Catálogo de Investigaciones | 2011-2012

25 Catálogo de Investigaciones | Pontificia Universidad Católica de Puerto Rico Estimating the Financial Amounts and Flows of Laundered Funds in the Puerto Rican Economy: An Application of the Modified Walker- Unger Model Quantifying illicit finance, along with the revenue generated from criminal activity and its presence in the global financial system, is a new phenomenon (Walker & Unger, 2009). This investigation proposes applying the Modified Walker-Unger econometric model to 2009 Puerto Rican economic activity to determine the attractiveness of the local financial system to worldwide money launderers. The model will quantify this “attractiveness” by estimating the amounts and flows of laundered funds in the Puerto Rican economy. Quantitative methods are the research technique used in this investigation. The investigation tested five hypotheses, which produced 15 sub-hypotheses. The results obtained seemed to support eight of the hypotheses, while seven of the research hypotheses were not supported, and thus rejected. The models results show that in 2009 between $109 and $426 million dollars seem to have been laundered in the Puerto Rican financial system, with the United States, Mexico, the British and U.S. Virgin Islands, and Trinidad & Tobago possibly laundering the most funds. The model appeared to accurately estimate foreign-based illicit financial activity; yet, it may have underestimated the amounts of laundered funds. This underestimation appears to be a result of an inaccurate weighted distribution of the models constructs. We recommend further model modifications to increase its accuracy, the creation of an illicit finance theory to advance research, and implementing targeted regulation, along with increasing the illicit finance knowledge base among stakeholders, to reduce illicit financial activity in the Puerto Rican financial system. juan e. román colón mentor dr. edgar rodríguez ríos money laundering illicit finance econometrics walker-unger model puerto rico