MEASURES TO COMBAT ECONOMIC CRIME, INCLUDING MONEY-LAUNDERING“Measuring the Impact of Economic Crime: Can Indicators Assist?”
Mr. Charles Goredema
Senior Research Fellow, Institute for Security Studies, South Africa‘These five characteristics – specialisation in market-based crimes, hierarchical and durable structures, use ofviolence and corruption to achieve monopoly power, high rates of return, and penetration of the legal economy,
seem to be what organized crime is all about.’ R. T. Naylor Wages of Crime: Black Markets, Illegal Finance andthe Underworld Economy (2002) Cornell University p. 16.

Introduction
As a general proposition all crime has economic consequences. The result of crime is potentially measurable
in economic terms. Some crimes are committed in order to yield material benefit to the perpetrator(s). It is theprospect of acquiring tangible assets which motivates them. Criminologists have drawn a further distinction
between predatory offences committed sporadically, when opportunities present themselves on the one hand,and on the other, market based offences.1 The key distinguishing characteristic is that the former are episodic
and do not always require supportive infrastructure, while the latter have to be supported by a modicum of longterm organisation and a viable market. Examples of such activities include trafficking - in humans, arms anddrugs. Financial crime committed systematically could also be described as market based economic crime. This
paper is confined to market based economic crimes encountered in Southern African countries. It is however
important at the outset to point out that the cleavage between predatory and market based economic crime is notclinical, as there are areas of overlap between them. The drug trafficking industry perhaps illustrates this reality
as well as any other. Typically, cannabis cultivation is carried out at a peasant, subsistence level for downstream
international criminal syndicates engaged in marketing the drug, often very far from the source regions. 2
Corruption, even at a grand level, demonstrates a symbiotic link between predatory and market-driven economic
crime. Where bribery involves a large corporate institution and state officials, the executives that corrupt the
public officials are likely to be repeat offenders, and could be said to be engaging in market based crime, whilefrom the perspective of the recipients of bribes, their activities are ad hoc opportunistic acts of delinquency.
The underlying premise of this paper is that market driven economic crime is organised. It manifests itself asvarious activities or kinds of activities that occur in society, in the same environment in which lawful activities
occur. As a result, and depending on its scale, economic crime is able to compete with lawful activity, and evenpenetrate and undermine it. The paper further assumes that in both developed and developing economies,
participation in organised crime is not confined to dedicated or professional criminal groups. Entities establishedfor legitimate business enterprises are just as liable to engage in organised crime as recognised criminal
syndicates.3 There seems to be agreement about the negative impact of organised crime on economies. General
spheres in which the impact is encountered include inflation, poverty, commercial crime, development, andcorruption.
Aware of this, most countries accept the need to conduct reform in key areas, such as legislation. At thepolitical level, the importance of adopting an enlightened approach to crime detection, and law enforcement
seems to have been accepted. It is clear that these initiatives have to be underpinned by an assessment of the
precise form of threat that organised economic crime presents.
This paper profiles the nature of the harm attributable to economic crime. It follows up with a discussion of
manifestations of harm. In the final part, the paper proposes indicative factors of incidence and scale of economic
crime, and suggests possible sources of data.
The relativity of economic crime as a detrimental factor to society as compared to other factors is beyond thescope of this paper. A comprehensive analysis should juxtapose economic crime alongside other phenomenathat constitute threats to society. Among those well known to the developing world are ‘the depletion of raw
1 On the distinction, see Naylor Wages of Crime: Black Markets, Illegal Finance and the Underworld Economy (2002) Cornell
University pp. 14-16.
2 See P. Bagenda, Chapter 4 of P Gastrow (editor) Penetrating State and Business: Organised Crime in Southern Africa, (2003) ISS
Monograph series number 86, pp. 81-2.
3 The debate on paradigms in organised crime discourse is explored further by A. Standing in Rival Views of Organised Crime (2003)
ISS Monograph series number 77.

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materials and capital, an over-dependence on imports, a high ratio of foreign to domestic investment, surplusesof imports over exports, and inadequate regulation of competition from foreign producers’.4 The true significanceof economic crime as a threat can be better demonstrated in that way.

