 1. How much crime is there around the world, and where is it based?
$ 2. How big are crime profits around the world, and where are they generated?
$ 3. What factors make crime more profitable in some countries than others?
$ 4. What factors make some countries more attractive to ML than others?
$ 5. How much money is laundered each year around the world?
$ 6. How much harm is caused by crime and ML, and who suffers most?
John Walker Crime Trends Analysis
So who is asking them?
Up to the 1980s

Most countries compile crime statistics. Only measures recorded crime. Accuracy
doubts; rigging by police, politicians; counting rules.

Interpol collects crime data from member countries – no consistency, no analysis, not
even computerised until the late 1990s. Only measures recorded crime.

Crime Victims Surveys developed in the 1970s (USA, UK) to capture data on a
common set of definitions and on unrecorded crime. Limited crime types, costly,
political risk, little interest in other countries.

In the 1980s, the U.N. attempted to compile international crime and justice statistics
on a common set of definitions – very problematic, poor response, little consistency,
poorly resourced.

Transnational crime analysis mostly country-specific, offence specific or confined to
studies of mafia, yakuza, drug gangs etc

Transparency International experimenting with corruption and bribery indexes.
John Walker Crime Trends Analysis
Measuring the Risks posed by Transnational
Crime and Moneylaundering
1988


United Nations Convention against illicit traffic in narcotic drugs and psychotropic substances;
EU decides to conduct Europe-wide crime survey. Australia, USA, Canada join in. Questions
include “did you report it to police?” and “how much did it cost you?”
1989

FATF Working Group on Statistics and Methods, “Narcotics ML – Assessment of the Scale of the
Problem” notes the lack of reliable data to measure ML.

EU Convention on laundering, search, seizure and confiscation of the Proceeds from Crime.
FATF’s “Forty Recommendations“ on the prevention of money laundering.
U.N. Rome conference agrees to pilot Business Crime survey, including reporting and costs
questions. Australia, UK, Netherlands, South Africa.
1990


1991

EU Directive on prevention of the use of the financial system for purpose of money laundering.

Estimates of the Costs of Crime in Australia – a model for the U.N.

Estimates of the Extent of money laundering in Australia – a model for the FATF.
1992
1995
1996-2000

UN Office on Drugs and Crime



Refinement of International Crime and Justice Surveys, International Crime Victims Surveys, Business
Crime Surveys
“Global Report on Crime and Justice” attempts to bring together data on economics of transnational crime
Attempts to survey the characteristics of organised crime groups in different countries
John Walker Crime Trends Analysis
Measuring the Risks posed by
Transnational Crime and Moneylaundering
June 1997

FATF creates “Ad Hoc Group on Estimating the Magnitude of Money Laundering”
Sept 1997

Ad Hoc Group’s Chair agrees to draft a paper to suggest methodologies to measure ML – calls for
papers from member countries.
Feb 1998

Interim report from Chairman

Identifies AUSTRAC study as a landmark study, examines four macro-economic methodologies identified by
FINCEN-sponsored studies, and concludes that future studies should be
 [a] confined to FATF members, [b] focused on a wide range of crimes that generate criminal proceeds.
Dec 1998

FATF International Meeting of Experts on Estimating the magnitude of ML
 Disappointing level of participation
 Most countries’ contributions focused on official statistics
 Discussion of relationship between underground economic activity and ML
 Switzerland attempts to have the work focus on ML from drug crimes, arguing that crimes
involving theft, fraud and corruption are “regarded as simply transfers of wealth”.
 Finland paper focuses on fraud.
 Australian paper presents complete methodology.
 Conclusions:


Need for greater participation from all FATF member countries
Initial focus to be on estimating “the supply and demand for illegal drugs”
John Walker Crime Trends Analysis
The Rich Countries’ Club fails to Deliver

FATF efforts to “estimate the magnitude of ML” failed on
5 key counts:





Focus on incomplete range of crime types – drugs only
Focus on incomplete range of illicit drugs - Cocaine, Marihuana,
Heroin only
Focus on incomplete range of countries - rich north-Atlantic
countries only
Focus on statistical “purity”
Avoidance of “proceeds of crime” logic

Intended to fail………….?

Need to provoke more constructive discussion.
John Walker Crime Trends Analysis
What next?

