To Launder or Not to Launder: Modelling How the Value of Dirty Income Impacts the Marginal Deterrence of AML Policy

Haak Samuel ()
Additional contact information
Haak Samuel: Department of Accounting, Finance and Economics, Griffith University, Brisbane, Australia

Review of Law & Economics, 2025, vol. 21, issue 3, 629-653

Abstract: This paper develops a mathematical model of the criminal’s decision to launder money, in order to analyze the relationship between anti-money laundering (AML) policy and the incentive to commit crime. The model includes a measure of the value of dirty income for direct usage in consumption and investment, which is contrasted with the value of laundered money. The results demonstrate that increases in the strictness of AML policy cause criminals to shift away from laundering and towards spending dirty income directly. To the extent that dirty income provides a positive utility on the margin, deterrence effects from AML will be incomplete, as criminals are deterred from crime but not from laundering. Additionally, the value of dirty income is shown to present a confounding influence on the use of changes in money laundering volume to assess criminal welfare. These results suggest that efforts to improve AML regulations may be less effective at combating crime than previously supposed, and highlight the need for further research to understand how criminals use dirty income.

Keywords: money laundering; AML; microeconomics; crime; public policy (search for similar items in EconPapers)
JEL-codes: G38 H10 K42 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/rle-2024-0115 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bpj:rlecon:v:21:y:2025:i:3:p:629-653:n:1002

Ordering information: This journal article can be ordered from
https://www.degruyte ... journal/key/rle/html

DOI: 10.1515/rle-2024-0115

Access Statistics for this article

Review of Law & Economics is currently edited by Francesco Parisi

More articles in Review of Law & Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().