The structure of drug trafficking organizations and money laundering practices: a risk appetite hypothesis

Cecilia Farfán-Méndez

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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 Félix, 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.

Keywords: money laundering; drug trafficking organizations; risk appetite; financial crime; Mexico; United States (search for similar items in EconPapers)
JEL-codes: N0 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2019-11-29
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Published in Journal of Illicit Economies and Development, 29, November, 2019, 1(3), pp. 294 - 311. ISSN: 2516-7227

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:102971

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