Need to provoke discussion, in the
absence of any real progress within the
UN or FATF.

Can the Australian model be used for
other countries around the world?
John Walker Crime Trends Analysis
The 1996 Australian Model
Identifies Upper and Lower Bounds
TC = Total Costs of Crime
TP = Total Proceeds of Crime
KP = Known Proceeds
of Crime
TE = Total
Economy
TM = Total
Money Laundering
TT = Total
Terrorist Financing
KM = Known
Money Laundering
Incoming Money Laundering
KT = Known Terrorist Financing
Costs of crime are part of the Economy. Proceeds of crime are a subset of costs. Some proceeds of crime are laundered, but
some laundered money also comes from outside the economy. Terrorist finance may not have criminal origins and is not
necessarily laundered. “Known” components are very small subsets of their respective estimated totals. [Not to scale]
John Walker Crime Trends Analysis
Estimates of ML in and through Australia (1996)
• Estimates based on Costs of Crime and Expert Survey
Estimated Proceeds of Crime
Crime Category/
Implied ML Estimates for Australia ($mill)
Min
Mid1
Mid2
Max
Homicide Max $2.75m
<1
<1
<1
<1
Robbery & Extortion $74.4m
<1
22
22
45
Other Violence Min $3.31m
<1
<1
<1
<1
Breaking and Entering $714.4m
14
71
71
500
Insurance Fraud $1530m
38
77
153
306
Business Fraud $375 - $900m
56
225
540
900
Other Fraud $750m
38
113
188
600
Motor Vehicle Thefts $533.6m
27
53
187
480
8
82
116
347
<1
<1
2
8
Illicit Drugs $1500m
300
750
1050
1350
Total
402
1394
2328
4536
Other Thefts $462Environmental Crime $5.21-
$5951 - $7661m
John Walker Crime Trends Analysis
Importance of Triangulating with Other Data
Estimates based on Costs of Crime and Expert Survey compared to:
• Estimates based on Proceeds of Crime Monitoring
• Estimates Based on Understatement of Income Data
• Estimates Based on Suspect Financial Transactions
• Estimates Based on Flows of Finance through Australian
Banks and International Transfers
John Walker Crime Trends Analysis
Estimates of ML in and through Australia (1996)
Overseas
Economy
Overseas Money laundered
overseas
$US20,000
billion
$US100-500 billion?
Costs of
Crime
The Australian Economy
$380 billion
P.o.C.
Costs of Crime
$11-21 billion
ML
Overseas Money
laundered in Australia
$7.7 billion?
Australian Money laundered
overseas
$5.5 billion?
John Walker Crime Trends Analysis
Proceeds of Crime
$6-8 billion
ML
$1-4.5 billion
Australian Money laundered in
Australia
“Just do it…..!”

Is there enough basic data to construct a
global model?
John Walker Crime Trends Analysis
How much Crime around the World?
U.N. Crime & Justice Survey
John Walker Crime Trends Analysis
Triangulate with other Data
…Banks and Businesses rarely report crime, because they think it will
adversely affect their “image”
Source: www.kpmg.com
John Walker Crime Trends Analysis
Measuring the Proceeds of Crime
• “Crime in Australia costs $A11-21 bn, and profits are $A6-8 bn per year”
(John Walker Crime Trends Analysis, 1996)
•"Illegal grey economy in Czech Republic about 10% of GDP”
(Hospodárské Noviny, 2 Apr 98)
• "$30bill illegal drugs reach the US from Mexico each year"
(Chicago Tribune, 25 Mar 98)
• "Shadow business in Russia's economy may range between 25% -50%"
(TASS 17 Mar 98)
• "UK black economy between 7-13% of GDP"
(Sunday Telegraph, 29 Mar 98)
• "$50-250bn illegally moved from Russia to Western banks in 5 years"
(Russian Interior & Economics Ministries, April 99)
• "Illicit drug sales (in the USA) generated up to $48bn a year in profits"
(Congressional hearing, April 99)
• "Illegal profits total 2-5% of world GDP or $1-3trillion"
(Dow Jones News, 12 Mar 98)
John Walker Crime Trends Analysis
About Criminal Income

Crime generates income in all countries

Income from crime depends on the prevalence of different types of crime and the
average proceeds per crime

Sophisticated and organised crimes generate more income per crime than simpler
and individual crimes

Crimes that trade on “forbidden goods” like drugs, arms, pornography, slave labour,
copyrights, migration visas etc, are particularly profitable

In general, richer countries generate more income per crime than poor ones

Income inequality or corruption may support a rich criminal class even in a poor
country

Not all criminal income is laundered - Even criminals have to eat, sleep, drive fast
cars, and pay accountants and lawyers
If you like algebra........

