Estimating the destination of Mexican-based laundered funds: an application of the modified Walker-Unger model
| DOI | https://doi.org/10.1108/JMLC-01-2021-0008 |
| Published date | 20 August 2021 |
| Date | 20 August 2021 |
| Pages | 224-248 |
| Author | Juan Roman,Ana Machuca,Thomas Schaefer |
Estimating the destination of
Mexican-based laundered funds:
an application of the modified
Walker-Unger model
Juan Roman
Department of Business Administration, Embry-Riddle Aeronautical University,
Daytona Beach, Florida, USA, and
Ana Machuca and Thomas Schaefer
School of Business, American Public University System, Charles Town,
West Virgina, USA
Abstract
Purpose –This study aimsto apply the modified Walker-Unger model to show the degree of attractiveness
of a countryfor Mexican-based money launderers to sendtheir illicit funds for the 2000–2015 timeperiod.
Design/methodology/approach –The modified Walker-Unger model is usedtoconduct the analysis,
as it combines several independentvariables related to an illicit financial activity. These allow the researcher
to investigate the attractivenessof a market to money launderers and the possible economic effects of money
laundering. In total,13 categories of indicators were used, namely, gross nationalproduct per capita; banking
secrecy; government attitude; society for worldwide interbank financial telecommunication membership;
financial deposits; conflict; corruption; Egmont group membership; language; trade; culture, colonial
background;and physical distance.
Findings –Model results suggest the preferred destinations for Mexican-based money launderers from
2000 to 2015 were Bermuda (i.e. from2000–2004), Canada (i.e. in 2005 and 2006) and Monaco (i.e. from 2007–
2015).
Research limitations/implications –Timing andavailability of reliable data after 2015.
Practical implications –Aids in continuing to empirically validate the Walker-Unger model. There is
little literatureon models that quantify money laundering activity.
Social implications –May aid policymakers in targetinganti-money laundering policy to more relevant
countries.
Originality/value –The first empirical investigation thatlooks to quantify money launderer activity in
Mexico.Contributes to the limited literature of quantitativeinvestigations on money laundering.
Keywords Mexico, Money laundering, Illicit finance, Walker-Unger model
Paper type Research paper
Introduction
Money laundering is a crime that violates social norms, uses secretive processes, injures
victims and benefits perpetrators unfairly(Barker and Roebuck, 1973;Vandenburgh, 1999).
According to Unger (2009a), money laundering (i.e. bringing illicit proceeds from criminal
activity into the legal economy)owes its name to Al Capone’s use of launderettes for hiding
illegal alcohol revenues during the US Prohibition in the 1930s. Money laundering has
figured prominently on the safety agenda of international organizations. The academic
JMLC
25,1
224
Journalof Money Laundering
Control
Vol.25 No. 1, 2022
pp. 224-248
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-01-2021-0008
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
literature offers multiple accounts of the nature and causes of criminal behavior related to
money laundering. However, the literature has focused on the relationship between the
crime and the causes of money laundering based on criminological specific assumptions.
These studies have not provided a sufficient understanding of the mechanism underlying
the economics of money laundering, especially in the financial markets where several
entities are interrelated. Therefore, they do not describe thecomplex economic interactions
that allow such eventsto occur. They have limited utility for academics and policymakersin
providing economicadvise to prevent and detect money laundering.
Literature review
The academic literature in management has studied money laundering on a limited scope.
Its focus has been on the description of criminal activities in microeconomic settings (Wait,
1997;Ziegenfuss, 1996) rather than on the estimation, prediction or explanationof criminal
economics. Money laundering literature published by government agencies focuses on
normative guidelines (FATF, 2003;Government Accountability Office,1999) and numerical
estimates of money laundering in the macro economy (United States Department of
Agriculture, 2001). The limited money laundering prevention and detection methods that
have been developed have a deductive rather than inductivescope. Statistical methods and
field investigations have been the most common approach in dealing with money
laundering operations(Bolton and Hand, 2002).
Money laundering has become the preferred method of hiding the proceeds obtained
from a broad range of criminalactivities. The main objectives of money laundering are:
Covering the costs of criminal operating expenses, such as replenishing their
inventories (e.g. narcotics, weapons, etc.) and paying bribes to corrupt officials.
Disguising the source of the money so that it cannot be discovered through a routine
audit.
Avoiding detection and loss (i.e. the proceeds of crime must be hidden or made to
appear legitimate).
Illicit financial techniques (i.e. including money laundering) are a necessary part of the
criminal process because they allow the individual engaged in criminal activities to use
the earned profits by disguising their origin without exposing the criminal activity (i.e. the
profit-making mechanism).
Historically, there have been many ways in which funds obtained from criminal
activities can be introducedinto a financial system. The most frequent schemes havebeen to
segregate large amounts of cash,purchasing monetary assets and depositing them into
traditional bank accounts in different financial institutions. Once the illegal funds have
penetrated the financial system,the illicit financier must alter and/or move that money so as
to create a reasonable distance between the funds and the source of the funds. The most
common techniquesare:
(1) Funneling the money through the subsequent purchase or sale of financial
instruments.
(2) The use of a wide array of wire transfers throughmany financial systems.
Afinancial transaction originated for money laundering purposes, involves using cash
obtained from an illegal act and using it in a legitimate (i.e. legal) transaction or event.
Therefore, given that the illicittransaction arises from an illegal purpose, it can be classified
as an irregularity when compared to the attributes of a legitimate transaction.The illicit
transaction becomes suspicious when examined in depth. The suspicion could befall on at
Laundered
funds
225
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeStart Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting