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Designing the anti-money laundering supervisor: The governance of the financial intelligence units

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  • Bartolozzi, D.
  • Gara, M.
  • Marchetti, D.J.
  • Masciandaro, D.

Abstract

Using a unique data set, this paper studies the governance of anti-money laundering (AML) supervisors known as Financial Intelligence Units (FIUs). We start from a theoretical framework that explains any FIU setting as the final outcome of a political choice that combines four governance properties: financial and informative powers, law enforcement and investigative powers, independence and accountability. Then we empirically explore the possible structural drivers of this choice, building up the first quantitative FIU Governance Index and applying this metrics in a cross country analysis of 71 countries. FIUs' financial powers tend to be weaker in bank-based economies and stronger in countries with more affiliations with international AML organizations. FIU's law enforcement powers are more intense in civil law countries, and Islamic culture matters as well on the choice of the FIU type. FIU independence and accountability are stronger in countries with higher-quality governance. The overall FIU Governance Index appears stronger for more developed and transparent countries. Finally, overall FIU governance as well as independence and accountability are found to be weaker in countries with law enforcement FIUs.

Suggested Citation

  • Bartolozzi, D. & Gara, M. & Marchetti, D.J. & Masciandaro, D., 2022. "Designing the anti-money laundering supervisor: The governance of the financial intelligence units," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 1093-1109.
    • Handle: RePEc:eee:reveco:v:80:y:2022:i:c:p:1093-1109
    DOI: 10.1016/j.iref.2022.03.009
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    More about this item

    Keywords

    Money laundering; Financial supervision; Anti-money laundering regulation; Financial intelligence unit;
    All these keywords.

    JEL classification:

    • E26 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Informal Economy; Underground Economy
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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