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Bank secrecy, illicit money and offshore financial centers

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  • Picard, Pierre M.
  • Pieretti, Patrice

Abstract

This paper discusses the effects of pressure policies on offshore financial centers as well as their ability to enforce the compliance of those centers with anti-money laundering regulations. Offshore banks can be encouraged to comply with rigorous monitoring of an investor's identity and the origin of his/her funds when pressure creates a sufficiently high risk of reputational harm to the investor. We show that such pressure policies harm both offshore and onshore investors and can benefit both the bank industry and tax administrations. We show that social optimal pressure policies are dichotomous decisions between no pressure at all and a pressure great enough to persuade offshore banks to comply. The delegation of pressure policies to onshore tax institutions may be inefficient. Deeper financial integration fosters compliance by the offshore center.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 95 (2011)
Issue (Month): 7-8 (August)
Pages: 942-955

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Handle: RePEc:eee:pubeco:v:95:y:2011:i:7-8:p:942-955

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Web page: http://www.elsevier.com/locate/inca/505578

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Keywords: Money laundering Offshore banking Compliance;

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References

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  1. Donato Masciandaro, 2005. "False and Reluctant Friends? National Money Laundering Regulation, International Compliance and Non-Cooperative Countries," European Journal of Law and Economics, Springer, Springer, vol. 20(1), pages 17-30, July.
  2. AndrewK. Rose & MarkM. Spiegel, 2007. "Offshore Financial Centres: Parasites or Symbionts?," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 117(523), pages 1310-1335, October.
  3. FitzGerald, Valpy, 2004. "Global financial information, compliance incentives and terrorist funding," European Journal of Political Economy, Elsevier, vol. 20(2), pages 387-401, June.
  4. Wilson, John Douglas & Wildasin, David E., 2004. "Capital tax competition: bane or boon," Journal of Public Economics, Elsevier, Elsevier, vol. 88(6), pages 1065-1091, June.
  5. Kanbur, Ravi & Keen, Michael, 1993. "Jeux Sans Frontieres: Tax Competition and Tax Coordination When Countries Differ in Size," American Economic Review, American Economic Association, American Economic Association, vol. 83(4), pages 877-92, September.
  6. Desai, Mihir A. & Foley, C. Fritz & Hines, James Jr., 2006. "The demand for tax haven operations," Journal of Public Economics, Elsevier, Elsevier, vol. 90(3), pages 513-531, February.
  7. Abbott, Kenneth W. & Snidal, Duncan, 2000. "Hard and Soft Law in International Governance," International Organization, Cambridge University Press, Cambridge University Press, vol. 54(03), pages 421-456, June.
  8. Cremer, Helmuth & Pestieau, Pierre, 2004. "Factor mobility and redistribution," Handbook of Regional and Urban Economics, Elsevier, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 57, pages 2529-2560 Elsevier.
  9. Slemrod, Joel & Wilson, John D., 2009. "Tax competition with parasitic tax havens," Journal of Public Economics, Elsevier, Elsevier, vol. 93(11-12), pages 1261-1270, December.
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Cited by:
  1. Raffaella Barone & Donato Masciandaro, 2011. "Organized crime, money laundering and legal economy: theory and simulations," European Journal of Law and Economics, Springer, Springer, vol. 32(1), pages 115-142, August.
  2. repec:idb:brikps:81941 is not listed on IDEAS

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