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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. Illicit Financial Flows .
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CEO, John Walker Crime Trends Analysis
Principal Research Fellow, Centre for Transnational Crime Prevention, University of Wollongong, Australia
Up to the 1980s
TP = Total Proceeds of Crime
KP = Known Proceeds
TM = Total
TE = TotalEconomy
TT = Total
KM = Known
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]The 1996 Australian ModelIdentifies Upper and Lower Bounds
The Australian Economy
Costs of Crime
Proceeds of Crime
Overseas Money laundered in Australia
Australian Money laundered in Australia
Australian Money laundered overseas
$5.5 billion?Estimates of ML in and through Australia (1996)
U.N. Crime & Justice Survey
…Banks and Businesses rarely report crime, because they think it will adversely affect their “image”
If you like algebra........
Total Population times GNP/Capita times:
Note: the big numbers come from fraud not drugs
If you like algebra........
United States 634
Cayman Islands 600
Vatican City 449
United Kingdom 439
Hong Kong 397
Bahamas, Andorra, Brunei, Norway, Iceland, Canada 250-299
Portugal, Denmark, Sweden, Monaco, Japan, Finland,
Germany, New Zealand, Australia, Belgium 200-249
Bahrain, Qatar, Italy, Taiwan, United Arab Emirates,
Barbados, Malta, France, Cyprus 150-199
Gibraltar, Azores (Spain), Canary Islands, Greenland,
Belarus, Spain, Israel 100-149
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?
6. Special investigative bodies or investigations in relation to ML offences?
1. Is there an anti-ML law in the jurisdiction?
2. Banks covered by the anti-ML law?
3. Other financial institutions covered by the anti-ML law?
4. Non-financial institutions covered by the anti-ML law?
5. Other professions carrying out a financial activity covered by the anti-ML law?
6. ID requirements for the institutions covered by the anti-money law?
7. Suspicious transactions reporting?
8. Central authority (for instance, an FIU) for the collection of suspicious transactions reports?
9. Co-operation between banks or other financial institutions and police authorities?
1. Prohibition to open a bank account without ID of the beneficial owner?
2. Limits to bank secrecy in case of criminal investigation and prosecution?
1. Minimum share capital required for limited liability companies?
2. Prohibition on bearer shares in limited liability companies?
3. Prohibition on legal entities as directors of limited liability companies?
4. Registered office exists for limited liability companies?
5. Any form of annual auditing (at least internal) for limited liability companies?
6. Shareholder register exists for limited liability companies?
1. Extradition (at least of foreigners) for ML offences?
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?
Model’s Top 10 Origins of Laundered Money
Rank Origin Amount ($Usmill/yr) % of Total
1 United States 1320228 46.3%
2 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%
Rank Origin Destination Amount ($USmill/yr) % of Total
1 United States United States 528091 18.5%
2 United States Cayman Islands 129755 4.6%
3 Russia Russia 118927 4.2%
4 Italy Italy 94834 3.3%
5 China China 94579 3.3%
6 Romania Romania 87845 3.1%
7 United States Canada 63087 2.2%
8 United States Bahamas 61378 2.2%
9 France France 57883 2.0%
10 Italy Vatican City 55056 1.9%
Rank Destination Amount ($Usmill/yr) % of Total
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%
After late 1999, it became apparent that most published estimates were based on my model
All rich countries have low % shadow economies
Many of the richest countries with high % shadow economies have significant transnational crime, illicit drug production and corrupt business practices.
Poor countries with low % shadow economies are
mostly “command economies”
Source: F. Schneider and J. Walker.
From “Capitalism’s Achilles Heel”, Baker 2005. Based on a review of studies of transnational crime
E & SE Asia
Near & Middle East/SW Asia
N & W Africa
W & C Africa
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