The Economics of Crime and Money Laundering: Does Anti-Money Laundering Policy Reduce Crime?
Anti-money laundering policy has become a major issue in the Western world, especially in the United States after 9-11. Basically all countries in the world are more or less forced to cooperate in the global fight against money laundering. In this paper, the criminalization of money laundering is modelled, assuming rational behaviour of criminals, following the law and economics strand of the literature which is described as the economics of crime. The theoretical model shows that a) the probability to be caught for money laundering, b) the sentence for money laundering, c) the probability to be convicted for the predicate crime and d) the transaction costs of money laundering are negatively related to the amount of crime. Under the assumption that these factors are all positively influenced by a stricter anti-money laundering policy, the hypothesis empirically tested in this paper is that anti-money laundering policy deters potential criminals from illegal behavior and therefore lowers the crime rate. Since the data on anti-money laundering policy, used in the literature so far, is not all-embracing, a new unique indicator is constructed by using all the information from the mutual evaluation reports on money laundering of the FATF, IMF and World Bank. This unique dataset is used in an empirical estimation based on a Mundlak specification to test the effect of antimoney laundering policy on the crime rate. Among the four policy areas measured â€“ the role of laws, the institutional framework, the duties of the private sector in law enforcement, and international cooperation, the latter turned out to be the most important policy area for reducing crime. This should be an extra incentive for countries and international organizations to continue their efforts to promote and develop international cooperation in the fight against money laundering.
|Date of creation:||2008|
|Contact details of provider:|| Postal: P.O. Box 80125, NL-3508 TC Utrecht|
Phone: +31 30 253 9800
Fax: +31 30 253 7373
Web page: http://www.uu.nl/EN/faculties/leg/organisation/schools/schoolofeconomicsuse/Pages/default.aspx
More information through EDIRC
|Order Information:|| Email: |
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.:
- Gary S. Becker, 1974. "Crime and Punishment: An Economic Approach," NBER Chapters,in: Essays in the Economics of Crime and Punishment, pages 1-54 National Bureau of Economic Research, Inc.
- T. S. Breusch & A. R. Pagan, 1980.
"The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics,"
Review of Economic Studies,
Oxford University Press, vol. 47(1), pages 239-253.
- Breusch, T.S. & Pagan, A.R., "undated". "The Lagrange multiplier test and its applications to model specification in econometrics," CORE Discussion Papers RP 412, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Soares, Rodrigo R., 2004. "Development, crime and punishment: accounting for the international differences in crime rates," Journal of Development Economics, Elsevier, vol. 73(1), pages 155-184, February.
- Steven Shavell & A. Mitchell Polinsky, 2000. "The Economic Theory of Public Enforcement of Law," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 45-76, March.
- Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
- Levitt, Steven D, 1997.
"Using Electoral Cycles in Police Hiring to Estimate the Effect of Police on Crime,"
American Economic Review,
American Economic Association, vol. 87(3), pages 270-290, June.
- Steven D. Levitt, 1995. "Using Electoral Cycles in Police Hiring to Estimate the Effect of Policeon Crime," NBER Working Papers 4991, National Bureau of Economic Research, Inc.
- John J. DiIulio, 1996. "Help Wanted: Economists, Crime and Public Policy," Journal of Economic Perspectives, American Economic Association, vol. 10(1), pages 3-24, Winter.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
- B. Unger & J. Ferwerda, 2008. "Regulating Money Laundering and Tax Havens: The Role of Blacklisting," Working Papers 08-12, Utrecht School of Economics.
When requesting a correction, please mention this item's handle: RePEc:use:tkiwps:0835. 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: (Marina Muilwijk)
If references are entirely missing, you can add them using this form.