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Competing for criminal money

Author

Listed:
  • Brigitte Unger
  • Gregory Rawlings

Abstract

To compete for criminal money by means of high levels of bank secrecy has been a tempting strategy for countries to attract globally mobile funds. We show in a model that this 'Seychelles strategy' can increase national output, in particular, if a country takes first movement leadership in the competition game. If all countries try to do the same, there will be a race to the bottom and a supranational authority like the Financial Action Task Force (FATF) must intervene. However, there are also some intrinsic barriers to the Seychelles strategy. Among others, criminal capital might crowd out legal capital and money laundering might increase crime. Our findings suggest that countries have created niches for money laundering. Small countries can free ride for a while, but will eventually face external sanctions and internal crime problems.

Suggested Citation

  • Brigitte Unger & Gregory Rawlings, 2008. "Competing for criminal money," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 10(3), pages 331-352.
    • Handle: RePEc:ids:gbusec:v:10:y:2008:i:3:p:331-352
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    Citations

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    Cited by:

    1. Konovalova, Mayya & Tuck, Penelope & Ormeño Pérez, Rodrigo, 2023. "In search of the owner: Regulating through transparency," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 91(C).
    2. Raffaella Barone & Donato Masciandaro, 2011. "Organized crime, money laundering and legal economy: theory and simulations," European Journal of Law and Economics, Springer, vol. 32(1), pages 115-142, August.
    3. repec:idb:brikps:81941 is not listed on IDEAS
    4. Valentina Gullo & Pierluigi Montalbano, 2018. "Where does “dirty” money go? A gravity analysis," Working Papers 5/18, Sapienza University of Rome, DISS.
    5. Gnutzmann, Hinnerk & McCarthy, Killian J. & Unger, Brigitte, 2010. "Dancing with the devil: Country size and the incentive to tolerate money laundering," International Review of Law and Economics, Elsevier, vol. 30(3), pages 244-252, September.
    6. Emma Galli & Ilde Rizzo & Carla Scaglioni, 2020. "Is transparency spatially determined? An empirical test for Italian municipalities," Applied Economics, Taylor & Francis Journals, vol. 52(58), pages 6372-6385, December.
    7. Olga Balakina & Angelo D’Andrea & Donato Masciandaro, 2017. "Bank secrecy in offshore centres and capital flows: Does blacklisting matter?," Review of Financial Economics, John Wiley & Sons, vol. 32(1), pages 30-57, January.
    8. Brigitte Unger, 2013. "Introduction," Chapters, in: Brigitte Unger & Daan van der Linde (ed.), Research Handbook on Money Laundering, chapter 1, pages 3-16, Edward Elgar Publishing.
    9. Gullo, Valentina & Montalbano, Pierluigi, 2022. "Financial transparency and anomalous portfolio investment flows: A gravity analysis," Journal of International Money and Finance, Elsevier, vol. 128(C).
    10. Tim Krieger & Daniel Meierrieks, 2011. "Terrorist Financing and Money Laundering," Working Papers CIE 40, Paderborn University, CIE Center for International Economics.

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