Money Laundering as a Financial Sector Crime. A New Approach to Measurement, with an Application to Italy
Anti-money laundering regulations have been centred on the 'Know-Your-Customer' rule so far, overlooking the fact that criminal proceedings that need to be laundered are usually represented by cash. This is the first study aimed at providing an answer to the question of how much of cash deposited via an official financial institution can be traced back to criminal activities. The paper develops a new approach to measure money laundering and then proposes an application to Italy, a country where cash is still widely used in transactions and criminal activities generate significant proceeds to be laundered. In particular, we define a model of cash in-flows on current accounts and proxy money laundering with two indicators for the diffusion of criminal activities related to both illegal trafficking and extortion, controlling also for structural (legal) motivations to deposit cash, as well as the need to conceal proceeds from tax evasion. Using a panel of 91 Italian provinces observed over the period 2005-2008, we find that the amount of cash laundered is sizable, around 7% of GDP, 3/4 of which is due to illegal trafficking, while 1/4 is attributable to extortions. Furthermore, the incidence of 'dirty money' coming from illegal trafficking is higher in the Centre-North than in the South, while the inverse is true for extortions. Results are useful to discuss policy initiatives to combat money laundering.
|Date of creation:||Mar 2013|
|Date of revision:|
|Contact details of provider:|| Postal: Corso Unione Sovietica, 218/bis - 10134 TORINO|
Phone: +39 011 670.6129
Fax: +39 011 670.6062
Web page: http://www.biblioecon.unito.it/biblioservizi/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Andreas Buehn & Friedrich Schneider, 2012. "Shadow economies around the world: novel insights, accepted knowledge, and new estimates," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 19(1), pages 139-171, February.
- J. C. Sharman, 2010. "Shopping for Anonymous Shell Companies: An Audit Study of Anonymity and Crime in the International Financial System," Journal of Economic Perspectives, American Economic Association, vol. 24(4), pages 127-40, Fall.
- Keith Blackburn & Niloy Bosey & Salvatore Capasso, 2008.
"Financial Development and the Underground Economy,"
5_2008, D.E.S. (Department of Economic Studies), University of Naples "Parthenope", Italy.
- Andrea Brandolini & Luigi Cannari & Giovanni Dâ€™Alessio & Ivan Faiella, 2006.
"Household Wealth Distribution in Italy in the 1990s,"
in: International Perspectives on Household Wealth, chapter 7
Edward Elgar Publishing.
- Andrea Brandolini & Giovanni D’Alessio & Luigi Cannari & Ivan Faiella, 2004. "Household Wealth Distribution in Italy in the 1990s," Economics Working Paper Archive wp_414, Levy Economics Institute.
- Andrea Brandolini & Luigi Cannari & Giovanni D'Alessio & Ivan Faiella, 2004. "Household Wealth Distribution in Italy in the 1990s," Temi di discussione (Economic working papers) 530, Bank of Italy, Economic Research and International Relations Area.
- Alexeev, Michael & Janeba, Eckhard & Osborne, Stefan, 2004. "Taxation and evasion in the presence of extortion by organized crime," Journal of Comparative Economics, Elsevier, vol. 32(3), pages 375-387, September.
- Charles Goodhart & Malte Krueger, 2001.
"The impact of technology on cash usage,"
LSE Research Online Documents on Economics
25048, London School of Economics and Political Science, LSE Library.
- Walker John & Unger Brigitte, 2009. "Measuring Global Money Laundering: "The Walker Gravity Model"," Review of Law & Economics, De Gruyter, vol. 5(2), pages 821-853, December.
- Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
- Johnson, Simon & Kaufmann, Daniel & McMillan, John & Woodruff, Christopher, 2000.
"Why do firms hide? Bribes and unofficial activity after communism,"
Journal of Public Economics,
Elsevier, vol. 76(3), pages 495-520, June.
- Johnson, Simon & McMillan, John & Woodruff, Christopher, 1999. "Why do Firms Hide? Bribes and Unofficial Activity After Communism," CEPR Discussion Papers 2105, C.E.P.R. Discussion Papers.
- Simon Johnson & Daniel Kaufmann & John McMillan & Christopher Woodruff, 2003. "Why Do Firms Hide? Bribes and Unofficial Activity after Communism," Public Economics 0308004, EconWPA.