Economic crime: areas of common concern
The forms of organised economic crime on which there is consensus, in terms of definition and incidence are:•armed robbery, including robbery of cash-in-transit;•
theft of motor vehicles;•
serious commercial fraud;•currency counterfeiting;•extortion rackets;•
drug trafficking;•smuggling of precious resources, predominantly diamond, gold, timber and wildlife products; and•corruption.
One mode of economic crime on which there is unanimity as to its existence, but not quite as to its definitionor magnitude, is money laundering. It appears that money laundering, being concerned with the managementand disposal of proceeds of crime, has come to be regarded as seriously as any of the other criminal activities.
On account of its significance, money laundering is treated in some depth in this paper.

A profile of economic crime as a threat
If the proposition that economic crime occurs in the same environment as lawful economic activity is
accepted, it follows that economic crime has an impact on such activity. The precise ways in which the impact will
be encountered depends on how unlawful activity relates to lawful activity.
In Southern Africa it is widely acknowledged that the relationship is predatory. At one end of the emerging
spectrum is the perception that proceeds of illicit activity sponsor unfair competition for lawful business. The
following statements summarise this view:‘Criminal organizations dealing only in illicit goods and services are no great threat to the nation. The
danger of organised crime arises because the vast profits acquired from the sale of illicit goods andservices are being invested in licit enterprise, in both the business sphere and the government sphere. It
is when criminal syndicates start to undermine basic economic and political traditions that the real
trouble begins.’ (Cressey 1969)5‘..the real harm done by organised crime comes not from selling inherently illegal goods and services but
from the way the profits are subsequently invested’ (Naylor 2002)‘There are also significant social costs if efforts are not made to counter money laundering. Moneylaundering, organised crime and economic crime are often integrally linked, and criminal organisations
will use their profits to infiltrate or acquire control of legitimate businesses, and to bribe individuals andeven governments. Over time, this can seriously weaken the moral and ethical fabric and standards ofsociety, and damage the principles underlying democracy. One cannot rule out the possibility ofcriminals installing puppet governments by deploying the proceeds of crime to rig and win elections.’(Sithole 2002)6
This view substantially forms the bedrock of economic policy based responses to organised crime, which seek
to draw illegally acquired funds into the public financial system, through taxation and asset forfeiture. Measuresinspired by these objectives aim to deprive criminals of the competitive advantage that they would otherwise
derive from the proceeds.
The advantage which stems from economic crime does not arise only from the deployment of proceeds. As
many economists have noted, sometimes it is inherent in the trade in commodities obtained by stealth - throughtheft, falsification or smuggling.7 The cost to society is greater, perhaps even disproportionate to the benefits that
4 A. N. Gorodysky, ‘Ukraine, International Money Laundering and the Investigation of Organized Crime’ unpublished paper, accessible

at http://www.ojp.usdoj.gov/nij/international/programs/Laundering.PDF.
5 D. Cressey Theft of the Nation (1969) Harper & Row, New York, p. 3-4.
6 Majozi Sithole, ‘Taking Action Against Money Laundering’, in C. Goredema (editor) Profiling Money Laundering in Eastern andSouthern Africa (2002) ISS Monograph series, number 90, p. 2.
7 Finance Week, 8-10 December 2004.

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accrue to the perpetrators. The illicit commodities can displace commodities produced and marketed incompliance with the applicable taxation and import laws, and even precipitate de-industrialization. Unemployment
inevitably results. The costs of unemployment in social, economic and political terms can be quite drastic.
There are other forms of harm to legitimate business and the communities in which it exists. Among the costs
regularly cited by organized business are:8•
Costs of establishing and maintaining security systems that are proactive, reactive and forensic;•
Inflated insurance premiums that take into account increased risk and higher levels of crime;•
Higher levels of taxation to support public expenditure to combat crime.
As Altbeker points out, the impact that crime has on business confidence is just as significant as the effect on
the so-called bottom lines. Business confidence, which is a matter of perception, is described as:9‘the subjective feelings of investors and managers that impacts on decisions to expand, contract, orchange direction’.
The kind of decisions taken by investors and managers can therefore be regarded as the barometer by which
to measure such confidence.
Fraudulent dealings with savings and investments inevitably precipitate losses to depositors and investors.10
So can speculative dealings. Occasionally, they result in the collapse of financial institutions. The latest
illustrations have been witnessed in Zimbabwe, where losses from banking and asset management sector
failures in the period 2003-4 cost investors an estimated Z$251 billion (USD 41,833,333.40).