Total Criminal Profits to be Laundered =
Total Population times GNP/Capita times:
 700*(TI Corruption Index)*(Bribery+Embezzlement+Fraud rates) +
 500*Drug Trafficking rate + 100*Theft rate + 65*Burglary rate +
 50* Drug Possession rate + 20*Robbery rate + 0.2*Homicide rate +
 0.1*(Assault rate + Sex Assault rate)
John Walker Crime Trends Analysis
About Corruption
Transparency International
Corruption Perceptions Index 2002
Score
Countries
9+
Finland, Denmark, New Zealand, Iceland, Singapore, Sweden, Canada,
Luxembourg, Netherlands,
United Kingdom, Australia, Norway, Switzerland, Hong Kong,
Austria, USA, Chile, Germany, Israel, Belgium, Japan, Spain,
Ireland, Botswana, France, Portugal, Slovenia,
Namibia, Estonia, Taiwan, Italy, Uruguay,
Hungary, Malaysia, Trinidad & Tobago, Belarus, Lithuania, South Africa, Tunisia,
Costa Rica, Jordan, Mauritius, South Korea, Greece, Brazil, Bulgaria, Jamaica,
Peru, Poland,
Ghana, Croatia, Czech Republic, Latvia, Morocco, Slovak Republic, Sri Lanka,
Colombia, Mexico, China, Dominican Rep., Ethiopia, Egypt, El Salvador, Thailand,
Turkey, Senegal, Panama
Malawi, Uzbekistan, Argentina, Cote d’Ivoire, Honduras, India, Russia, Tanzania,
Zimbabwe, Pakistan, Philippines, Romania, Zambia, Albania, Guatemala,
Nicaragua, Venezuela, Georgia, Ukraine, Vietnam, Kazakhstan, Bolivia,
Cameroon, Ecuador, Haiti, Moldova, Uganda, Azerbaijan
Indonesia, Kenya, Angola, Madagascar, Paraguay, Nigeria, Bangladesh
8<9
7<8
6<7
5<6
4<5
3<4
2<3
1<2
John Walker Crime Trends Analysis
Resulting Estimates of Money Generation by Crime Type by
Offences
involving
Fraud
Drug
Offences
Property
Offences
Violent
Offences
Total
Generated
ate
To
tal
Ge
ne
r
Au
str
ala
sia
As
ia
St
h
Af
ri c
a
Am
eri
c
a
$US bill/yr
C.
St
h
e
st
As
ia
Ea
Nt
hA
Eu
ro
p
me
ric
a
Crime
Types
Am
er
ica
World Region
1358
973
327
30
29
25
21
3.7
2767
38
26
1
0.5
0.6
0.5
1.6
0.5
68.9
7.2
6.3
0.4
0.2
0.1
<.1
0.2
14.6
<.1
<.1
<.1
<.1
<.1
<.1
<.1
<.1
<.1
1403
1006
329
31
30
25
22
4
2850
Note:
<.1
the big numbers come from fraud not drugs
John Walker Crime Trends Analysis
Assumptions about Laundering Processes

Not all laundered money leaves the country

Some countries' finance sectors provide perfect cover for local launderers

Countries where official corruption is common provide benign environments for
launderers

Laundered money seeks countries with attractive banking regimes

Tax Havens

"No questions asked" banking

Countries with stable economies and low risk

Trading, ethnic and linguistic links will determine launderers' preferred destinations

Other things being equal, "hot" money will be attracted to havens with trading, ethnic, linguistic or
geographic links to the generating country
If you like algebra........

