CAPITALISM'S ACHILLES HEEL Dirty Money and How to

have every reason to conclude that, on a global scale, abusive transfer pricing
between affiliated entities greatly exceeds mispricing between unaffiliated
entities. Nevertheless, to be conservative, I take the percentage level of abusive
transfer pricing between related parties as equal to the level of mispricing
between unrelated parties—5 to 7 percent—even though I have many
indications that it is substantially higher.
Imports and exports into and out of developing and transitional
economies currently total approximately $4 trillion a year. Multiplying this
figure by the 5 to 7 percent average range of variant pricing produces a total
for falsified pricing of $200 to $280 billion a year, shifting money out of
these countries into western accounts by this mechanism. This in my judgment
is a low range. Others who have considered these issues think it is way
short of the mark.
Fake Transactions
Magnitudes and Misunderstandings 171
Billing and receiving payment for goods and services never delivered is a frequently
used technique for generating dirty money. Illegal transfers devoid of
authenticity have sucked billions out of the former Soviet Union just in the
past 15 years. The billions coming out of Russia into the Bank of New York
and other European and U.S. banks are included in this category of fake
transactions. It is not proper to put these sums into the criminal category because
the criminal origin for such fake transactions is seldom established.
Fake or vastly exaggerated charges for services, royalties, patents, trademarks,
advertising, consulting, management contracts, software updates, insurance
policies, and countless other subterfuges are common. The whole
business of asset stripping is included in this category. Swapping shares with
offshore companies and swapping real estate in fraudulent transactions is
here. I put illicit countertrade into this category, since it is barter trade rather
than invoiced trade that underlies most of these deals.
Other observers think that such pure fakery now significantly exceeds
the low-end estimate of $200 billion for mispricing and abusive transfer
pricing I have estimated globally. Correspondent banking relationships have
become so porous that wire transfers in the billions now fly around the
world without a particle of underlying reality or financial oversight. Nevertheless,
I am not yet satisfied that purely fictitious transactions with no
goods and services delivered exceed the false pricing attached to goods and