Indicators of vulnerability
The classic view is that economic crime is endemic in states overwhelmed by challenges of transition, orcaught up in political crises. At these junctures, the level of vulnerability is acute. The features of a transitional
state which produce a peculiar vulnerability may be summarised as follows:•
diminished social control, as reflected by no (or weakly enforced) laws against economic crime;•
greater mobility of personnel within the country and transnationally;•
corruption precipitated by declining wages, increased opportunities, diminished penalties and falling
moral values;•
close linkage between political power and access to economic leverage; and•imbalance in resources between the law enforcement structures and criminal organisations; leading to•frustration of law enforcement functionaries, and their absorption into the private sector or by organised
crime; and•opening up of avenues for unbridled opportunism to flourish.
With regards to Southern Africa, Gastrow offers a summary of the situation that most countries were in by the
beginning of the 90s. He observes:11‘Many recently independent states were then faced with the overwhelming task of managing a doubletransition, namely from state-led to market-led economies, and from autocratic rule to transparent
democratic politics. With some exceptions, such as Botswana, the SAPs (structural adjustment
programmes – author’s note) tended to produce unintended consequences. Besides being ineffective ona macro-economic level in many countries, there were elements in the political leadership and inbureaucracies who skilfully managed the reforms in a way to suit themselves. These elements were able
to use the new ideological changes to engage in “practices of accumulation”, by staking out forthemselves profitable areas for their own business activities. They straddled positions of public officewith positions of accumulation, inevitably leading to corruption. This development was bound to impact
on corruption and organised crime. The corrupt practices of so-called accumulators in high positions
brought them into contact with ‘middlemen’, increasingly foreigners, and other entrepreneurs who wereoperating in the criminal markets...
...It therefore appears that by 1990, obscured by the major transformation processes and turmoil thatwere experienced during the post-independence years and by the political conflicts in South Africa
8 See A. Altbeker, ‘Losing our nerve? Business Confidence and Crime in South Africa’ (2001) NEDBANK ISS Crime Index number 4

pp. 16-7.
9 Altbeker, op cit, at p. 17.
10 In many parts of the world, fraudulent investment schemes have been used to lure gullible investors to part with their savings. The
notorious advance fee fraud schemes (colloquially referred to as ‘419’ fraud) are symptomatic of these kinds of fraud.
11 Gastrow, op cit, p. 11-13.

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during the 1970s and 1980s, transnational organised crime had come of age in the SADC region. The
precise causes of its growth are complex and multiple and differ from country to country in the region.
However, one experience that all SADC countries went through after independence was a fundamental
transformation process. As a general rule, the growth of organised crime is most rapid in thosecountries, which experience not only a significant political change, but also an associated economic one.
This has certainly been the case in a number of SADC states. However, the transition processes
experienced in these states differed in content and intensity, and took place over different periods oftime. It would therefore be too simplistic to ascribe the growth of organised crime in the region solely tothe political and economic transitions that followed independence’.
Within that environment certain indicative factors of economic crime are evident.

