Sizing the Money Laundering Problem
The relative aggregate amount or number — a definition of size. When applied to the money laundering problem we most often gravitate to the very dated UNODC estimate (an aggregate amount given in a range on an annualized basis). The accuracy of the estimate is problematic for a number of reasons — it’s stale; it’s unreliable; and it’s narrowly constructed.
Viewing the money laundering problem quantitatively is innate — we live in a time when quantitative data derived from scientific and mathematical methods are golden to decision cycles. What we miss in this view — is the fact that the money laundering problem narrowly — is not the problem set that is of most concern. The money laundering problem set is in actuality the artificial layer we have placed on top of an array of illicit activities (drug trafficking, human trafficking, arms trafficking, smuggling, racketeering, fraud, corruption and the list goes on and on). To compound that problem set we have created a regulatory layer on various industries (financial services being the most burdened) where sizing the problem is viewed in an even more narrow sense — how to avoid regulatory scrutiny (enforcement actions/fines) vs. combatting illicit activity through good corporate citizenry.
Reverting back to sizing — quantifying the problem. What reliable aggregate amount or number would actually move the dial for policymakers and stakeholders that claim to address the money laundering problem? I suspect that there is not one — and if that’s true why do we care about sizing the money laundering problem at all? I suspect in reality we actually do not care about sizing the problem. So should we be sizing the problem?
Here are three contrarian view points on this unique question.
Scope vs. Size
Relative to what influences your emotional instincts — it’s hard to get past the scope of the money laundering problem set. I would best describe the scope in this way — where there is crime there is generally money involved. That holds true on an individual level and it certainly holds true when concerning rogue nation states that pose a threat to global security. So in essence — attacking the “artificial layer” makes a ton of sense in terms of countering/mitigating/solving the problem, but only if you truly understand the scope. Based on the aforementioned — the scope of the problem is massive (a qualitative term, an adjective, that everyone should be in agreement on).
Dynamic vs. Conventional Measurements
Not to be confused with sizing! Dynamic measurements track the frequency, pace, and evolution of the problem set. Conventional measurements focus on static and backwards looking measurements like enforcement actions (as an example). When conventional measurements stall meaningful solutions to the problem set — the space between compounds.
Siloed vs. Integrated Solutions
When the law enforcement and intelligence communities have their “heads down” on their statutory authorities and focus on the “violations they work” — expect siloed policies, investigative/intelligence activities, prosecutorial/intelligence actions/priorities. When anti-money laundering professionals are focused on compliance and fraud professionals are focused on managing fraud loss (to the acceptable write off levels) — expect siloed programs, inefficiencies, and a crap shoot on desired results. Integrated solutions across public/private sector efforts are only going to increase the view which in turn will shape better policy — drive more efficient operations — and likely yield more effective results. One might argue — not rocket science!
More to come of the problem with sizing the problem of money laundering…
and for those of you that like to skim to the bottom of my stories: scope the problem, it’s more impactful than sizing it; apply dynamic measurements, the conventional ones are almost useless; integrate the mechanics of solving the problem, silos only perpetuate it.
