CAPITALISM'S ACHILLES HEEL Dirty Money and How to

Magnitudes and Misunderstandings 163
Applied to global GDP of approximately $32 trillion, this would indicate
a range of roughly $640 billion to $1.6 trillion annually.
IMF officials have declined to clarify whether Camdessus’s statement
was limited to the worst of criminal and corrupt money or was also intended
to include the commercially tax-evading component. This gets into a definitional
question that has affected commentary on these issues for years.
“Dirty money” and “laundered money”: Are they the same thing?
In my use of the terms, the answer is no. “Laundered money” is money
that breaks anti–money laundering laws. For many countries this is limited
to drug proceeds and terrorist financing and a few other categories. More on
this later in the chapter. But seldom does anti–money laundering law include
tax-evading funds, the commercial component I have written about
extensively, as a major part of the dirty-money phenomenon. In other
words, laundered money is narrowly defined as some of the criminal and
corrupt money. The designation cannot properly be applied to proceeds that
are not specified in anti–money laundering legislation. “Dirty money” is the
whole of illicit proceeds, a much larger sum. If it breaks one country’s laws
in its origin, movement, or use, then it’s dirty money, regardless of whether
it’s singled out as laundered in another country’s laws.
With this clarification, let’s go back to the IMF’s figure of $640 billion
to $1.6 trillion for laundered money. If this was not intended to include the
commercial component, which is almost certainly the case, then the larger
dirty-money figure would easily rise to the range of $1 trillion to $2 trillion
annually. Furthermore, the context of Camdessus’s address implies that he
was talking about cross-border flows, not what remains inside national jurisdictions.
Thus, $1 to $2 trillion annually can be taken as a rough estimate of
global dirty money.
Do such numbers make sense? One way to get a feel for this is to examine
offshore assets. Merrill Lynch/Cap Gemini Ernst & Young produces an
annual World Wealth Report, based on high-net-worth individuals with liquid
financial assets of $1 million or more. Data from 2002 and 2003 are
shown in Table 4.1. From 1996 to 2001, offshore liquid holdings of high
net-worth individuals rose from $5.5 trillion to the $8.5 trillion figure
shown. This is a rate of increase of $600 billion per year.
The data in this survey do not include offshore holdings of individuals
with investible liquid assets below $1 million, and corporations, which reportedly
pass more money through tax havens than individuals. 2 Nor does