Economic crime: the indicative factors
Proceeds of economic crime and other illegally acquired income tend to be transferred abroad within arelatively short period of acquisition. The objectives are to prevent detection of the predicate activities or to invest.
To facilitate transmission and infusion into foreign economies and financial systems, conversion into acceptablecurrencies or marketable commodities is often necessary. The availability of such currencies and avenues
through which to acquire them can be regarded both as characteristics engendering vulnerability to economic
crime, as well as indicators of incidence. Currency exchange establishments, in the formal and informal sector,
have been linked with money laundering in many parts of southern Africa and elsewhere. Records of transactions
conducted through them, if genuine and comprehensive, would provide evidence of scale. Unfortunately,
indications are that in too many instances, they are neither available nor reliable.
Investments of unexplained or undeclared wealth in external markets and foreign jurisdictions. Investments ofthis kind by nationals in politically connected or exposed positions invariably provide illustrations of thisphenomenon.
Since the 1980s, large quantities of money have been transmitted to South Africa. Source countries include
Angola, the DRC, Malawi, Mozambique, Zambia and Zimbabwe. With the advent of Frelimo rule in the midseventies in Mozambique, there was capital flight by the erstwhile Portuguese settler community, facilitated bybanks, through direct transfers and payment for fictitious goods. It is estimated that 90% of the Portuguese left
the country within the first five years following independence.
The trend does not seem to have abated; part of the reason is that the factors that encourage the trend haveremained virtually intact. In certain cases, developments in the source countries have increased the flow. Assetflows to South Africa are influenced by:
The scope for investment in residential property. With the exception of Botswana, Lesotho, Swaziland andZimbabwe, the average price of good quality residential property in South Africa is relatively lower than in otherparts of the region.12 This oddity is probably attributable to the creeping dollarisation of economies in Southern
Africa. In addition, the prevailing security of property rights in South Africa is rather less fragile than it is in someother parts of the region.
The presence in South Africa of a relatively developed financial system and safe investment climate/environment
provides an incentive for cross border asset transmission.
The presence of migrant communities across national borders enriches the environment for the transmissionof resources between the respective countries, often informally and with no recourse to the financial institutions
and regularly in violation of currency movement control laws. An example is the spread of the Lundas in Angola,
the DRC and Zambia, the Tutsi in Rwanda, Uganda and the DRC, the Venda in South Africa and Zimbabwe, or
the Chewa-speaking communities on either side of the Malawi/Zambia border. In addition, dual nationality eases
movement between the countries, and makes it difficult to regulate currency transmission.
Conspicuous consumption in luxury commodities. It has been observed that illegal income is likely to be
consumed quicker or invested outside the financial sector than legal income. There are several reasons for this12 The average price of a dwelling house in middle-income areas of South Africa in May 2004 was ZAR488,456 (US$75,147). This islower than that for similar property in neighbouring Mozambique (US$135,000) or Tanzania (US$120,000). Information based on
Property Section in the Weekend Argus (29 May 2004), which circulates in Cape Town, South Africa.

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inclination, partly the desire to conceal such income from detection, and partly to exploit lawful markets with theproceeds.13 The latter motivation is particularly compelling if the environment in which consumption occurs isafflicted by inflation and unattractive interest rates. Proceeds of crime are then likely to be invested in real estate,commercial properties and luxury motor vehicles.
The market for luxury motor vehicles in Southern Africa transcends borders, which has led to the growth ofsymbiotic links among crime syndicates. An indeterminate number of South African syndicates engage in theft ofmotor vehicles in South Africa. The vehicles are thereafter smuggled across borders to Zimbabwe, Namibia andMozambique for sale to syndicates which sell them on to syndicates that thrive on smuggling precious resources,
drug trafficking and currency speculation.14
In these circumstances, indicators of incidence and scale of economic crime are likely to be:
1. Data on vehicles stolen in South Africa, less recoveries.
2. Data on average incomes in economic hub centres in Zimbabwe, Namibia, and Mozambique.
3. Data on registration of vehicles imported into those countries.
4. Aggregate values of imported vehicles.
Abuse of state institutions for private accumulation of capital. Various scenarios have been encountered in
Africa. The first two arise within a context of economic and financial crisis, precipitated by external or internal
factors. This usually leads to crisis management, and the creation of an environment replete with opportunities for
economic crime on a grand scale. In the first scenario, the state is desperate for foreign currency to support
trading activities and debt servicing. The ‘bogus exports’ fraud that led to the notorious Goldenberg scam in
Kenya stemmed from an arrangement ostensibly introduced as an incentive to diversify the national export base.
The judicial inquiry conducted over the last two years exposed a corrupt scheme that involved, and was facilitatedby government departments at various levels, including the Office of the President, the Ministry of Finance, theCustoms & Excise Department, the Ministry of Environment & Natural Resources, the Mines & Geology
Department, and the Central Bank of Kenya.
The total funds yielded by the Goldenberg grand corruption and fraud scheme have not been quantified. They
are estimated to be between US $600m and US $1 billion. Having been accumulated over a period of time, thefunds were consumed gradually. Various entities have benefited from them. At the centre was the Pan Africa
Banking Group. Others were - the Pan African Building Society; the Pan African Credit & Finance; the Uhuru
Highway Development Corporation - which in turn constructed and managed a large hotel in Nairobi called theGrand Regency Hotel; the Kenya Duty Free shopping complexes at airport terminals; the United Touring
Company and the Safari Park Hotel. In fact, the resources illegally gained through fraudulent compensation
claims ‘provided seed money for criminal infiltration of legal business...’ and set up a foundation for the capture of‘major sectors of the legitimate economy’. This typified the classic threat of systematic economic crime on which
drastic measures against money laundering appear to be premised.15 There is speculation that some of thecriminally earned assets were used to fund the campaign of a political party in the elections in Kenya in 1992.
In the second scenario, government, under pressure from economic and civil strife, resorts to ill advised waysof earning money, for instance by printing money. During the civil war in Mozambique (1977-1992), the state
printed money to pay war-related expenses, and to finance a commodities black market. The market had in turnbeen fuelled by the war. The capacity of the formal economy and the state to provide goods and services wasseverely eroded by the war, creating a huge gap for the informal economy to exploit. Large amounts of money incirculation ended up in the hands of speculators.
The third scenario involves the ubiquitous front companies and foreign banking accounts establishedostensibly to support security (espionage and economic) activities of the state. Funds are transmitted directlyfrom the treasury to foreign financial repositories to pay for the activities of ‘state security agents’ operating
13 In the words of Naylor‘Usually a legal firm works on the premise that it will be around for a long, perhaps indefinite time, even if the time horizon of any
particular set of executives is shorter. On the other hand, an illegal; enterprise has a time horizon equal to that of the illegal
entrepreneur. Thus, with its time horizon short to begin with, the illegal enterprise is always in danger of being abruptly terminated,
reinforcing its tendency to take a grab-and-run attitude toward market exploitation.’
14 ‘Police smash alleged smuggling ring’ Independent on Line (31 March 2005), accessible at http://www.iol.co.za/index.
15 Authors like Naylor are cynical about the incidence of this kind of scenario. See R T Naylor, op cit, p. 34-7.

