CAPITALISM'S ACHILLES HEEL Dirty Money and How to

170 CAPITALISM’S ACHILLES HEEL
subject. In addition to this procedure, I have also taught other economic intelligence
methodologies to security officials.
The results of this survey did not surprise me. For Latin America, between
45 and 50 percent of foreign trade transactions were revealed to be
falsely priced, with Argentina, Brazil, and Venezuela all falling within or
close to this range. Levels of mispricing in these falsified transactions averaged
more than 10 percent. Multiplying these two percentages produces an
estimated mispricing component for Latin American trade between unrelated
parties of 5 percent.
For Africa, 60 percent of trade transactions were indicated to be intentionally
mispriced by an average of more than 11 percent. This produces
an estimated mispricing component for African trade between
unrelated parties of about 7 percent. Nigeria significantly exceeded the
norm of 7 percent.
Another method for checking false pricing is to take a sample of commercial
invoices for imports and exports and negotiate as an interested buyer
or seller for the same goods and quantities. This is a costly procedure but can
be very revealing.
I have rechecked my figures in the Middle East and Asia, confirming
the 5 to 7 percent range of mispricing commonly observed. What has been
happening in the former communist countries, however, far exceeds this
mispricing level. The simple truth is, thousands of companies provide
helpful mispricing services to tens of thousands of their overseas customers
in hundreds of thousands of transactions moving billions of dollars into
western accounts.
Transfer Pricing
Falsified pricing is not only a feature in trade between unrelated parties. Exactly
the same device is used in transfer pricing between parent, subsidiary,
and affiliate companies. As discussed in Chapter 3, transfer pricing is used
by virtually every multinational corporation to shift profits at will around
the globe. While I have independently investigated mispricing between unaffiliated
companies, I have not done a formal investigation of transfer pricing
between affiliates. I have, however, observed enough transactions, seen
enough exaggerated intracompany prices, asked enough questions in dozens
of countries, and collected and reviewed more than enough trade data to