Brigitte Unger

The Scale and Impacts of Money Laundering

The book gives an interdisciplinary overview of the state-of-the-art of money laundering as well as describing the legal problems of defining and fighting money laundering. It then goes on to present a number of economic models designed to measure money laundering and applies these to measuring the size of laundering in The Netherlands and Australia. The book also gives an overview of techniques and potential effects of money laundering identified and measured so far in the literature. It adds to this debate by calculating the effects of laundering on crime and economic growth.

Attempts to Dodge Drowning in Data : Rule- and Risk-Based Anti Money Laundering Policies Compared

Both in the US and in Europe anti money laundering policy switched from a rule-to a risk-based reporting system in order to avoid over-reporting by the private sector. However, reporting increased in most countries, while the quality of information decreased. Governments drowned in data because private agents feared sanctions for not reporting. This ‘‘crying wolf’ problem’ (Takats 2007) did not happen in the Netherlands, where the number of reports diminished but information quality improved. Reasons for this can be found in differences in legal institutions and legal culture, notably the contrast between US adversarial legalism and Dutch cooperative informalism. The established legal systems also provide for resistance to change. Thus lowering sanctions in order to reduce over-reporting may not be a realistic option in a legal system which traditionally uses deterrence by fierce criminal and private legal sanctions. Furthermore, a risk-based approach may not be sustainable in the long run, as litigation may eventually replace a risk-based approach again by a rule-based one, now with precise rules set by the courts.

Gravity Models of Trade-based Money Laundering

Several attempts have been made in the economics 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 attempt to test well-known prototype models proposed by Walker and Unger to predict illicit money laundering flows and to apply traditional gravity models borrowed from 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 here can indeed explain TBML flows worldwide in a plausible manner. An important determinant is licit trade, the mass in which TBML is hidden. Furthermore, our results suggest that criminals use TBML in order to escape the stricter anti moneylaundering regulations of financial markets.

The Economic and Legal Effectiveness of the European Union’s Anti-Money Laundering Policy

Official government policies against money laundering in the EU have been in place for roughly 25 years, after much concerted effort and a great deal of time and money invested. This volume examines the anti-money laundering policy of the EU Member States in connection to the threat of money laundering they face.

Money Laundering in the Real Estate Sector

In many countries, the real estate sector is vulnerable to money laundering due to a high number of factors including; the high value of assets, price fluctuations and speculation within the market, difficulties in assessing the true value of a house, and the fact that the legal owner is not necessarily the economic owner. In this book, the authors identify a total of 25 characteristics which render a property susceptible to money laundering. The more such characteristics a property exhibits, the more suspicious it becomes. The authors also discover that some of these characteristics weigh heavier than others. Combining economic, econometric and criminological analysis, this multidisciplinary approach shows how to detect criminal investment in the real estate sector.

Can Money Laundering Decrease

After two decades of research on money laundering, it seems time to look at what we know and what progress has been made in research. One simple question is whether we know if money laundering has increased, stayed constant, or decreased over these years. This article shows that over the last two decades, money laundering could hardly have decreased. This is largely because the concept of money laundering has broadened. However, there are also some hints that traditional areas of laundering such as fraud and corruption proceeds have increased rather than being effectively combated. There may be potential for money laundering to decrease in the future.

The Real Estate Sector

The International Accounting Standards Board (IASB) has published a new Standard, IFRS 15 Revenue from Contracts with Customers (‘the new Standard’). The new Standard outlines a single comprehensive model of accounting for revenue arising from contracts with customers and supersedes current revenue recognition guidance, which is found currently across several Standards and Interpretations within IFRSs. The core principle is that an entity recognises revenue to reflect the transfer of goods or services, measured as the amount to which the entity expects to be entitled in exchange for those goods or services. However, the new Standard does not apply to transactions that are instead within the scope of the leasing standard.

Threat of money laundering

This chapter presents a Walker gravity model to calculate the amount of money laundering threat for 27 EU Member States. It is found that the threat of money laundering is greatest in the United Kingdom, Luxembourg and other west-European countries, as a result of their relatively sophisticated financial markets, their relatively high GDP per capita levels, their trade, as well as cultural links to a wide range of proceeds of crime-generating countries. The picture changes dramatically, however, when expressed as a percentage of each countrys GDP. The threats can be very high - particularly for the smaller countries, such as Estonia, Latvia, Malta and Luxembourg. These countries are bordering or related to much larger countries that generate large amounts of money potentially available for laundering. They therefore face threats equivalent to a significant proportion of their total GDP, even - in those four countries - greater than their entire GDP. The threat assessment presented in this study, based on the Walker gravity model, appears to be quite robust.

Globalisation, Tax Competition and the Harmonisation of Corporate Tax Rates in Europe: A Case of Killing the Patient to Cure the Disease?

This paper surveys the literature on tax competition, and uses it to analyse current European proposals to harmonise corporate tax rates. It begins, in the course of Section One, by introducing the phenomenon of international tax competition, and illustrates, with the use of secondary research, the reality of the regulatory ‘race to the bottom’. Section Two, however, demonstrates the harmful consequences of tax competition – with reference to the immobile factors of production – and makes obvious the necessity of effective intervention. Section Three then introduces and evaluates the calibre of the current proposals to tackle tax competition through collusion and harmonisation, and concludes negatively in the process. As illustrated in this discussion, any efforts to harmonise corporate taxes above the international equilibrium will not only fail to solve the problem at hand, but will exacerbate them, and may even serve to undermine and destabilise the political Union. Section Four then introduce an alternative solution to the problem – in the form of the residence principle – and Section Five concludes.

Who Governs? Economic Governance Mechanisms and Financial Market Regulation

This book focuses on recent financial market reforms, and their implications for social, economic and political exclusion. In particular it considers the hitherto under-researched question of whose interests govern the design of regulatory mechanisms and who influences the decision-making process. This process is set out as contested terrain, in which there are winners and losers, and in which there are inevitably circles of exclusion. The authors, comprising financial authority experts and academic specialists, expand the concept of exclusion beyond its typical social dimension to incorporate all actors, be they individuals or institutions not permitted to contribute to financial market regulation as a public good. As they point out, this may take the form of political, economic or indeed cultural exclusion. The book examines the conflicts that arise between various interests and how these are managed within the process of regulation.