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abroad. The system leads to the treasury being virtually turned into part of the banking system. To be sure, someof the payments processed in this manner are not looted. Its weakness lies in the absence of rigorous safeguards
against theft, and its reliance on the honesty of individual officials. In the ‘80s and ‘90s, this avenue was exploitedby state officials in various positions in South Africa, Zaire (now the DRC), Nigeria and Zambia to fraudulently
transfer money to private accounts held in foreign banking institutions. Where these funds have since been
traced, they have yet to be repatriated or fully accounted for.
The fourth scenario revolves around investment undertakings ostensibly undertaken in the interests of thestate. Indications of the criminal abuse of these undertakings lie in the lack of accountability on their funding andperformance during their existence.
Evidence of this kind of criminal conduct has been observed in mining undertakings that originated in
Zimbabwe and Namibia. The mining locations were in the Democratic Republic of the Congo.16 A study on theimplications of inadequately conceived military undertakings by Zimbabwe in the DRC showed unsustainablelevels of defence spending. Figures released by the Ministry of Finance revealed that more than 12% of the entire
budget for 2001-2 was committed to defence. No provision was made for inflows from the commercial ventures inthe DRC. To date, none of the expenditure incurred in that country has been offset by income from the ventures.
The scale of the economic decline in Zimbabwe after 2000 appears to be partly attributable to the costs of the
DRC campaign. The lack of accountability also creates opportunities for corruption and secondary asset
laundering. The latter takes the form of mingling of resources, such as rough diamonds originating from one
source with those extracted from another.
In view of the history of its evolution, it is not surprising that market-based economic crime in Southern Africa
has cross-border dimensions. Illicit business emulates legitimate business in creating and using trans-national
markets. Criminal groups have proved to be adept at taking advantage of globalisation and rapid technologicalinnovation. The composition of these groups has for long been cosmopolitan,17 and the nature of the activities ofengagement varies with the demands of the market. One of the implications of this is the likelihood of crossborder transmission of proceeds of crime. The impact of crime is experienced in both the place where the criminal
activity occurs and the destination of the proceeds. Indicators of economic crime cannot be complete if they do
not take account of corresponding data in relevant foreign countries. It has been suggested that, as a researchtool, data collection should occur on a corresponding basis among affected countries in the region. Major
predicate activities should be identified, using material such as police and court records. Patterns of transmission
should be mapped out, on the basis of information collected from within the criminal justice system as well asfrom data sources on routes of trade and other commercial activity. Departments of trade and customs will be
important in this exercise. The resulting information is then organised in the form of a table, in which the source
activities constitute a vertical column, and the destinations of transmission or consumption are arranged in ahorizontal row. For Southern Africa, the table could resemble Table 1 below.18

16 C. Goredema ‘Organised Crime in Zimbabwe’ in P. Gastrow (editor) Penetrating State and Business: Organised Crime in Southern

