According to Schneider, the FATF mentioned in a paper46 (apparently referring to the year 1997) a global turnover figure for the sales of illegal drugs of around US$300 billion (which would be in line with UNODC estimates of the total value of drug sales), resulting in US$120 billion in profits out of which US$85 billion could have been relevant for money-laundering.
Such figures (US$120 bn) were already used almost a decade earlier, but were then referred to as ‘final sales
46 F. Schneider, “Money Laundering: some Preliminary Empirical Find-ings,” presentation, October 2007.
table 18: Summary of proceeds of crime in selected industrialized countries
* partial estimate of a limited number of selected crimes.
** a combined category of fraud and tax evasion was reported for the Netherlands; in order to provide an estimate of total crime, excluding tax evasion, it was assumed that the same breakdown existed in the Netherlands as in Germany.
*** country results weighted by their GDP in 2009.
Sources: Peter Reuter, “Chasing Dirty Money – the Fight against Money Laundering”, washington 2004, p. 20 and oNDcP, What America’s Users Spend on Illegal Drugs, washington D.c, December 2001, p. 3.
chris Groom and Tom Davies, “Developing a Methodology for Measuring Illegal Activity for the UK National Accounts”. Economic Trends, no.
536, July 1998, pp. 33-71.
Stephen Pudney, celia Badillo, Mark Bryan, Jon Burton, Gabriella conti, Maria Iacovou ( Institute for Social and Economic Research, University of Essex ),“ Estimating the size of the UK illicit drug market”, in Home office, “Measuring different aspects of problem drug use: methodo-logical developments”, Home Office Online Report 16/06, pp. 46–120.
Data based on John walker, 2003 (updates from an original paper undertaken by John walker for the Australian Institute of criminology in 1992), quoted in Brigitte Unger, The Scale and Impacts of Money Laundering, cheltenham (UK), Edward Elgar Publishing company, 2007, p.
62.
Brigitte Unger, The Scale and Impacts of Money laundering, cheltenham (UK), Edward Elgar Publishing company, 2007, p. 66, based on studies by Smekens and Verbruggen (2004), Business criminality: criminaliteit en rechtshandhaving (2001), woDc (2003, p. 60) and NIPo (2002).
fATf, Germany – Mutual Evaluation Report, february 2010 and International Monetary fund, March 2010, and International Monetary fund ,
“Germany: Detailed Assessment Report on Anti-Money laundering and combating the financing of Terrorism”, IMF Country Report No.
10/78, washington D.c., february 2010, p. 24. and Statistisches Bundesamt, wiesbaden.
consicglio Italiano per le Scienze Sociali, Il mercato illecito and SoS Impresa, XII Rapporto – Le mani della criminalità sulle imprese, Rome, 27 January 2010, SoS.
as a percentage of GDP Year of
estimate Drugs Total crime, excluding tax
evasion
Total crime including tax
evasion
USA 2000 0.7% 2.3 % 8.0%
UK 1996/2003/04 0.5% 1.2%* n.a.
Australia 2003 0.3% 1.5 % n.a.
Netherlands 2003 0.4% 1.7%** 3.5%
Germany 2007 0.4% 1.3 % 2.3%
Italy 2009 0.7% 7.7 % n.a.
Unweighted average 0.5%
(0.4%-0.6%) 2.6 %
(0.6%-4.6%) 4.6%
(2.2%-7.0%)
Weighted average*** 0.6%
(0.5%-0.7%) 2.5 %
(0.5%-4.5%) 5.3%
(2.9%-7.7%) Extrapolated to the global
level (2009) in trillion US$ 0.35
(0.27-0.43) 1.5
(0.3-2.6) 3.1
(1.7-4.5)
The UNODC study estimated the global drug market at US$ 322 billion, equivalent to 0.9% of global GDP.
North America and Europe were identified as the largest drug markets, accounting for 44% and 33%, respec-tively, of the global market. The largest drug sales were related to cannabis, followed by cocaine and opiates.
Subsequent estimates confirmed the size of the opiate market (US$65-US$70 bn), though slightly higher fig-ures were found for the cocaine market (US$88 bn in 2008 and US$85 bn in 2009). These recent figures did not signal a true increase, but a revision of coca plant yield figures in the main producer countries.
(US$28.8 billion) and heroin (US$12 billion). The FATF estimated that out of the US$124 billion in drug sales, around US$85 billion could be available for laun-dering. This was equivalent to 0.7% of GDP in the USA and Europe (1988), or 0.5% of global GDP. De facto assuming that drugs were responsible for about a quarter of global money-laundering, the FATF estimated that global money-laundering in the late 1980s would have been equivalent to some 2% of global GDP.48 As men-tioned earlier, an attempt by FATF to generate new estimates a decade later failed – and no efforts appear to have been made since.
UNODC undertook a study to estimate the size of the global illegal drug market in 2005. This was based on production, consumption, seizure, price and purity data, combined into a global input/output model, with some features of a gravity model. It also allowed for a number of calibrations to take expert knowledge into account (assuming that the likelihood of seizures in North Amer-ica or Europe was higher than in AfrAmer-ica where law enforcement capabilities are more limited). The model arrived at higher figures (US$322 bn) than the old FATF estimates of the late 1980s, though the differences were not that significant once inflation and the consid-eration of drug markets besides the USA and Europe had been taken into account. If only the European and North American markets were considered, the inflation-adjusted FATF figures (some US$200 bn) would be quite similar to the UNODC estimates (US$248 bn ).
The ‘new’ estimates (US$322 bn) are also similar in magnitude to those calculated by UNDCP for the mid-1990s using a different model (US$360 billion).49
48 Organisation for Economic Co-operation and Development, FATF Working Group on Statistics and Methods - Narcotics Money Launder-ing, Assessment of the Problem, 1989, Financial Action Task Force on Money Laundering, Report, February 7, 1990.