- Daniel Hoechle, 2007. "Robust standard errors for panel regressions with cross-sectional dependence," Stata Journal, StataCorp LP, vol. 7(3), pages 281-312, September.
- Amedeo Argentiero & Michele Bagella & Francesco Busato, 2008.
"Money laundering in a two sector model: using theory for measurement,"
CEIS Research Paper
128, Tor Vergata University, CEIS, revised 09 Sep 2008.
- Amedeo Argentiero & Michele Bagella & Francesco Busato, 2008. "Money laundering in a two-sector model: using theory for measurement," European Journal of Law and Economics, Springer, vol. 26(3), pages 341-359, December.
- Friedrich Schneider & Dominik Enste, 2000.
"Shadow Economies Around the World; Size, Causes, and Consequences,"
IMF Working Papers
00/26, International Monetary Fund.
- Friedrich Schneider & Dominik Enste, 1999. "Shadow Economies Around the World - Size, Causes, and Consequences," CESifo Working Paper Series 196, CESifo Group Munich.
- Friedrich Schneider (ed.), 2011. "Handbook on the Shadow Economy," Books, Edward Elgar Publishing, number 13432.
- Friedrich Schneider, 2010. "Turnover of organized crime and money laundering: some preliminary empirical findings," Public Choice, Springer, vol. 144(3), pages 473-486, September.
- Guerino Ardizzi & Carmelo Petraglia & Massimiliano Piacenza & Gilberto Turati, 2014.
"Measuring the Underground Economy with the Currency Demand Approach: A Reinterpretation of the Methodology, With an Application to Italy,"
Review of Income and Wealth,
International Association for Research in Income and Wealth, vol. 60(4), pages 747-772, December.
- Guerino Ardizzi & Carmelo Petraglia & Massimiliano Piacenza & Gilberto Turati, 2012. "Measuring the underground economy with the currency demand approach: a reinterpretation of the methodology, with an application to Italy," Temi di discussione (Economic working papers) 864, Bank of Italy, Economic Research and International Relations Area.
- 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.
- Friedrich Schneider & Ursula Windischbauer, 2010.
"Money Laundering: Some Facts,"
Economics of Security Working Paper Series
25, DIW Berlin, German Institute for Economic Research.
- Torgler, Benno & Schneider, Friedrich, 2009.
"The impact of tax morale and institutional quality on the shadow economy,"
Journal of Economic Psychology,
Elsevier, vol. 30(2), pages 228-245, April.
- Benno Torgler & Friedrich Schneider, 2007. "The Impact of Tax Morale and Institutional Quality on the Shadow Economy," CESifo Working Paper Series 1899, CESifo Group Munich.
- Torgler, Benno & Schneider, Friedrich, 2007. "The Impact of Tax Morale and Institutional Quality on the Shadow Economy," IZA Discussion Papers 2541, Institute for the Study of Labor (IZA).
- Benno Torgler & Friedrich Schneider, 2007. "The Impact of Tax Morale and Institutional Quality on the Shadow Economy," CREMA Working Paper Series 2007-01, Center for Research in Economics, Management and the Arts (CREMA).
- Friedrich Schneider & Benno Torgler, 2007. "The impact of tax morale and institutional quality on the shadow economy," Economics working papers 2007-02, Department of Economics, Johannes Kepler University Linz, Austria.
- Wagstaff, Adam & Van Doorslaer, Eddy & Watanabe, Naoko, 2001.
"On decomposing the causes of health sector inequalities with an application to malnutrition inequalities in Vietnam,"
Policy Research Working Paper Series
2714, The World Bank.
- Wagstaff, Adam & van Doorslaer, Eddy & Watanabe, Naoko, 2003. "On decomposing the causes of health sector inequalities with an application to malnutrition inequalities in Vietnam," Journal of Econometrics, Elsevier, vol. 112(1), pages 207-223, January.
- Capasso, Salvatore & Jappelli, Tullio, 2013.
"Financial development and the underground economy,"
Journal of Development Economics,
Elsevier, vol. 101(C), pages 167-178.
- Cameron,A. Colin & Trivedi,Pravin K., 2005. "Microeconometrics," Cambridge Books, Cambridge University Press, number 9780521848053, Junio.
When requesting a correction, please mention this item's handle: RePEc:tur:wpapnw:018. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Simone Pellegrino)
If references are entirely missing, you can add them using this form.