Africa, Volume II (2003) ISS Monograph series number 89, pp. 22-4 and J. Grobler ‘Organised Crime in Namibia’ in P Gastrow, op cit,
p. 30.
17 See P. Gastrow, Organised Crime in the SADC Region: Police Perceptions (2001) ISS Monograph series number 60, pp. 39-65.
The author employs tables to illustrate the picture as perceived by police agencies in the region. For a historical overview of thedevelopments in this area, refer to P. Gastrow, op cit, p. 1-17 On the role of networks from West Africa, see Crime as Business, andBusiness as Crime (2003) South African Institute for International Affairs.
18 Adapted from a methodological framework proposed by John Walker, a criminal justice researcher based in Melbourne, Australia, in2004 to facilitate a global survey of money laundering trends.

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Table 1: Framework for comparative indicative proceeds of crime data between countries
Source activity ofproceeds

Consumed

Transmitted

Transmitted

Transmitted

Transmitted

locally

to country 1

to country 2

to country 3

to country 4

Drug trafficking
Theft of motor vehicles
Commercial fraud
Armed robbery(excluding motor vehicles)
Extortion rackets
Corruption
Smuggling of precious
resources
Externalisation of currency
Money laundering

Sources of data
There are significant challenges that can impede the collection of the data required to collate indicators of
economic crime. For data on criminal activity to be available at all, it is necessary not just for the activity to berecognised as a crime, but also for it to be officially recorded, and for the records to be stored in an organised andretrievable form. Furthermore, if what is sought is information on the impact of crime, there should be a modicumof analytical content to the record. The preferable record is one that can be objectively verified. It is matter of
debate whether the impact of crime is recordable in this sense, and if so, at what stage this can be done.
Table 1 rests on the assumption that the police are the main repositories of the relevant information on crime
trends. The reality is that in some cases, police statistics are deficient. In other instances, it may not be practicalto expect all the information to be available to the police. Agencies mandated to detect, investigate and prosecutespecies of organised crime, playing a complementary but not subordinate role to that of the police, areoccasionally better placed. In respect of corruption, the advent of dedicated anti-corruption agencies is apromising development. There has been growth in the establishment of these agencies in the last few years, inthe wake of the adoption of the SADC Protocol against Corruption. The position at the end of 2004 is shown in
Table 2.

Table 2: Dedicated Anti-Corruption Agencies in Southern Africa (2004)
Group I: countries with dedicated anti- Group II: countries contemplating thecorruption agencies
establishment of a dedicated anticorruption agency
Botswana, Malawi, South Africa,
Swaziland, Tanzania, Zambia,
Lesotho, Mauritius, Mozambique andZimbabwe

NamibiaGroup III: countries not contemplating
establishing a dedicated anticorruption agency
DRC, the Seychelles

The focus on anti-corruption agencies is influenced by the noticeable tendency to require such agencies toinvestigate the laundering of proceeds of crime.19 It is suggested that anti-corruption agencies should be required
to collect and exchange data on the magnitude of economic losses attributable to corruption.
Apart from the agencies mandated to tackle corruption, one should also be able to obtain usable informationfrom other sectors which are particularly vulnerable to economic crime. In a survey of auditors in seven countries
in the region in 2003, Standing and Van Vuuren found that in most, the banking and finance sector was perceived
19 As has occurred in Botswana, South Africa, Swaziland, Mauritius, Mozambique and Zimbabwe. The proposed Bill in Lesotho adopts
the same approach.

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to fall into this category.20 With specific reference to money laundering, it was found that other sectors were:•
vehicle retailing•mining•entertainment•
precious commodities trading•
real estate•
fuel industry•
sugar trading.
It has been observed that the impact of economic crime manifests itself in the phenomena of inflation, poverty,
commercial crime, development, and corruption. In each of the stipulated sectors, a key objective of the inquiry
will determine the causal connection with criminal business. In each case, the nature and scale of economic
crime is compared with the nature and scale of inflation, poverty, commercial crime, development, and corruption.
The result should be capable of being presented in the form of a series of graphs, on each of which one pole of
the axis represents the scale of economic crime, and the other shows the scale of, for instance, poverty.
In order to secure data relevant to the relationship, one has to look beyond the stipulated sectors. Table 3
presents a possible list of other data repositories that could be relied on to construct a comprehensive picture. It
is adapted from an analysis of sources developed at a workshop on money laundering in Blantyre, Malawi.21 For
each source of information, it is important not only to recognise the type of data to be sought, but also thepossible limitations that may affect either the source or the utility of data.