Attractiveness to money launderers =

[GNP per capita] *[3*BankSecrecy+GovAttitude+SWIFTmember-3*Conflict-Corruption +15]


Where: GNP per capita is measured in US$, BankSecrecy is a scale from 0 (no secrecy laws) to 5 (bank secrecy laws enforced),
GovAttitude is a scale from 0 (government anti-laundering) to 4 (tolerant of laundering),
SWIFTmember is 0 for non-member countries and 1 for members of the SWIFT international fund transfer network,
Conflict is a scale from 0 (no conflict situation) to 4 (conflict situation exists),
Corruption is the modified Transparency International index (1=low, 5=high corruption),
And the constant '15' ensures that all scores are greater than zero.
John Walker Crime Trends Analysis
Model Index: Most Attractive to Launderers
COUNTRY
Score
Luxembourg
United States
Switzerland
Cayman Islands
Austria
Netherlands
Liechtenstein
Vatican City
United Kingdom
Singapore
Hong Kong
Ireland
Bermuda
Bahamas, Andorra, Brunei, Norway, Iceland, Canada
Portugal, Denmark, Sweden, Monaco, Japan, Finland,
Germany, New Zealand, Australia, Belgium
Bahrain, Qatar, Italy, Taiwan, United Arab Emirates,
Barbados, Malta, France, Cyprus
Gibraltar, Azores (Spain), Canary Islands, Greenland,
Belarus, Spain, Israel
686
634
617
600
497
476
466
449
439
429
397
356
313
250-299
Attractiveness to
Money
Launderers
=
200-249
150-199
100-149
[GNP per capita]*[3*BankSecrecy+GovAttitude+SWIFTmember–3*Conflict–Corruption +15]
John Walker Crime Trends Analysis
Triangulation: Attractiveness to ML:
Service Exports and Incoming Money Laundering
John Walker Crime Trends Analysis
Triangulation: Attractiveness to ML:
Banking Risk Analysis
TRANSCRIME “Euroshore” project
1. Money laundering punished in your criminal system?
2. Legislation provides for a list of crimes as predicate offences?
3. Predicate offences cover all serious crimes?
4. Predicate offences cover all crimes?
5. Provision allowing confiscation of assets for an ML offence?
O ld A ttra
tiv e n e s Attractiveness
s In d e x V e rs u s N e w
Transcrime
& cWalker
6. Special investigative
bodies
or investigations in relation toIndices
ML offences?
CRIMINAL LAW
700.0
BANKING LAW
Tra nsCrim e Ba se d Score
ADMINISTRATIVE
REGULATIONS
COMPANY LAW
1. Is there an anti-ML law in the jurisdiction?
2. Banks covered by the anti-ML law?
L u x e m b o u rg
3.. 0Other financial institutions covered by the anti-ML law?
600
Cay m ans
4. Non-financial institutions covered by the anti-ML law?
S w it z e rla n d
5. Other professions carrying out a financial activity covered by the anti-ML
law?
500.0
6. ID requirements for the institutions covered by the anti-money law?
S in g a p o re
7. Suspicious transactions reporting?
A u s t ria
8.. 0Central authority (for instance, an FIU) for the collection
of suspicious transactions reports?
400
L ie c h t e n s t e in
H
o
n
g
K
o
n
g
9. Co-operation between banks or other financial institutions and police authorities?
N e t h e rla n d s
300
1.. 0Prohibition
to open a bank account without
ID of the beneficial owner?
B e rm u d a
2. Limits to bank secrecy in case of criminal investigation and prosecution?
Ire la n d
200.0
1. Minimum share capital required for limited liability companies?
2. Prohibition on bearer shares in limited liability companies?
3.. 0Prohibition on legal entities as directors of limited liability companies?
100
4. Registered office exists for limited liability companies?
5. Any form of annual auditing (at least internal) for limited liability companies?
0.0
6. Shareholder register exists for limited liability companies?
0.0
INTERNATIONAL
CO-OPERATION
PROVISIONS
U .K .
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
1. Extradition (at least ofWforeigners)
