Unintended Consequences of Money-Laundering Regulations

Fabrizio Colella, Keith Maskus and Alessandro Peri

No 2403, RF Berlin - CReAM Discussion Paper Series from Rockwool Foundation Berlin (RF Berlin) - Centre for Research and Analysis of Migration (CReAM)

Abstract: Tighter money-laundering regulations in offshore financial havens may inadvertently spur incentives to launder money domestically. Our study exploits regulations targeting financially based money laundering in Caribbean jurisdictions to uncover the creation of front companies in the United States. We find that counties exposed via offshore financial links to these jurisdictions experienced an increase in business activities after the tightening of anti-money-laundering regulations. The effect is more pronounced among small firms, in sectors at high risk of money laundering, and in regions with high intensities of drug trafficking. Our work provides the first empirical evidence of the real effects of policy-induced money-laundering leakage.

Keywords: Money laundering; money-laundering leakage; business establishments; offshore leaks; regulatory reforms; monopolistic competition (search for similar items in EconPapers)
JEL-codes: D58 F30 G28 H00 K40 (search for similar items in EconPapers)
Date: 2024-02
New Economics Papers: this item is included in nep-pay and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:crm:wpaper:2403

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