Table 3: Analysis of primary sources of information on economic crimeand money laundering scale and trends
Economic Crime & Money Laundering: Analysis of Primary Sources of Information on Trends
Key repositories of
data
Police statistics
Senior officers
Station heads,
detectives, Economic
and commercial crime
units, Narcotics
bureaus,
Crime intelligenceType of data

Limitations

Crime statistics
Proceeds of crime
Criminal syndicate identities
Case experiences
Existing measures
Crime trends and patterns

Anti-Corruption
Bureau/Commission

Director of bureau,
investigators

Agency records for pending
cases
Completed case records/files

Revenue
Authority(customs/
taxation)Tax (income, retail andvalue added) records
Duty collection records
Trade trends (imports
and exports)
Trade volumes
Statistics
officials

Economic statistics
Scale and nature of inflow andoutflow of imports and exports,
declarations of value,avenues of legitimate tradeNon-declared income (corporate
and individual)

Might not be comprehensive (will notrecord unreported crimes)
Limited penetration analysis - mayoverlook destination of proceeds ofcrime
May be reluctant to divulge pending
cases
Political motive to play down levels of
crime
Disclosure may be prevented byconfidentiality or for legal reasons
Records may not be centralised
Corruption
Political motivation may deter certain
investigations
Corruption may compromise record
keeping or efficiency
Inter-country arrangements may
make record keeping unnecessary
Illicit sources of incoming/outgoing
commodities may not be detected
Eventual destination of incoming
commodities will not appear
Goods through undesignated points
unrecorded
May be difficult to make sense of
mixed mass of information

SourcePolice20 A. Standing & H. Van Vuuren ‘The role of auditors: Research into organised crime and money laundering’ (2003) ISS Occasional

paper, number 73.
21 ISS Workshop on Money Laundering in Malawi, Protea Ryalls Hotel, 29 September, 2004.

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Absence of legislative duty
Ethical considerations may impede
openness
Political pressure may result in nondisclosure
Capacity constraints
Not comprehensive (will not takeBorder security
account of unreported crime)
Case experiences
Preoccupation may be with political
Effectiveness of existingrather than criminal threatmeasures
Corruption may effect reliability
Patterns and level of economic
Confidentiality to protect sources
crime
Reciprocal obligations to counterpart
Identity of criminal syndicatesorganisations may impede
information disclosure
Political motive to downplay
incidence of crime
Penetration analysis may be limited
Might not be systematicallyTender documents
Information on awards of tenders documented
Verification of existing
companies
Tender compliance
Lack of capacity
Verification of eligible andineligible companies
Authentication of remittances
Fiscal information
Economic data
Average income levels
Size of the legitimate economy

Reserve/
Central Bank

Regulatory units
Bank supervision
Anti-ML units

NationalIntelligence
BureauInternal security unit
External security unit
Specialised crime unit

Directorate of
PublicProcurement

Director

National
Construction
Industry Council
National Audit

Head of council,
officials
Auditor General

Information on criminal misuseof public resources

Directorate of
PublicProsecutions
Road Traffic
Directorate

DPP

As with the police

Director

Vehicle registration
Crime statistics

Ministry ofCommerce

Head of ministry,
bureaucrats

Immigration
Department

Immigration officials
and registers

Licences
Type of business conducted bycompanies
Inflows and outflows of migrants

Registry ofCompanies

Companies registrar
Actual registers

Currency
Exchanges(bureaux dechange)Transaction records
Bureau operators
Oral and documentary
survey of clientsIntellectual property records andtransfers
Assets attributable to individuals
Beneficial interests in corporate
entities
Unexplained wealth
Suspicious registrations
Transaction records
Efficacy of control measures
Turnover over pre-determined
periodPotential for abuse
Empirical evidence of actual
abuse for ML activity– 130 –

Limited resources and time affectreliability
Restricted to public sector
As with the police

Corruption
Lack of capacity
Might not be systematically recorded

Corruption may affect availability or
reliability of data
Accessibility
Inadequate technology (records
prepared manually)
Corruption may affect availability or
reliability of data
Accessibility
Inefficiency
Incomplete records