49 UNDCP, “Economic and Social Consequences of Drug Abuse and Illicit Trafficking,” UNDCP Technical Series, 1997 p. 51.
table 19: fATf estimates (late 1980s) of global amounts of laundered money
Source: organisation for Economic co-operation and Development, Financial Action Task Force on Money Laundering, Paris, 1990, p. 6.
quoted in UNDcP, Economic and Social Consequences of Drug Abuse and Illicit Trafficking, UNDcP Technical Series No. 6, Vienna 1998, p, 26; International Monetary fund, financial System Abuse, Financial Crime and Money Laundering- Background Paper, february 2001.
Estimate of drug sales in key markets (1988) US$124 bn
As a percentage of global GDP (1988) 0.8%
Assumed proportion that is laundered 2/3 - 70%
Estimate of amounts laundered related to drugs US$85 bn
Proportion in % of global GDP (1988) 0.5% of GDP
Estimated proportion of drugs in total amounts laundered 25%
Estimated total amounts laundered in 1988 US$ 340 bn
As a percentage of global GDP 2.0% of GDP
Extrapolated to global GDP in 2000 US$ 0.6 trillion
Extrapolated to global GDP in 2009 US$ 1.2 trillion
table 20: Size of the global illicit drug market, billion US$ (2003)
Source: UNoDc, 2005 World Drug Report, Volume 1, Analysis, Vienna 2005, p. 127.
retail At level
of which bought at wholesale
level
of which bought from
producers Value of
drugs sold US$322 bn US$94 bn US$13 bn In %
of GDP 0.9% 0.3% 0.03%
table 21: Regional breakdown of the global illicit drug market, 2003 (N = US$ 322 billion)
Source: UNoDc, 2005 World Drug Report, Volume 1, Analysis, Vienna 2005, p. 127.
Value in %
North America 142 44%
South America 9 3%
Europe 106 33%
Asia 35 11%
Africa 14 4%
oceania 16 5%
extrapolated to 2009, would have resulted in an estimate of amounts laundered around US$1.2 trillion).
• Private sector estimates
Given the lack of more comprehensive official estimates at the international level and the need for the financial sector to get more active in the fight against money-laundering, including in response to anti-terrorism efforts and the tightening of anti-money-laundering legislation, private consultancy firms got involved in estimating the amounts of annual money-laundering.
Celent, a research and consulting firm operating in the financial services industry, estimated global money-laundering to have amounted to some US$0.9 trillion over the 2002-2005 period, that is, 2.6% of global GDP in 2002 or 2.0% of global GDP in 2005, thus reaching estimates at the low end of the IMF ‘consensus range’.
According to their estimates, money-laundering is par-ticularly widespread in the Americas (38%), followed by the Asia-Pacific region (31%) and Europe (26%). Africa and the Near and Middle East account for just 5% of the total. Money-laundering related to criminal activi-ties was estimated at around US$0.2 trillion, suggesting UNODC has a relatively good understanding of the size
and value of the opiate and cocaine markets at the global level. Far higher levels of uncertainty exist with regard to the cannabis and synthetic drug markets. While the baseline for synthetic drugs is more difficult to establish, and the synthetic drug markets may have increased in recent years, some recent estimates of the US cannabis market suggest that the latter market could be substan-tially smaller than assumed in the model. Given such internal shifts in opposing directions, there are reasons to believe that the illicit drug market at the global level may still be at a similar magnitude to 2005. Updated global estimates of the illicit drugs markets using the current model – or alternative estimates from other models – falling into a range of US$200 – US$400 bil-lion could be considered reasonable. Estimates of US$910 billion or more - as mentioned by some authors in the literature for 200650 – are outside such a range, and clearly too high.
Updating the initial FATF model with the UNODC 2003 estimates on total drug proceeds would result in an estimate of money-laundering equivalent to 2.4% of GDP or US$1.4 trillion in 2009, that is, slightly higher than the initial FATF estimate (2% of GDP which,
50 F. Schneider, “Money Laundering: some Preliminary Empirical Find-ings”, presentation, October 2007.
table 22: Size of the global illicit drug market, by substances, billion US$ (2003)
Source: UNoDc, 2005 World Drug Report, Volume 1, Analysis, Vienna 2005, p. 127.
Opiates Cocaine Cannabis
herb Cannabis
resin
Ampheta-mines ‘Ecstasy’
Retail level 64.8 70.5 113.1 28.8 28.3 16.0
of which bought at
wholesale level 20.5 18.8 29.7 10.4 6.8 7.7
of which bought
from producers 1.2 0.5 8.8 0.7 0.6 1.0
table 23: Updated fATf model of global amounts laundered
Sources: International Monetary fund, financial System Abuse, Financial Crime and Money Laundering - Background Paper, feb. 2001 and UNoDc, 2005 World Drug Report, Volume 1, Analysis, Vienna, p. 127.
Estimate of drug sales in key markets (UNoDc estimate for 2003) US$322 bn
As a percentage of GDP 0.9% of GDP
Assumed proportion that is laundered (initial fATf estimate) 2/3 - 70%
Estimate of amounts laundered related to drugs US$220 bn
Proportion in % of global GDP (2003) 0.6 % of GDP
Estimated proportion of drugs in total amounts laundered (initial fATf estimate) 25%
Estimated total amounts laundered in 2003 US$ 880 bn
As a percentage of GDP 2.4% of GDP
Extrapolated to global GDP in 2009 US$ 1.4 trillion
such estimates and explaining in detail the methodology used to generate them, but towards alerting the financial sector of potential training, software and hardware requirements to cope with the requirements resulting from improved anti-money-laundering legislation.