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Global Money Laundering

                                                                                                                                                                                                                                                                                                                   

Table 3 shows the top twenty countries of origin for laundered money, as estimated by the model. Note that most are developed countries.

Table 3. Top 20 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%
11 Spain 56287 2.0%
12 Thailand 32834 1.2%
13 South Korea 21240 0.7%
14 Mexico 21119 0.7%
15 Austria 20231 0.7%
16 Poland 19714 0.7%
17 Philippines 18867 0.7%
18 Netherlands 18362 0.6%
19 Japan 16975 0.6%
20 Brazil 16786 0.76
Total All Countries 2850470 100.0%
The model then tries to estimate where these amounts of hot money will go for laundering, using the assumptions described above.

 Estimates of the top twenty flows are presented in Table 4, including flows of funds within the generating countries themselves.

Table 4. Top 20 Flows of Laundered Money
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%
11 Germany Germany 47202 1.7%
12 United States Bermuda 46745 1.6%
13 Spain Spain 28819 1.0%
14 Thailand Thailand 24953 0.9%
15 Hong Kong Hong Kong 23634 0.8%
16 Canada Canada 21747 0.8%
17 United Kingdom United Kingdom 20897 0.7%
18 United States Luxembourg 19514 0.7%
19 Germany Luxembourg 18804 0.7%
20 Hong Kong Taiwan 18796 0.7%
Total All Countries All Countries 2850470 100.0%
Finally, it is possible to aggregate these flows according to their destinations.

Table 5 presents the top twenty destination countries for money laundering, according to the assumptions currently incorporated in the model.


Table 5. Top 20 Destinations of Laundered Money
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%
11 Bahamas 66398 2.3%
12 Germany 61315 2.2%
13 Switzerland 58993 2.1%
14 Bermuda 52887 1.9%
15 Netherlands 49591 1.7%
16 Liechtenstein 48949 1.7%
17 Austria 48376 1.7%
18 Hong Kong 44519 1.6%
19 United Kingdom 44478 1.6%
20 Spain 35461 1.2%
It is interesting again to note how much of the laundered money, using these assumptions, flows to already developed countries – particularly the United States and Europe. The potential of money laundering to widen the gap between rich countries and poor countries is another important issue that can be tested using a model of this kind.
Use of Media Content Analysis for Calibration of the Model

As a means of evaluating the credibility of the estimates produced by the model, a sample of one hundred press clippings on money laundering or related issues, provided by a crime-related media monitoring service, was examined for information regarding the extent of national or global flows of laundered money.

The original press reports, predominantly (but not exclusively) from English-language printed and electronic media, were dated between 27 February and 5 May 1998 – a period of less than ten weeks. More recently, national assessments for Belarus (personal communication), Canada (web site) and Colombia (clippings) have also been obtained, together with an estimate for drug-related money laundering in the USA (Europol clippings).
.....Table 6. Comparisons of Estimates contained in Media reports against Model results.


Press Clippings Model results
"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 sent for laundering in Poland each year
"Share of shadow business in Russia's economy may range between 25% -50%" (TASS 17 Mar 98)
"In the estimate of experts from the Russian interior and economics ministries, between $50bn and $250bn has been illegally transferred from Russia to western banks over the past five years" (Interfax News Agency, 23 Apr 99) Model estimates money laundering 15% of Russian GDP
Model estimates an annual $28bn is laundered from Russia into western banks; i.e. $140bn in a five year period.

"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
"Money laundering in Belarus about 30% of GDP" (European Humanities University, 20 Nov 98) Model estimates 22.2% of GDP
"Illicit funds generated and laundered in Canada per year between $5 and $17 billion." (Canadian Solicitor General, Sep 1998) Model estimates $22 billion generated and laundered in Canada per year, but also that $63 billion of US crime funds laundered in Canada.
"Approximately $2.7 billion are laundered in Colombia every year" (BBC Monitoring Service, Latin America, 25 Nov 98) Model estimates that $2.1 billion laundered in Colombia every year.
"Illicit drug sales generated up to $48 billion a year in profits that criminals tried to put back into the mainstream economy through money laundering, a Congressional hearing told." (Reuters, 16 April 99) Model estimates $34.6 billion 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

John Walker 30/11/1998.
http://www.johnwalkercrimetrendsanalysis.com.au/ML%20method.htm


http://docs.dos.ny.gov/info/register/2010/oct20/pdfs/securities.pdf