Poor documentation (sources ofcurrency exchanged not
documented)
Corruption
Involvement in criminal businessNo obligation to co-operate with nonstatutory institutions

III PAPERS SUBMITTED TO THE WORKSHOP

Investment

Management

Transaction records

Banks andInvestment values

Discount Houses

Individual deposits

Bank confidentiality

Insurance

Insurance agents

Asset values and holdings

High volume of transactions

Companies

Insurance brokerages

Paid out claims

Poor record keeping

Fraudulent claims

The use of intermediaries may

Economic impact of crime

obscure linkages
Absence of relevant legislation
Corruption

Estate Agents

Legal Profession

Records of property

Property values

Absence of regulation

sales

Beneficial interests in fixed

Confidentiality duties to clientsproperty

Corruption

Lawyers

Property transactions

Lack of legal obligation to disclose

Lawyers financial

Trust settlements andClient privilege

identification of beneficiaries
Statement of affairs/accounts
Audit reports
Verification of existence ofcorporate bodies
Origin of goods
Value of imports
Volume of imports
Ownership of goods
Value of goods
Frequency of imports andexports
Duties payable
Tax history
Methods of purchase
Individual deposits
Fraud statistics
Suspicious transaction reports
Economic impact of crime
Foreign currency levels

Collusion
No legislative obligations
Confidentiality
Collusion
Lack of client profiling
Collusion with dishonest clientsrecords
Accountants and Accountants, auditors
auditors

Commercial
agentsSales persons

Clearing andforwarding
agentsSales persons
Dealership owners
Sales records

Commercial
Banks

Bank managers
Bank tellers
Foreign currency
departments

Motor Vehicle
Dealers

Sales persons
Dealership owners
Sales records

Motor vehicle sales
Purchaser identities/nationalities
Methods of purchase

Interpol(SARPCCO)

Nat. Crime Bureau
reports
Economic crime data
Bureau chief

Narcotics data
Trends and patterns of crime
Identity and size of crime
syndicates
Anti-crime networking– 131 –

Poor record-keeping
Source of funds may not be visible
Collusion and corruption
High volumes may make task ofcollating information difficult

Lack of national identification system
Not systematically documented
Bank confidentiality
Competition
No obligation to report suspicioustransactions
Poor record-keeping
Origin of funds may not be visible
No obligation to reportHigh volumes may make task ofcollating information difficult
Where vehicles financed throughthird party intermediaries, records will
be difficult to use
Heavily reliant on constituent
members statistics
Insufficient analysis
Capacity constraints
No authority to release data

MEASURES TO COMBAT ECONOMIC CRIME, INCLUDING MONEY-LAUNDERING

Summary of indicators
The indicators can be grouped into two categories: indicators of the incidence of economic crime andindicators of its impact.
Incidence of Economic Crime•

Scale of the trade in commodities obtained by stealth - through theft, falsification or smuggling
data on vehicles stolen in the country, less recoveries
data on average incomes in the national economic hub centres
data on registration of vehicles imported into the country
aggregate values of imported vehicles•
Manifestation of the challenges of transition, or political crisis
declining wages, increased opportunities for crime;
diminished penalties and falling moral values;
close linkage between political power and access to economic leverage;
imbalance in resources between the law enforcement structures and criminal organisations.
•
Abundance of hard currency•
Unexplained disparities between production declared by the state and exports (of precious resources,
such as minerals)•
Unrecorded income from precious resource sales
Indicators of Impact
•
•
•
•
•
•
•
•

Level of inflation
Level of poverty
Level of commercial crime
Level of under-development
Degree of corruption
Costs of establishing and maintaining corporate security systems
Extent by which insurance premiums are affected by levels of crime
Correlation between crime and levels of taxation

Conclusion
While there is broad and evident consensus about the need to respond adequately to serious economic
criminal activity, clarity on the terrain for which responses should be designed continues to elude policy anddecision makers, particularly in Southern Africa. Various reasons may be blamed for this state of affairs. They
include the dearth of empirical research on the nature and scale of crime, even in respect of crimes considered to
be priority crimes. The gap in the current environment has tended to be filled by misconceptions on the nature oforganised crime groups and criminal business in general.
This paper proposes a method by which to develop a set of indicative factors that could facilitate a better
understanding of the scope of criminal business (in its most comprehensive form) as well as facilitate theassessment of the threat that this business raises to economies from time to time.

– 132 –