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The Impact of Anti-Money Laundering Regulation on Payment Flows: Evidence from SWIFT Data - Working Paper 445

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  • Matt Collin , Samantha Cook and Kimmo Soramäki

Abstract

Regulatory pressure on international banks to fight money laundering (ML) and terrorist financing (TF) increased substantially in the past decade. At the same time there has been a rise in the number of complaints of banks denying transactions or closing the accounts of customers either based in high risk countries or attempting to send money there, a process known as de-risking. In this paper, we investigate the impact of an increase in regulatory risk, driven by the inclusion of countries on an internationally-recognized list of high risk jurisdictions, on subsequent cross-border payments. We find countries that have been added to a high risk greylist face up to a 10 percent decline in the number of cross border payments received from other jurisdictions, but no change in the number sent. We also find that a greylisted country is more likely to see a decline in payments from other countries with weak AML/CFT institutions. We find limited evidence that these effects manifest in cross border trade or other flows. Given that countries that are placed on these lists tend to be poorer on average, these impacts are likely to be more strongly felt in developing countries.

Suggested Citation

  • Matt Collin , Samantha Cook and Kimmo Soramäki, 2016. "The Impact of Anti-Money Laundering Regulation on Payment Flows: Evidence from SWIFT Data - Working Paper 445," Working Papers 445, Center for Global Development.
  • Handle: RePEc:cgd:wpaper:445
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    File URL: http://www.cgdev.org/impact-anti-money-laundering-SWIFT-data
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    Keywords

    Money laundering; de-risking; banking; payment flows;

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