The eye popping enormity of global money laundering

Oliver Bullough



Trade-based Money Laundering is a dull name for an alarming concept. In short, it’s the practice of moving illicit wealth around the world in the form of stuff, rather than in the form of money. If you want to move wealth out of a country, you over-pay for imports, or under-bill for exports; if you want to move wealth into a country, you do the opposite. Failing that, you can just settle accounts within two different countries, and balance up by moving goods between them. All these techniques avoid the Financial Intelligence Units that are central to standard anti-money laundering methods.

Expert analysis suggests perhaps four-fifths of all money laundering happens in this way, rather than through financial institutions, but it’s laborious work to spot it so – rather in the manner of the drunk man looking for his keys under the lamp post – we tend to focus on money flows, which can be more easily be analyzed.

According to the analysts at Global Financial Integrity in Washington DC, there was a hole worth $1.6 trillion (that is enough wealth to buy you Google, with enough cash left over to make you one of the richest people on earth) in trade statistics between countries in 2018, which is the most up-to-date year for which figures are available. If even half of that was money laundering, rather than just data entry errors, we are talking about a super-colossal amount of wealth moving around the world undetected.

  • “It is the largest money laundering methodology in the world, and it’s the one that is least recognized and enforced. And it breaks my heart. I just think the overall magnitude of the problem is enormous,” the money laundering expert and US enforcement veteran John Cassara told British Columbia’s Cullen Commission in December 2020.

So, huge props to Transparency International’s Russia chapter, for producing this report on how overpaying for injection molding machines and other imports allowed persons unknown in Russia to export $820 million. That is huge – almost four times more money than was stolen by the corrupt officials exposed by Sergei Magnitsky.

  • “The money laundering scheme we discovered was functioning from 2014 to 2016. It was specifically a scheme, actions of the launderers were recurrent and predictable. The fact that 40 billion rubles were siphoned off unnoticed says that Rosfinmonitoring’s system for identifying and investigating money laundering schemes, especially transborder ones, is inefficient,” TI-Russia states.

Of course, any scheme of this nature relies on loopholes in many different countries to work properly, and it won’t surprise you (well, if it does, I fear my previous newsletters have been insufficiently strident) to hear there was a U.K. angle.

  • “British shell companies played a central role, selling goods in a way that strongly suggests the transactions were fictional, and used to disguise illicit funds being moved out of the country,” concluded TI-UK. “These revelations show how the UK plays a major role in enabling large-scale suspicious financial flows, potentially depriving the Russian people of funds while benefiting the rich and powerful there.”

Fortunately, the U.K. government has finally realized that allowing unknown quantities of wealth of unknown ownership to buy up unknown quantities of the country is a potentially poor idea, and – in response to the Ukraine invasion – promised to finally legislate to prevent anonymous shell companies from owning property, and to clean up its own corporate registry.

Unfortunately, rather than tackle this once-in-a-generation crisis, the ruling Tory Party has decided to spend the next three months arguing over which of a dozen people should become prime minister instead of Boris Johnson, who they imposed on the rest of us three years ago. For those of us who had been heartened by the prospect of Action, it’s all rather depressing, though made a bit better by this hilarious spoof campaign video from Rosie Holt, whose impression of a conservative member of parliament is scarily accurate.

So what should politicians be doing instead of arguing about trans people and generally trying to appeal to the only British electorate that matters (namely, the largely white, male and elderly members of the Tory party who will get to vote on our next prime minister)? Here are some thoughts from Helena Wood, of the think tank RUSI, which have relevance way beyond the U.K.

  • “Economic crime, particularly fraud, is a volume crime on a scale like no other, requiring an industrialized response beyond traditional criminal justice outcomes. Put simply, we can’t arrest our way out of this problem. The approach must be one of ‘disruption by any means’ using a mix of industrialized prevention via the private sector and more targeted operational interventions by policing and wider enforcement partners,” she writes.