a l k e r 1 9 9 9for
M ML
o d eoffences?
l A ttr a c ti v e n e ss S c o r e
2. Assistance to foreign law enforcement agencies in investigation of ML cases?
3. Law enforcement may respond to a request from a foreign country for financial records?
4. Provision allowing the sharing of confiscated assets for ML offences?
5. The 1988 UN Convention
been
ratified?
John
Walker
Crime Trends Analysis
…Putting all this information together...
Model’s Top 10 Origins of Laundered Money
Rank
Origin
1
United States
2
Amount ($Usmill/yr)
% of Total
1320228
46.3%
Italy
150054
5.3%
3
Russia
147187
5.2%
4
China
131360
4.6%
5
Germany
128266
4.5%
6
France
124748
4.4%
7
Romania
115585
4.1%
8
Canada
82374
2.9%
9
United Kingdom
68740
2.4%
10
Hong Kong
62856
2.2%
John Walker Crime Trends Analysis
Model’s Top 10 Flows of Laundered Money
Rank
Origin
Destination
Amount ($USmill/yr)
1
United States
United States
528091
18.5%
2
United States
Cayman Islands
129755
4.6%
3
Russia
Russia
118927
4.2%
4
Italy
Italy
94834
3.3%
5
China
China
94579
3.3%
6
Romania
Romania
87845
3.1%
7
United States
Canada
63087
2.2%
8
United States
Bahamas
61378
2.2%
9
France
France
57883
2.0%
10
Italy
Vatican City
55056
1.9%
John Walker Crime Trends Analysis
% of Total
Model’s Top 10 ML Destinations
Rank
Destination
Amount ($Usmill/yr)
1
United States
538145
18.9%
2
Cayman Islands
138329
4.9%
3
Russia
120493
4.2%
4
Italy
105688
3.7%
5
China
94726
3.3%
6
Romania
89595
3.1%
7
Canada
85444
3.0%
8
Vatican City
80596
2.8%
9
Luxembourg
78468
2.8%
10
France
68471
2.4%
John Walker Crime Trends Analysis
% of Total
Model results compared to Press reports
"Illegal grey economy in Czech Republic about 10% of GDP” (Hospodárské Noviny, 2 Apr 98)
Model estimates 14.8% of GDP
"$30bill illegal drugs reach the US from Mexico each year" (Chicago Tribune, 25 Mar 98)
Model estimates $26bill laundered in Mexico each year
“More than $2bill is laundered in Poland each year" (National Bank of Poland, reported on 15 Apr 98)
Model estimates $3bill laundered in Poland each year
"Share of shadow business in Russia's economy may range between 25% -50%" (TASS 17 Mar 98)
Model estimates money laundering 15% of Russian GDP
"Switzerland is implicated in $500bill of money laundering each year" (Swiss Finance Ministry, reported on 26 Mar 98)
Model estimates $59bill - including only "first-stage" laundering.
"UK black economy between 7-13% of GDP" (Sunday Telegraph, 29 Mar 98)
Model estimates total money laundering 7.4% of UK GDP
"$50-250bn illegally moved from Russia to Western banks in 5 years" (Russian Interior & Economics Ministries, April 99)
Model estimates $28bn per year from Russia to western banks
"Money Laundering in Belarus about 30% of GDP" (European Humanities University, 20 Nov 98)
Model estimates 22.2% of Belarus GDP is laundered money
"Illicit funds generated and laundered in Canada per year $5-17 bn" (Canadian Solicitor General, Sep 1998)
Model estimates $22bill generated and laundered in Canada each year,
but also that $63bn of US crime funds laundered in Canada.
"Approximately $2.7bn are laundered in Colombia each year" (BBC Monitoring Service, Nov 98)
Model estimates $2.1bn laundered in Colombia every year
"Illicit drug sales (in the USA) generated up to 48bn a year in profits for laundering" (Congressional hearing, April 99)
Model estimates $34.6bn generated and laundered by illicit drug trade in USA
"Illegal profits total 2-5% of world GDP or $1-3trillion" (Dow Jones News, 12 Mar 98)
Model estimates total global money laundering $2.85 trillion
After late 1999, it became apparent that most published estimates were based on my model
John Walker Crime Trends Analysis
Triangulation:
Shadow Economy,
Crime and Money
Laundering

