$3.1Tn of illicit fund flows in 2023

February 4, 2024

Nasdaq and Verafin have just published their 2024 Global Financial Crime Report, which is a welcome addition to the body of knowledge about the scale of financial crime. Just as importantly, it carries first-hand examples of the human impact of financial crime, with various brave victims giving first-hand testimony of the suffering and pain caused. Awareness of the human impact of this typically white-collar crime is vital.

$3.1 trillion is a huge number, basically 3% of global GDP, or the size of the economy of a country like the UK. Unhappily for us, the number is also significantly underestimated for reasons set out in the report.

The report breaks down financial crime by typology and by geography, and across all three time zones, the biggest source category is Organised Crime, fraud and corruption which accounts for almost two-thirds of the $3.1 trillion total. In contrast, the volume of drug trafficking is put at $783 billion globally.

The authors state that the gross number is still short of various 'financial crimes' where numbers have not been included: "fraud loss estimates do not include tax evasion, corruption, bribery, embezzlement, business lost to counterfeit goods or industrial espionage". The counterfeit goods 'industry' alone is thought to reach between $1.7trn to $4.5trn according to estimates cited in a 2020 report sponsored by the US Department of Commerce.

Herein lies a serious problem: the numbers. The above-mentioned Nasdaq/Verafin report is excellent, with the underlying analytical work having been carried out by Oliver Wyman. Yet over the years, no one has carried out a global study of, for example, the scale of trade-based money laundering. In his recent book on Money Laundering, John Cassara cites empirical work that suggested that between 6-9% of US international trade was purposefully misinvoiced. The percentage when related to international trade with less developed economies was higher. With global trade running at $31 trillion in 2023, just customs fraud may well reach $1.9-2.8 trillion per annum.

The analysis of empirical evidence is fundamental if legislators are to start tackling the rapid growth in international financial crime, and this is where part of our focus will be at the UFV's Observatory of Organised Crime. Watch this space.