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OVERVIEW OF METHODOLOGIES
USED IN MEASURING ILLICIT
FINANCIAL FLOWS
Reform of the Public Sector
Public Governance and Terr...
• The World Bank Residual (WBR) Model (1985)
– Broader indicator of capital flight
– Involves comparing a country’s source...
• IPPS (International Price Profiling System-) based Trade Mispricing
Model
– Based on individual export and import transa...
• Over 140 crypto-currency regimes in place (Litecoin, Peercoin, Namecoin,..)
• Bitcoin, introduced in 2009, the most reno...
• Transactions remain pseudo-anonymous
• Rapid transmission
• Limited and controlled money supply
• Lower transaction fees...
POTENTIAL FOR GROWTH AND
ASSESSMENT OF THREATS
• Unregulated status well suited for purchasing and selling illegal goods and
for money laundering purposes.
• May 2013 – ...
Please feel free to share (e-mail us) your comments,
queries, but foremost your recommendations and
suggestions by contact...
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OECD, 2nd Task Force Meeting on Charting Illicit Trade - Jack Radisch & Matej Sodin

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This presentation by Jack Radisch & Matej Sodin was made at the 2nd Task Force Meeting on Charting Illicit Trade held on 5-7 March 2014. www.oecd.org/gov/risk/charting-illicit-trade-second-task-force-meeting.htm

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OECD, 2nd Task Force Meeting on Charting Illicit Trade - Jack Radisch & Matej Sodin

  1. 1. OVERVIEW OF METHODOLOGIES USED IN MEASURING ILLICIT FINANCIAL FLOWS Reform of the Public Sector Public Governance and Territorial Development Jack Radisch Matej Sodin
  2. 2. • The World Bank Residual (WBR) Model (1985) – Broader indicator of capital flight – Involves comparing a country’s source vs. use of funds – Drawback: data limitations pertaining to external debt & net FDI • The (Hot Money) Narrow Model – Based on the Net Errors and Omissions (NEO) in the Balance of Payments (BOPs) – IFFs are usually understated in comparison to WBR (latter includes licit capital) • Department of Trade Statistics (DOTS-) based Trade Mispricing Model – IFFs via trade mispricing – Under-invoicing of exports & the over-invoicing of imports main channel of IFFs 5 MAIN APPROACHES (MODELS)
  3. 3. • IPPS (International Price Profiling System-) based Trade Mispricing Model – Based on individual export and import transactions of the U.S. with the rest of the world • The Dooley Method – Encompasses the dynamics of IFFs – No longer relevant (since 2007) as the 5th edition of the Balance of Payments Manual (BPM) no longer required capital flows to be classified by maturity Potential for further assessment in a tailored/modified version of the Walker Gravity Model if conducted on an aggregate level? 5 MAIN APPROACHES (MODELS)
  4. 4. • Over 140 crypto-currency regimes in place (Litecoin, Peercoin, Namecoin,..) • Bitcoin, introduced in 2009, the most renowned of these. • Security lies in the hands of the public – mining (keeping up hash rate difficulty)< • General observation – cap rate on volume of cyber-currencies issued. • The latter means escaping hyper-inflation, however may induce hyper- deflation when emitted volumes come close to cap rate. CRYPTO-CURRENCIES
  5. 5. • Transactions remain pseudo-anonymous • Rapid transmission • Limited and controlled money supply • Lower transaction fees • Decentralised forms of payment PERCEIVED BENEFITS & DOWNSIDES • Highly volatile (speculative) currency • Only some may be exchanged for real fiat currency • Regulatory institutions weary of the use • Some currencies liable to receive infringement letters
  6. 6. POTENTIAL FOR GROWTH AND ASSESSMENT OF THREATS
  7. 7. • Unregulated status well suited for purchasing and selling illegal goods and for money laundering purposes. • May 2013 – closure of Costa Rican based crypto-currency firm Liberty Reserve • 7th February Mt Gox crash (over 700,000 Bitcoins stolen) • 4th March 2014 – 900 Bitcoins were stolen from Bitcoin bank Flexcoin • HOW CRYPTO-CURRENCIES FACILITATE MONEY LAUNDERING
  8. 8. Please feel free to share (e-mail us) your comments, queries, but foremost your recommendations and suggestions by contacting: jack.radisch@oecd.org and/or matej.sodin@oecd.org Thank you for your attention! Comments, questions, suggestions…

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