Tracing dirty money - an expert on the trail
11 August 2011 - More than one trillion dollars: this is the staggering amount of money probably laundered annually in recent years, says Pierre Lapaque, chief of the section dealing with organized crime and money-laundering at UNODC. In 1998, the International Monetary Fund estimated this figure to be the equivalent of between two and five per cent of global GDP. UNODC considers that such a range remains plausible today, says Lapaque.
"We cannot separate drug money from crime money - it's all dirty money," explains Lapaque. "It's a huge flow, but we cannot make precise estimates. Let me put it this way: you have to identify the stream of illicit money before it joins the rivers of global financial flows. That's the crux of the problem in making estimates."
Once criminal money has entered the global and financial markets, it becomes much harder to trace its origins. Despite the measures in place to combat financial crimes - from prevention efforts and client identification to the training of police and customs personnel and the development of a detection system - there will always be money-laundering. "The most we can do is to restrict the flow and staunch it as early as possible," says Lapaque.
Many institutions are grappling with the problem of legal and illegal flows. The Financial Action Task Force is an intergovernmental organization that is developing and promoting national and international policies to fight money-laundering and terrorist financing. Other organizations have also tried to assess the extent of national and transnational organized crime and what percentage of laundered funds ends up in the international financial markets. However, it is difficult to arrive at internationally accepted estimates, since the figures rely on sketchy or inaccurate data.
Regarding the controversy surrounding the conduct of banks during the 2008 financial crisis, Mr. Lapaque is very clear: "There are a number of safeguards and checks and balances, because a bank cannot afford to be linked to criminal activities which might damage its reputation. When a State, or financial institution, harbours suspicions about large sums of money being deposited within its jurisdiction, it verifies the information given by the government or institution of origin and then undertakes an investigation if this has not been done. These interlocking systems work quite well, even though they are never fully effective."
Money-launderers use state-of the-art technology, making the fight all the more difficult and requiring governments to conduct ongoing risk assessments. But Mr. Lapaque remains optimistic: "In the long term, criminal groups are not important. What really matters is to tackle the criminal markets to make them less attractive. Focusing solely on law enforcement is short-sighted. Imprisoned criminals will be immediately replaced by others, and their activities will continue as long as crime is lucrative."
"For long-term results, we need prevention and control strategies to tackle drug markets, human trafficking, mafia activities and corruption. This is precisely the strategy that UNODC is implementing in partnership with the international community, and especially with international financial institutions," said Mr. Lapaque.