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John Walker Crime Trends Analysis Estimating the Illicit Flows Asking the Right Questions John Walker CEO, John Walker Crime Trends Analysis Principal Research Fellow, Centre for Transnational Crime Prevention, University of Wollongong, Australia Slide 2 John Walker Crime Trends Analysis Illicit Financial Flows Put simply, Illicit Financial Flows from Developing Countries consist of quantities of money derived from crimes committed in those countries. Put simply, Illicit Financial Flows from Developing Countries consist of quantities of money derived from crimes committed in those countries. Official definitions of crime vary between countries, although there is consensus about most forms of crime. Official definitions of crime vary between countries, although there is consensus about most forms of crime. Contentious areas include business practices considered as fraudulent in some countries but not in others (e.g. payments of bribes and false invoicing), and some areas of excise avoidance (e.g. cigarette smuggling). Contentious areas include business practices considered as fraudulent in some countries but not in others (e.g. payments of bribes and false invoicing), and some areas of excise avoidance (e.g. cigarette smuggling). This paper takes a broad view that acts that would be crimes or illegal business practices in countries with sophisticated legal systems must also be regarded as crimes or illegal business practices in developing countries. This paper takes a broad view that acts that would be crimes or illegal business practices in countries with sophisticated legal systems must also be regarded as crimes or illegal business practices in developing countries. Illicit Financial Flows from Developing Countries are, therefore, part of the broader issue of transnational crime and moneylaundering. Illicit Financial Flows from Developing Countries are, therefore, part of the broader issue of transnational crime and moneylaundering. Slide 3 John Walker Crime Trends Analysis Asking the Right Questions about Transnational Crime and Moneylaundering It is difficult to explain the importance of a problem without quantifying it. (Neil Jensen, Director, AUSTRAC, 2005) It is difficult to explain the importance of a problem without quantifying it. (Neil Jensen, Director, AUSTRAC, 2005) FinCens overriding objective under the strategic plan is the development of a viable model for measuring the magnitude of moneylaundering. No assessment of an agencys or governments anti-moneylaundering programs can be a true gauge of its effectiveness, unless it is based on an understanding of the breadth of the problem being addressed. (FinCEN Strategic Plan, 2000) FinCens overriding objective under the strategic plan is the development of a viable model for measuring the magnitude of moneylaundering. No assessment of an agencys or governments anti-moneylaundering programs can be a true gauge of its effectiveness, unless it is based on an understanding of the breadth of the problem being addressed. (FinCEN Strategic Plan, 2000) The government are very keen on amassing statistics. They collect them, add them, raise them to the nth power, take the cube root, and prepare wonderful diagrams. But you must never forget that every one of these figures comes, in the first instance, from the village watchman, who just puts down what he damn pleases. (English economist Sir Josiah Stamp, 1929) The government are very keen on amassing statistics. They collect them, add them, raise them to the nth power, take the cube root, and prepare wonderful diagrams. But you must never forget that every one of these figures comes, in the first instance, from the village watchman, who just puts down what he damn pleases. (English economist Sir Josiah Stamp, 1929) "Striving for perfection is the greatest stopper there is... It's your excuse to yourself for not doing anything. Instead, strive for excellence, doing your best." (British actor, Sir Laurence Olivier) "Striving for perfection is the greatest stopper there is... It's your excuse to yourself for not doing anything. Instead, strive for excellence, doing your best." (British actor, Sir Laurence Olivier) ..blending dodgy data and heroic assumption and turning them into something particularly useful (Dutch criminologist, Max Kommer) ..blending dodgy data and heroic assumption and turning them into something particularly useful (Dutch criminologist, Max Kommer) Accuracy is meaningless credibility is everything. (Me) Accuracy is meaningless credibility is everything. (Me) Slide 4 John Walker Crime Trends Analysis The Right Questions about Transnational Crime and Moneylaundering How Much Crime is there ? How Much Profit is there in the Crime ? What Proportion of the Profits is Laundered ? How does it impact on Society ? Where does it go for Laundering ? Slide 5 John Walker Crime Trends Analysis These are Very important Questions $ 1. How much crime is there around the world, and