Last week I wrote about how the Hungarian government and Republican Party were acting as a transatlantic tag team to stop Joe Biden’s global tax reform plan from going through. I’m delighted to see that the White House is not just sitting back and has instead announced that it will cancel a 1979 bilateral tax treaty between the two countries in response.

  • “The benefits are no longer reciprocal – with a significant loss of potential revenues to the United States and little in return for U.S. business and investment in Hungary,” a treasury spokesperson said.

To which my own personal response was “lol”, but the Republicans felt the need to comment at greater length.

When Republicans pressured Hungary to take advantage of its veto over European tax arrangements, that was not interference in an internal EU policy-making process, but an integral part of democracy; but when Democrats do the opposite, it was. It’s funny how hard those things can be to tell apart. Less amusing, however, was the update on progress towards ratifying the First Pillar of the Multilateral Convention (MLC) that Hungary is trying to block. It is not going well despite attempts to spin progress as being “on track for delivery”.

  • “The MLC will enter into force only upon ratification by a critical mass of countries, which will include the residence jurisdictions of the ultimate parent entities of a substantial majority of the in-scope companies whose profits will be subject to the Amount A taxing right, as well as the key additional jurisdictions that will be allocated the obligation to eliminate double taxation otherwise arising as a result of the Amount A tax,” cover noted a Cover Note.

In practice, considering the companies that will be covered by the Pillar One agreement are primarily large American tech companies, and considering that tax treaties need to be approved by a two-thirds majority of the senate, that means the opinions of Republican senators are of great significance to its future, and not just something to be schadenfreude-ish about. I am bored to near-death of politicians posing as tribunes of the people, while in reality they’re just acting as human shields for their donors, like one of those movie bodyguards who dives in front of their principal when the gun goes off.


A historically-informed reader has written in with a response to last week’s item about Putin’s pooper-scooper (if you missed it, I can only congratulate you), to point out that it wasn’t just in Tudor England that the monarch’s excrement was an object of fascination.

  • “Many years ago I read, in the correspondence between the Marquise du Deffand and Horace Walpole, her letter passing on the good news of the good health after recent illness of Louis XV (although possibly Louis XVI, if this was after 1764 and her death in 1780). Full of enthusiasm, she reported that at dinner her guests were invited to pass round a chamber pot containing the royal stool. Having sniffed it, and found it very noisome indeed, they rejoiced at such evidence of the King’s recovery.”

Putin enthusiasts will presumably be hoping the parallel between their boy and the French monarch stops at the coprophilia, since (spoiler alert!) things did not work out very well for Louis XVI or even worse for his hangers-on, the oligarchs of his day. The wealthiest 10% of French society on the eve of the 1789 revolution owned a shocking 90% of everything, which is more extreme than the situation in Putin’s egalitarian utopia, but not by much. The top tenth of Russians own somewhere between 77 percent and 87 percent of national wealth.

Sadly, there is actual good news for the oligarchs who own almost everything in Russia. The Russian economy appears to be performing far better than expected, with estimates for this year’s contraction as low as 3.5%.

  • “The boxer is now moving again after being knocked down,” said Anton Tabakh, chief economist at Moscow-based credit assessor Expert RA. “There was a knockdown, but it’s been offset substantially by comfortable export prices, even with the discounts, and the budget’s capacity to pour money on the problem.”

A lot now depends on the willingness of Europeans to continue with their efforts to reduce energy imports from Russia, and whether Germans are prepared to tolerate the kind of fiscal pain they used to demand from the Greeks, or whether they insist on foreigners sharing the burden. In a sign of how serious things could get for the European economy, the euro has hit parity with the dollar for the first time in 20 years.


I am currently halfway through John Cassara’s Money Laundering and Illicit Financial Flows in my quest to understand more about how dodgy wealth flows around the world. It is very enlightening, and I have ordered two more of his books to continue my education.