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Money Laundering and its Regulation

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  • Alberto Chong
  • Florencio Lopez-de-Silanes

Abstract

The recent wave of terrorist attacks has increased the attention paid to money laundering activities. Using several methodologies, this paper investigates empirically the determinants of money laundering and its regulation in over 80 countries by assembling a cross-country dataset on proxies for money laundering and the prevalence of feeding activities. The paper additionally constructs specific money laundering regulation indices based on available information on laws and their mechanisms of enforcement and measures their impact on money laundering proxies. The paper finds that tougher money laundering regulations, particularly those that criminalize feeding activities and improve disclosure, are linked to lower levels of money laundering across countries; the results are robust to potential endogeneity of money laundering regulation. The relevance of historical factors in explaining the variation of money laundering regulation across countries sheds light on theories of institutions and provides room for further action, particularly in the areas of the law that improve the impact of criminalization, including liability of intermediaries, reductions of the burden of proof and better disclosure.

Suggested Citation

  • Alberto Chong & Florencio Lopez-de-Silanes, 2007. "Money Laundering and its Regulation," Research Department Publications 4493, Inter-American Development Bank, Research Department.
    • Handle: RePEc:idb:wpaper:4493
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    1. Ahsan Habib & Mostafa Monzur Hasan & Ahmed Al-Hadi, 2018. "Money laundering and audit fees," Accounting and Business Research, Taylor & Francis Journals, vol. 48(4), pages 427-459, June.
    2. Zhang, Guike & Gao, Zengan & Dong, June & Mei, Dexiang, 2023. "Machine learning approaches for constructing the national anti-money laundering index," Finance Research Letters, Elsevier, vol. 52(C).
    3. Lillo, Felipe & García, Leidy & Santander, Valentín, 2017. "Dynamics of global remittances: A graph-based analysis," Mathematical Social Sciences, Elsevier, vol. 87(C), pages 64-71.
    4. Tomas Williams & Pablo Slutzky & Mauricio Villamizar-Villegas, 2019. "Drug Money and Bank Lending: The Unintended Consequences of Anti-Money Laundering Policies," Working Papers 2019-5, The George Washington University, Institute for International Economic Policy, revised May 2020.
    5. Md. Abdul Kaium Masud & Mahfuzur Rahman & Md. Harun Ur Rashid, 2022. "Anti-Corruption Disclosure, Corporate Social Expenditure and Political Corporate Social Responsibility: Empirical Evidence from Bangladesh," Sustainability, MDPI, vol. 14(10), pages 1-20, May.
    6. Raffaella Barone & Domenico Delle Side & Donato Masciandaro, 2018. "Drug trafficking, money laundering and the business cycle: Does secular stagnation include crime?," Metroeconomica, Wiley Blackwell, vol. 69(2), pages 409-426, May.
    7. Michelle Sydes & Lorelei Hine & Angela Higginson & James McEwan & Laura Dugan & Lorraine Mazerolle, 2023. "Criminal justice interventions for preventing radicalisation, violent extremism and terrorism: An evidence and gap map," Campbell Systematic Reviews, John Wiley & Sons, vol. 19(4), December.
    8. Premti, Arjan & Jafarinejad, Mohammad & Balani, Henry, 2021. "The impact of the Fourth Anti-Money Laundering Directive on the valuation of EU banks," Research in International Business and Finance, Elsevier, vol. 57(C).
    9. Carmela D’Avino, 2023. "Money laundering and AML regulatory and judicial system regimes: investigation of FinCEN files," European Journal of Law and Economics, Springer, vol. 55(2), pages 195-223, April.
    10. Fanta, F & Mohsin, H, 2010. "Anti-Money Laundry regulation and Crime: A two-period model of money-in-the-utility-function," MPRA Paper 25773, University Library of Munich, Germany.
    11. Ferrante, Livio & Reito, Francesco & Spagano, Salvatore & Torrisi, Gianpiero, 2021. "Shall we follow the money? Anti-mafia policies and electoral competition," Journal of Policy Modeling, Elsevier, vol. 43(5), pages 1110-1130.
    12. 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.
    13. Christian Friedrich & Reiner Quick, 2019. "An analysis of anti-money laundering in the German non-financial sector," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(4), pages 1099-1137, December.
    14. Pietro A. Bianchi & Antonio Marra & Donato Masciandaro & Nicola Pecchiari, 2017. "Is It Worth Having the Sopranos on Board? Corporate Governance Pollution and Organized Crime: The Case of Italy," BAFFI CAREFIN Working Papers 1759, BAFFI CAREFIN, Centre for Applied Research on International Markets Banking Finance and Regulation, Universita' Bocconi, Milano, Italy.

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