New UN report says criminals may have laundered $1.6 trillion in 2009

Criminals may have laundered around $1.6 trillion in 2009, one fifth of that coming from the illicit drug trade, according to a new report by the United Nations Office on Drugs and Crime (UNODC).

The $1.6 trillion represents 2.7 per cent of global gross domestic product (GDP) in 2009, says the agency. This figure is in line with the range of two to five per cent of global GDP previously established by the International Monetary Fund (IMF) to estimate the scale of money-laundering.

The report, entitled Estimating illicit financial flows resulting from drug trafficking and other transnational organized crime, also says that the “interception rate” for anti-money-laundering efforts at the global level remains low.

Globally, it appears that much less than one per cent of illicit financial flows are currently being seized and frozen.

“Tracking the flows of illicit funds generated by drug trafficking and organized crime and analysing how they are laundered through the world’s financial systems remain daunting tasks,” stated UNODC Executive Director Yury Fedotov, who launched the report today in Marrakech, Morocco, during the week-long meeting of the Conference of the Parties to the UN Convention on Corruption.

The report points out that “dirty money” promotes bribery and corruption, finances insurgency and, in some cases, terrorist activities. It also destabilizes and deters legitimate enterprise, foreign investment and development.

All criminal proceeds, excluding tax evasion, would amount to some $2.1 trillion or 3.6 per cent of GDP in 2009, according to the report. Of this total, the proceeds of transnational organized crime, such as drug trafficking, counterfeiting, human trafficking and small arms smuggling, would amount to 1.5 per cent of global GDP, 70 per cent of which would likely have been laundered through the financial system.

The illicit drugs trade, which accounts for half of all transnational organized crime proceeds and one fifth of all crime proceeds, is the most profitable sector, UNODC notes.

The report focused on the market for cocaine, probably the most lucrative illicit drug for transnational criminal groups. Traffickers’ gross profits from the cocaine trade stood at around $84 billion in 2009.

While Andean coca farmers earned about $1 billion, the bulk of the income generated was in North America ($35 billion) and in West and Central Europe ($26 billion). Close to two thirds of that total may have been laundered in 2009.

The findings suggest that most cocaine-related profits are laundered in North America and in Europe. The main destination to process cocaine money from other subregions is probably the Caribbean.

The report says that for drug-related crime, there tends to be a significant “re-investment” of illicit funds into drug trafficking operations which have major negative implications for society at large.

Once illegal money has entered the global and financial markets, notes UNODC, it becomes much harder to trace its origins, and the laundering of ill-gotten gains may perpetuate a cycle of crime and drug trafficking.

“UNODC’s challenge is to work within the UN system and with Member States to help build the capacity to track and prevent money-laundering, strengthen the rule of law and prevent these funds from creating further suffering,” said Mr. Fedotov.