What Crime is the Largest Source of Laundered Funds?


Drug dealers get the most attention but tax evasion is by far the largest source of laundered funds. DSA analyzed US crime estimates 1 and found that there is $14.06 in dirty money generated from tax evasion for every $1 generated by illegal drug sales. Similarly, tax evasion generates $3.81 dollars to every $1 for other all other non-drug crimes combined. DSA based these calculations on estimated crime proceeds prepared by the UN using 2010 data.

A more detailed (but dated) look at tax evasion versus other criminal sources of laundered funds was undertaken by Edwin Truman and Peter Reuter using 1990 crime estimates 2.

 

 

 

DSA prepared the table below from the 1990 estimates to demonstrate the how many dollars of laundered funds were generated by tax evasion versus each of the listed crimes.

Crime Dollars of Tax Evasion per $1 of other Crime
Fraud (nonarson)  $                          4.42
Prostitution  $                       17.84
Loan sharking  $                       18.73
Motor vehicle theft  $                       32.78
Illegal gambling  $                       34.50
Larceny/theft  $                       69.00
Burglary  $                       74.91
Robbery  $                     524.40
Human traficking  $                 1,311.00
Counterfeiting  $                 2,622.00
Fraud (arson)  $                 6,555.00

DSA found that the portion of the total amount of illicit proceeds attributable to drug trafficking decreased from 20.6% in 1990 to 5.3% in 2010. The portion attributable to tax evasion increased from 55% in 1990 to 75% in the 2010 UN study. In dollar terms, the DEA estimates that American spend $65 billion on illegal drugs each year. In comparison, a 6% tax evasion rate in the United States would have generated almost $900 billion in 2010.

 

1 “Estimating Illicit Financial Flows Resulting From Drug Trafficking and Other Transnational Organized Crimes,” United Nations Office on Drugs and Crime, October 2011.

2 “Chasing Dirty Money: The Fight Against Money Laundering,” Edwin Truman and Peter Reuter, November 2004.