The impact of anti-money laundering oversight on banks' suspicious transaction reporting: Evidence from Italy

Mario Gara (), Francesco Manaresi (), Domenico J. Marchetti () and Marco Marinucci
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Mario Gara: Bank of Italy
Francesco Manaresi: Bank of Italy
Domenico J. Marchetti: Bank of Italy

No 491, Questioni di Economia e Finanza (Occasional Papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We provide the first thorough investigation of the effect of anti-money laundering inspections on banks' reporting of suspicious transactions. We do so by using highly detailed data from Bank of Italy and UIF (Italian authority for anti-money laundering), which include information on i) on-site inspections by authorities and follow-up actions, and ii) quantity and quality of suspicious transactions reports being filed by banks before and after inspections. Through a difference-in-differences econometric analysis we find that inspections (notably when followed by some type of intervention by the authority) induce, ceteris paribus, an increase in suspicious transaction reports being filed by banks. Crucially, the effect is not limited to low-quality reports, as feared in the literature ('crying wolf' effect) but is spread to high-quality reports. Authorities' oversight is thus shown to increase the quantity of information shared by banks without deteriorating its quality.

Keywords: Money laundering; Financial regulation; Economic crime; Banking (search for similar items in EconPapers)
JEL-codes: G28 K23 L51 M21 (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-ban, nep-eur and nep-law
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:bdi:opques:qef_491_19

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