Typologies in general examined - Securities Trade Based Counterfeit Trade Sports Clubs (and Equestrian) Child Pornography & Human Trafficking Government Contracting / Bribery / PEPs Internet Based Market Systems Currency Demand Approach Pricing Approach Multiple Indicators Multiple Solutions (MIMIC) Measurement of Crimes Model Newton’s Law of Gravity applied to ML

1. International Tax & Financial Services
Graduate Programs
19 years online - serving international financial
service professionals and government regulators
Prof. William H. Byrnes, IV
Assoc. Dean, Graduate & Distance Programs
Law & Economics Workshop

2. Two Topics
 Models
 Typologies & Trends

3. Part I: Survey of Models
 Currency Demand Approach
 Pricing Approach
 Multiple Indicators Multiple Solutions (MIMIC)
 Measurement of Crimes Model
 Newton’s Law of Gravity applied to ML

4. Research Part II: Predictive Model
 Neural Networkings
 Concept Mapping
 Evolutionary Programming (Generic
Algorithms)

5. Typologies & Trends Part I
 Securities
 Trade Based
 Counterfeit Trade
 Sports Clubs (and Equestrian)

6. Typologies & Trends Part II
 Child Pornography & Human Trafficking
 Government Contracting / Bribery / PEPs
 Internet Based Market Systems
– Amazon, E-Bay, Second-Life & World of Warcraft

7. Crime Specific Estimates
PROCEEDS OF CRIME ×
PERCENTAGE LAUNDERED
= MONEY LAUNDERED
NUMBER OF CRIMES ×
MONEY LAUNDERED PER RECORDED CRIME
= MONEY LAUNDERED

8. Measuring a Black Hole

9. MIMIC Model to Measure ML
y = aML + e (1)
ML= b’x + c (2)
Where y = effects and x = causes
ML= unobservable variable
CAUSES (X)
Crime / Bank
Secrecy
Effects (Y)
Demand for $
Growth Rates
Unobservable
Money Laundering
(ML)

10. Newton’s Law of Gravitation
Attractive Force Fij = G* Mi*Mj/(Dij) 2
Fij = the attractive force between objects i and j
Mi = mass of object i
Mj = Mass of object j
Dij = Distance between object i and object j
G = Gravitational constant

11. Tinbergen’s Formula
Fij = Rj * Mi*Mj / Dij θ
Rj has replaced the constant G from
Newton’s gravity formula.
Rj represents sets of alternatives for importers.
M represents economic mass (GDP)

12. Walker Model: Subjective Calibrations
per country & bi-lateral
Fij/Mi = Attractiveness j /Distance ij2
BS Bank Secrecy GA Govt Attitude CF Conflict CR Corrupt
Fij/Mi = (GNP/capita)j * (3BSj+GAj+SWIFTj-3CFj –CRj +15)/ Distance ij2
Rich Developed
Countries
$
Pakistan
(drugs)
Netherlands

13. Unger’s Calibrating Revisions
Attractiveness = (GDP/capita)*(3BS+GA+SWIFT+FD-3CF-CR-EG+10)
Distance
DIST = language+3*colonial background+3*trade+physical distance
BS = Bank Secrecy
GA= Govt Attitude
CF = Risk of Conflict
CR Corruption
EG – Egmont
FD = financial deposits for market size

14. Modified Walker (Unger)
P = proportion of money from X to Y

15. Walker Model: Results
bi-lateral
E14.5  NL + E4  E18.5 (5% NL GDP)
Antilles, Spain,
Turkey,
Colombia
Netherlands
USA, Russia,
Italy,
Germany, UK,
France

16. Topic 1: II – Predictive Modeling
•Neural Networks
•Concept Mapping
•Evolutionary Programming = Genetic Algorithms
http://amlsample.googlepages.com/Securities_and_Trade_ML.html

17. Topic II: I - Typologies
•Securities
•Trade Based
•Counterfeit Trade
•Sports Clubs (and Equestrian)

18. Topic II: I - Securities
If incidence of Opaqueness relative to Transparency; with
higher Liquidity is an indicator for Launderer, then
Securities
•GEM, AIM, B®IC
•Hedge Funds
•Audit firms, banks, law firms = $100B in tax losses = $T
alleged w/o business purpose and w/o risk, IMAGINE
what launders can do…

19. Topic II: I – Trade Based
Transfer Pricing
L.A. goods hP a USA
Dump (harm market price
& higher risk detection)
Smurf purchases to avoid
CTRs
Switzerland  USA $31B
Russia  USA $9B

20. Topic II: I – Counterfeit Trade
• 2% - 7% of World Trade $200B - $650B
• CF currency
• CF goods perceived by BRIC as less harmful than drugs
This weakness in perception can allow substantial $
flows from other crimes
(B movie industry)

21. Topic II: I - Equestrian
Equestrian > Hollywood
Economic Impact = $25B / $100B indirect
# of Americans Involved = 7.1 Million
# of Full-Time Jobs = 1.4 Million
# of Horses = 6.9 Million
Total Taxes Paid = $1.9 Billion

22. Topic 2: II - Trends
• Child Pornography & Human Trafficking
• Government Contracting / Bribery / PEPs
• Internet Based Market Systems
• Amazon & E-Bay
• Second-Life (Direct) & World of Warcraft (3rd Party)