Abstract
Scholarly and policy literature has yet to provide a systematic analysis on how criminal organizations launder money beyond descriptions of who conducts this illegal activity and the existing types and practices for laundering the proceeds of crime. This article seeks to bridge the divide of two scant perspectives within illicit economies literature: one related to the structure of drug trafficking organizations (DTOs) and the other related to theoretical conceptualizations of money laundering. It provides a working hypothesis on how DTOs choose to launder money contingent on the risk appetite each structure has as a result of the investment in human capital they conduct at the managerial levels. Using Mexican DTOs as case studies (Arellano Felix, Sinaloa, La Familia Michoacana, and Zetas) and data collected during fieldwork with US and Mexican officials involved with anti-money laundering measures, I show hierarchical structures—understood as structures that process information and acquire knowledge—prefer risk-averse methods, whereas wheel networks tend to use risk-tolerant procedures for laundering money. These findings have important implications for theory development and policy design.
Highlights
Disrupting the flow of money to illegal groups is central to weakening and containing their activities
Despite propositions on the types of individuals who launder money (Morselli and Guigere 2006; Kleemans and de Poot 2008; Malm and Bichler 2013; Soudijn 2014) and descriptions on how proceeds are laundered (Financial Action Task Force 2006, 2012, 2015), what is missing in the literature is a systematic analysis that links specific types of criminal groups with particular practices for money laundering
Instead of focusing on descriptions of how drug trafficking organizations (DTOs) launder money, I propose a hypothesis linking the structural type of DTOs—either hierarchies or wheel networks—to varying degrees of risk appetite which mediate the methods for laundering money
Summary
Disrupting the flow of money to illegal groups is central to weakening and containing their activities. Instead of focusing on descriptions of how DTOs launder money, I propose a hypothesis linking the structural type of DTOs—either hierarchies or wheel networks—to varying degrees of risk appetite which mediate the methods for laundering money. The structure of DTOs affects the risk appetite of the organizations, or how willing they are to sacrifice assets, both human and financial, which in turn impacts the methods for laundering money. I do not contend that risk-appetite is the only variable that affects how they choose to launder money It is an important factor for anticipating the methods DTOs will use, instead of thinking of them as a product of happenstance.
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