Bank Secrecy, Illicit Money and Offshore Financial Centers
AbstractInternational and national institutions regularly put pressure on offshore Financial centers and their clients to enforce compliance with anti-money laundering regulations and that in spite of the existence of bank secrecy. This paper discusses the winners and losers of such policies. Surprisingly, aggregate profits and tax revenues can increase under those policies. In addition, we show that o¤shore banks can be encouraged to comply with rigorous monitoring of the investor's identity and the origin of his/her funds when the pressure creates su¢ ciently high risk of reputational harm to this investor. Nevertheless, the efficient pressure policy is dichotomous in the sense that a social planner chooses zero pressure or the pressure that just entices o¤shore banks to comply. By contrast, the imple- mentation of those pressure policies on an onshore institution may be ine¢ cient. Finally, we show that deeper financial integration fosters compliance by the offshore center while it also gives better incentives for delegated organizations to effectively induce compliance.
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Bibliographic InfoPaper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 08-18.
Date of creation: 2008
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Other versions of this item:
- Picard, Pierre M. & Pieretti, Patrice, 2011. "Bank secrecy, illicit money and offshore financial centers," Journal of Public Economics, Elsevier, vol. 95(7), pages 942-955.
- Picard, Pierre M. & Pieretti, Patrice, 2011. "Bank secrecy, illicit money and offshore financial centers," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 942-955, August.
- PICARD, Pierre & PIERETTI, Patrice, 2010. "Bank secrecy, illicit money and offshore financial centers," CORE Discussion Papers 2010018, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- PICARD, Pierre M. & PIERETTI, Patrice, . "Bank secrecy, illicit money and offshore financial centers," CORE Discussion Papers RP -2343, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law
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