Money Laundering in a Microfounded Dynamic Model: Simulations for the U.S. and the EU-15 Economies

Bagella, Michele; Busato, Francesco; Argentiero, Amedeo

doi:10.2202/1555-5879.1420

Cited by 40 publications

(30 citation statements)

References 3 publications

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“…Since the introduction of anti-money laundering policies, there has been a high demand for estimates of money laundering to justify the costs that are faced by public and private entities to chase the dirty money. Walker 6 , Schneider 13 , Unger 14 , and Baguella et al 15 all use an economic or econometric model to estimate the amount of money laundering. Walker 6 was the first with a prototype model to estimate global money laundering.…”

Section: Introductionmentioning

confidence: 99%

Estimating money laundering flows with a gravity model-based simulation

Ferwerda

Saase

Unger

et al. 2020

Sci Rep

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It is important to understand the amounts and types of money laundering flows, since they have very different effects and, therefore, need different enforcement strategies. Countries that mainly deal with criminals laundering their proceeds locally, need other measures than countries that mainly deal with foreign illegal investments or dirty money just flowing through the country. This paper has two main contributions. First, we unveil the country preferences of money launderers empirically in a systematic way. Former money laundering estimates used assumptions on which country characteristics money launderers are looking for when deciding where to send their ill-gotten gains. Thanks to a unique dataset of transactions suspicious of money laundering, provided by the Dutch Institute infobox Criminal and Unexplained Wealth (iCOV), we can empirically test these assumptions with an econometric gravity model estimation. We use this information for our second contribution: iteratively simulating all money laundering flows around the world. This allows us, for the first time, to provide estimates that distinguish between three different policy challenges: the laundering of domestic crime proceeds, international investment of dirty money and money just flowing through a country.

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Section: Introductionmentioning

confidence: 99%

Estimating money laundering flows with a gravity model-based simulation

Ferwerda

Saase

Unger

et al. 2020

Sci Rep

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“…Walker (1995), Unger (2007), Schneider (2008), and Bagella et al (2009) estimate the amount of money laundering based on an economic or econometric model. Walker (1995) was the first to propose a prototype model to estimate money laundering worldwide.…”

Section: Introductionmentioning

confidence: 99%

Gravity models of trade-based money laundering

et al. 2013

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Several attempts have been made in the literature to measure money laundering. However, the adequacy of these models is difficult to assess, as money laundering takes place secretly and, hence, goes unobserved. An exception is Trade-Based Money Laundering (TBML), a special form of trade abuse that has been discovered only recently. TBML refers to criminal proceeds that are transferred around the world using fake invoices that under-or overvalue imports and exports. This article is a first test on the well-known prototype models proposed by Walker and Unger to predict illicit money laundering flows and to apply traditional gravity models familiar in international trade theory. To do so, we use a dataset of Zdanowicz of TBML flows from the US to 199 countries. Our test rejects the specifications of the Walker and Unger prototype models, at least for TBML. The traditional gravity model that we present can explain TBML flows worldwide in a plausible manner. An important determinant is trade in which TBML is hidden. Furthermore, our results suggest that criminals use TBML in order to escape the stricter anti-money laundering regulations of financial markets.

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“…In this special issue, three promising recent methods to estimate the amount of money laundering globally will be presented: a model from international trade theory, the gravity model (Walker and Unger, 2009); an analysis of unusual trade data (Zdanowicz, 2009); and a dynamic equilibrium two-sector model from macroeconomics (Bagella et al, 2009). …”

Section: Three Promising Methods To Estimate the Scale Of Money Laundmentioning

confidence: 99%

Money Laundering - A Newly Emerging Topic on the International Agenda

Unger¹

2009

Review of Law &Amp; Economics

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Money laundering - bringing illicit proceeds from drugs, fraud and other crime, back into the legal economy - has become an issue of international concern only in the last twenty years. Since 9/11 it has figured as a prominent issue of national and international safety on the agenda of international organizations such as the Financial Action Task Force, the IMF, the United Nations, the Bank of International Settlement, and the European Union. Since then, the need to know more about the volume of laundering and laundering techniques, about the behavior of launderers, the effects of laundering on crime and on the economy, and the potential for successful anti-money laundering policy, has dramatically increased. So far, the academic field of the economics of crime has not devoted much attention to financial crime. And the economics of finance has not dealt with criminal behavior The first three papers presented in this issue will show three very different ways of making use of economics to estimate money laundering. The last three papers show how the law and economics literature especially can be used to analyze the role of anti-money laundering policy.

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Money Laundering in a Microfounded Dynamic Model: Simulations for the U.S. and the EU-15 Economies

Cited by 40 publications

References 3 publications

Estimating money laundering flows with a gravity model-based simulation

Estimating money laundering flows with a gravity model-based simulation

Gravity models of trade-based money laundering

Money Laundering - A Newly Emerging Topic on the International Agenda

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