where is it based? $ 2. How big are crime profits around the world, and where are they generated? $ 3. What factors make crime more profitable in some countries than others? $ 4. What factors make some countries more attractive to ML than others? $ 5. How much money is laundered each year around the world? $ 6. How much harm is caused by crime and ML, and who suffers most? Slide 6 John Walker Crime Trends Analysis So who is asking them? Up to the 1980s Most countries compile crime statistics. Only measures recorded crime. Accuracy doubts; rigging by police, politicians; counting rules. Most countries compile crime statistics. Only measures recorded crime. Accuracy doubts; rigging by police, politicians; counting rules. Interpol collects crime data from member countries no consistency, no analysis, not even computerised until the late 1990s. Only measures recorded crime. Interpol collects crime data from member countries no consistency, no analysis, not even computerised until the late 1990s. Only measures recorded crime. Crime Victims Surveys developed in the 1970s (USA, UK) to capture data on a common set of definitions and on unrecorded crime. Limited crime types, costly, political risk, little interest in other countries. Crime Victims Surveys developed in the 1970s (USA, UK) to capture data on a common set of definitions and on unrecorded crime. Limited crime types, costly, political risk, little interest in other countries. In the 1980s, the U.N. attempted to compile international crime and justice statistics on a common set of definitions very problematic, poor response, little consistency, poorly resourced. In the 1980s, the U.N. attempted to compile international crime and justice statistics on a common set of definitions very problematic, poor response, little consistency, poorly resourced. Transnational crime analysis mostly country-specific, offence specific or confined to studies of mafia, yakuza, drug gangs etc Transnational crime analysis mostly country-specific, offence specific or confined to studies of mafia, yakuza, drug gangs etc Transparency International experimenting with corruption and bribery indexes. Transparency International experimenting with corruption and bribery indexes. Slide 7 John Walker Crime Trends Analysis Measuring the Risks posed by Transnational Crime and Moneylaundering 1988 United Nations Convention against illicit traffic in narcotic drugs and psychotropic substances; United Nations Convention against illicit traffic in narcotic drugs and psychotropic substances; EU decides to conduct Europe-wide crime survey. Australia, USA, Canada join in. Questions include did you report it to police? and how much did it cost you? EU decides to conduct Europe-wide crime survey. Australia, USA, Canada join in. Questions include did you report it to police? and how much did it cost you?1989 FATF Working Group on Statistics and Methods, Narcotics ML Assessment of the Scale of the Problem notes the lack of reliable data to measure ML. FATF Working Group on Statistics and Methods, Narcotics ML Assessment of the Scale of the Problem notes the lack of reliable data to measure ML.1990 EU Convention on laundering, search, seizure and confiscation of the Proceeds from Crime. EU Convention on laundering, search, seizure and confiscation of the Proceeds from Crime. FATFs Forty Recommendations on the prevention of money laundering. FATFs Forty Recommendations on the prevention of money laundering. U.N. Rome conference agrees to pilot Business Crime survey, including reporting and costs questions. Australia, UK, Netherlands, South Africa. U.N. Rome conference agrees to pilot Business Crime survey, including reporting and costs questions. Australia, UK, Netherlands, South Africa.1991 EU Directive on prevention of the use of the financial system for purpose of money laundering. EU Directive on prevention of the use of the financial system for purpose of money laundering.1992 Estimates of the Costs of Crime in Australia a model for the U.N. Estimates of the Costs of Crime in Australia a model for the U.N.1995 Estimates of the Extent of money laundering in Australia a model for the FATF. Estimates of the Extent of money laundering in Australia a model for the FATF.1996-2000 UN Office on Drugs and Crime UN Office on Drugs and Crime Refinement of International Crime and Justice Surveys, International Crime Victims Surveys, Business Crime Surveys Refinement of International Crime and Justice Surveys, International Crime Victims Surveys, Business Crime Surveys Global Report on Crime and Justice attempts to bring together data on economics of transnational crime Global Report on Crime and Justice attempts to bring together data on economics of transnational crime Attempts to survey the characteristics of organised crime groups in different countries Attempts to survey the characteristics of organised crime groups in different countries Slide 8 John Walker Crime Trends Analysis

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