“Excess” shadow economy
might be an indicator of
the proceeds of crime.
On this basis, the shadow
economy in Australia
would produce around
AU$20 billion per year,
some of which laundered.
40,000
All rich countries have
low % shadow
economies
Ireland
35,000
USA
30,000
GDP/capita ($US) 2001

GDP per capita vs. Shadow Economy
Switzerland
Austria
25,000
Japan
UK
Australia
16.821
Italy
Many of the richest
countries with high %
shadow economies have
significant transnational
crime, illicit drug
production and corrupt
business practices.
UAE
20,000
NZ
15,000
Estonia
10,000
35.4
Mexico
32.2
Iran
Uruguay
RussiaBelarus
Colombia Thailand
Panama
Peru
5,000
China
Vietnam
Mongolia
Poor countries
with low % shadow
0
economies are
0
20
mostly “command economies”
38.9
Morocco
Yemen
41.6
42.1
Pakistan
42.1
40
Shadow Economy as % of GDP
Source: F. Schneider and J. Walker.John Walker Crime Trends Analysis
Georgia
Bolivia
Lao PDR
60
80
Triangulation: Cross-border flow Analysis
(Raymond Baker, 2005)
Global Flows
Low ($US bn)
High ($US bn)
Drugs
$120
$200
Counterfeit goods
$80
$120
Counterfeit currency
$3
$3
Human trafficking
$12
$15
Illegal arms trade
$6
$10
Smuggling
$60
$100
Racketeering
$50
$100
$331
$549
Mispricing
$200
$250
Abusive transfer pricing
$300
$500
Fake transactions
$200
$250
Commercial Subtotal
$700
$1000
Corruption
$30
$50
Grand Total
$1061
$1599
Crime Subtotal
From “Capitalism’s Achilles Heel”, Baker 2005. Based on a review of studies of transnational crime
John Walker Crime Trends Analysis
Triangulation: the Economics of the Global
Illicit Drugs Trades

By 2005 UNODC researchers were convinced they had sufficient data in
their Annual Reports Questionnaires to develop a global model of the illicit
drugs market.

ARQs received from most countries around the world – all continents;
rich/poor; developed/less developed countries.

We developed mechanisms for testing the credibility of ARQ data from
different countries by comparing them with other ARQ data and other
studies.

We developed mechanisms for filling the gaps in the data, by classifying
different countries and “interpolating”.

We identified the economic logic of the illicit drugs trades.

We identified ways to deduce the “trade routes” of the illicit drugs trades, by
comparing “mentions”, and developed this into a “tracking model” that can
explain corruption levels in transit countries.
John Walker Crime Trends Analysis
The Economics of the Illicit Drugs Trades
John Walker Crime Trends Analysis
General Conclusions from the Model

Global money laundering may be as much as $US3 trillion per annum

Business Fraud exceeds illicit drugs as a source of laundered money

Attacking the economics of crime can be an effective transnational crime
prevention strategy.

Economists can play a valuable role in monitoring and combating
transnational crime and money laundering.

Does AML reduce crime? – Probably not by much.

Does AML reduce ML? – Probably not much, but it diverts it from the
finance sectors to more costly avenues.

Does AML help catch criminals? – Probably only a few, but sometimes very
important ones.

Does AML protect the economy? – Probably a massive boost to the
economy by ensuring that the finance sector is seen as honest, wary and
supervised.
John Walker Crime Trends Analysis
Model Estimates of ML Flows from
Developing Countries
Region…………………………………………………………………………………….
Total US$ Million
Caribbean
6,452
Central America
2,525
Central Asia and Transcaucasian countries
East Africa
15,201
3,559
East and South-East Asia (Excl. Brunei, Japan, Singapore, Rep of Korea)
444,536
East Europe
176,963
Near and Middle East /South-West Asia (Excl Israel)
North Africa
12,213
4,178
Oceania (Exc Australia, NZ)
209
South America
30,361
South Asia
3,465
Southeast Europe
129,512
Southern Africa
14,321
West and Central Africa
3,278
Total Developing Countries
846,773
John Walker Crime Trends Analysis
Model Estimates of ML Flows from
Developing Countries
E Europe
176963
SE Europe
129512
Caribbean
6452
Central America
N & W Africa
4178
12213
W & C Africa
30361
15201
Near & Middle
East/SW Asia
2525
South America
C Asia/Transcaucasus
3278
E & SE Asia
444536
South Asia
3465
E Africa
Oceania
3559
209
Southern
Africa
14321
C & S America total $39.3 bn; Africa total $25.3 bn;
Europe total $306.5bn; ME & Asia total $475.6bn
Global total $846.8 bn
John Walker Crime Trends Analysis