Following the global dirty money trail
ANDREAS CHAI, MATTHEW MANNING AND ELENA STEPANOVA |
New research reveals how wealth, financial systems, trade, geography and international connections shape the movement of illicit financial flows around the world.
Illicit financial flows (IFFs) are a hidden threat to economies, governments and communities around the world. Money generated through corruption, fraud, tax evasion and organised crime can cross borders using many of the same networks that facilitate legitimate trade, investment and remittances.
New research published in the Journal of Quantitative Criminology examines how these illicit flows move between countries – and why some destinations are more attractive to criminals than others.
Led by Griffith Asia Institute researcher Dr Andreas Chai, with Matthew Manning from City University of Hong Kong and Elena Stepanova from the European Commission’s Joint Research Centre, the study develops a new statistical model to examine the global network of illicit financial flows.
The researchers analysed suspicious activity data covering US$35 billion in reported illicit flows across 129 countries between 2007 and 2017, drawing on the FinCEN Files published by the International Consortium of Investigative Journalists.
Rather than simply measuring the volume of illicit money moving between countries, the study examined two questions: what influences the choice of destination country, and what determines the volume of illicit funds ultimately moved there?
Stronger financial systems can deter illicit flows
One of the study’s key findings is that while wealthier countries attract higher levels of illicit financial flows, countries with higher-quality financial services and stronger monitoring capabilities are less likely to be selected as destinations.
The research suggests that sophisticated financial systems can deter money laundering by increasing the likelihood of detection.
However, criminals may adapt their methods in response.
The findings provide evidence consistent with structuring, where illicit funds are divided into smaller transactions to avoid detection. This suggests that stronger AML/CFT systems may not simply eliminate illicit activity – they can change how criminals attempt to move money.
Dirty money follows legitimate connections
The research also found a strong relationship between illicit financial flows and legitimate international economic activity.
Countries with greater bilateral trade were more likely to have reported illicit financial flows between them, and the volume of suspicious flows was also higher. Geographic proximity was similarly associated with illicit flows.
These findings are consistent with the idea that criminals exploit existing networks of trade, people and financial activity. Trade-based money laundering, for example, can manipulate legitimate commercial transactions to conceal the origins or movement of illicit funds.
Cultural and historical connections also matter. Countries sharing a common colonial history were more likely to experience reported bilateral illicit financial flows, suggesting that established relationships and networks can influence the pathways used to move illicit money.
Tackling displacement
Perhaps the most important implication for policymakers is the evidence of displacement.
When criminals face stronger monitoring in one jurisdiction, they may redirect illicit funds through countries where financial systems and surveillance are weaker.
This means strengthening AML/CFT controls in individual countries is important, but international cooperation is equally critical.
The study found that membership of the Egmont Group, an international network of financial intelligence units, was associated with a greater likelihood of reported illicit financial outflows. Rather than indicating greater criminal activity, this finding is consistent with stronger intelligence-sharing and detection capabilities leading to more suspicious activity being identified and reported.
The research highlights the need for financial institutions and policymakers to look beyond individual transactions when assessing risk. Trade relationships, geographic proximity, remittance flows, cultural connections, conflict, corruption and the strength of financial institutions can all help identify potential vulnerabilities.
Ultimately, combating illicit financial flows is a moving target. As monitoring systems become more sophisticated, criminals adapt their methods and seek new pathways.
Understanding these networks – and strengthening cooperation across borders – will be essential to reducing the ability of organised crime to exploit the global financial system.
AUTHORS
Andreas Chai is Director of the Academy of Excellence in Financial Crime Investigation and Compliance and a member of the Griffith Asia Institute. Matthew Manning is from City University of Hong Kong, Hong Kong and Elena Stepanova is from the European Commission’s Joint Research Centre (JRC), Ispra, Italy.
This article is a synopsis of the Journal article: Chai, A., Manning, M. & Stepanova, E. The Global Dirty Laundry: A Heckman-Adjusted Gravity Model of Illicit Financial Flows. J Quant Criminol (2026). https://doi.org/10.1007/s10940-026-09659-5