Illicit Activity and Money Laundering from an Economic Growth Perspective: A Model and an Application to Colombia

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Analytical Study of the Phenomenon of Money Laundering and its Impact on the Iraqi Banking Sector

“…Influence of money laundering has on economic development [23] mentioned that Money laundry is one of those international phenomena which have affected the whole world and even after so many precautions and implementation of rules and regulations, it is still happening on a very large ratio. It is a fact that this issue has affected the economy of the world very drastically especially the economy of those countries which are actually being used by money launders.…”

Administrative Legislation for Tax Payoff by Combining Tax Payments, Land Allotment, Service Concession under Humanitarian Approach

“…In our globalization times tax collection evolved in an impossible mission due to offshore banking, invoices and investments triangles and unlimited tax avoidance tricks on the edge of legality. We study for years' money laundering antisocial policies like Bank capture, Black salaries, Bulk cash smuggling, Cash-intensive businesses, Casinos, Fictional loans, Real estate, Round-tripping, Shell companies and trusts, Structuring, Trade-based laundering etc [14,18]. However, these and a lot more represent the dark side of the tax collection system.…”

Can the AML system be evaluated without better data?

“…Such figures increase over time but unlike crime rates, never appear to fall (see, for example, [14]), only 10 The World Bank is attempting to develop more sophisticated models for the estimation of money laundering at the national level. For an early effort with Colombia see Villa et al [15]. 11 Michel Camdessus, then the Managing Director of the IMF, did not claim that the IMF had produced the estimate but only that such estimates had been made by others: however this refinement has been lost in the subsequent narratives.…”

“…14 A RAND study suggested that 2005 Mexican Drug Trafficking Organizations' gross revenues (significantly more than their net profits) from moving drugs into the United States total $5.1 billion ( [27], p. 30), plus relatively modest further income in the low hundreds of millions from people trafficking. 15 Even taken at face value, however, these numbers are only weakly related to money laundering. Fearsome though they may be, Mexican DTOs have large expenses in bribes to law enforcement and politicians (which may have to be laundered only when they are above a rather high threshold of lifestyle and patronage expenditures); and they have large levels of 'staffing' to support, mainly in cash from cash proceeds of crimes.…”

“…This leads to the aggregation of large amounts of funds deemed unpaid, on which notional interest has to be paid, artificially creating an ever-higher unredeemable attrition rate (Home Affairs [24][25][26]). 15 It is important to focus on gross revenues because estimating net revenues requires information about what DTOs pay to produce or purchase the drugs, and data are far too poor to permit this. 16 One complexity points in the other direction, to underestimates of the demand for money laundering services in the drug trade.…”