Anti-money-laundering oversight and banks’ reporting of suspicious transactions: some empirical evidence

Mario Gara, Francesco Manaresi, Domenico J Marchetti and Marco Marinucci

The Journal of Law, Economics, and Organization, 2024, vol. 40, issue 2, 434-469

Abstract: We investigate the relation between anti-money-laundering (AML) inspections and banks’ ability and effort to identify and report suspicious transactions. We do so by using detailed data from the Bank of Italy and the Italian Financial Intelligence Unit, which include information on (i) authorities’ on-site inspections and enforcement actions, (ii) quantity and quality of suspicious transactions reports filed by banks before and after inspections, and (iii) reports’ investigative follow-ups. We document an increase in banks’ reporting after an inspection. Crucially, the increase is not concentrated among low-quality reports, but is spread to reports which are relevant from both a financial and an investigative point of view. We thus overall observe a rise in the information conveyed by AML reports after the authorities’ intervention. On the mechanism of the effect, we provide some suggestive evidence that inspections induce an increase of both banks’ reporting effort as well as screening skills (JEL G28, K23, L51, M21).

Date: 2024
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