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Measuring global money laundering, the proceeds of transnational crime that are pumped through the financial system worldwide, is still in its infancy. Methods such as case studies, proxy variables, or models for measuring the shadow economy all tend to under-or overestimate money laundering. The model presented here is a gravity model which makes it possible to estimate the flows of illicit funds from and to each jurisdiction in the world and worldwide. This "Walker Model" was first developed in 1994, and used and updated recently. We show that it belongs to the group of gravity models which have recently become popular in international trade theory. Using triangulation, we demonstrate that the original Walker Model estimates are compatible with recent findings on money laundering. Once the scale of money laundering is known, its macroeconomic effects and the impact of crime prevention, regulation and law enforcement effects on money laundering and transnational crime can also be measured.

*Measuring global money laundering, the proceeds of transnational crime that are pumped through the financial system worldwide, is still in its infancy. Methods such as case studies, proxy variables, or models for measuring the shadow economy all tend to under-or overestimate money laundering. The model presented here is a gravity model which makes it possible to estimate the flows of illicit funds from and to each jurisdiction in the world and worldwide. This "Walker Model" was first developed in 1994, and used and updated recently. We show that it belongs to the group of gravity models which have recently become popular in international trade theory. Using triangulation, we demonstrate that the original Walker Model estimates are compatible with recent findings on money laundering. Once the scale of money laundering is known, its macroeconomic effects and the impact of crime prevention, regulation and law enforcement effects on money laundering and transnational crime can also be measured.

Money laundering regulations have become stricter over time and involve more and more actors. This means that the accountability of laundering regulation will become more important; theoretically, money laundering should have decreased with the implementation of new regulations. However, as this paper shows, it is difficult to estimate even the sign of the trend in the proceeds of crime and of laundering over time with particular reference to the drug trade. There seems to be a substitution from hard to softer drugs, and no substantial decline in the proceeds of crime and likewise no substantial decline in money laundering. Criminals seem to switch from the more controlled banking sector into still less controlled parts of financial markets, and from financial markets to other sectors. These new sectors include electronic payments, trade and real estate. The paper shows how one can empirically approach the latter two by using economic information of unusual prices and other characteristics in order to identify the amount of laundering in these sectors. Combining economic information with criminological data facilitates the development of a new tool for identifying money laundering in some important sectors.

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