Money laundering and corruption: birds of a feather flock together

Raffaella Barone, Donato Masciandaro () and Friedrich Schneider ()

No 7687, CESifo Working Paper Series from CESifo

Abstract: This paper is the first to analyse the three-way relationship among money laundering, anti-money-laundering efforts and corruption. On the one hand, if we assume that the goal of criminals involved in corruption is to minimize the probability of being detected, then corruption represents a demand for money laundering (trigger effect), while money laundering can serve as an effective way to clean the revenue from corruption for re-investment (multiplier effect). On the other hand, criminals can try to maximize the likelihood that anti-money-laundering activities will be ineffective. Corruption can be an effective device for maximizing this likelihood, as organized crime may corrupt financial institutions – both regulators and regulated firms – in order to prevent crime detection (accelerator effect). The paper proposes a novel theoretical framework for these interconnections, which is then used to simulate the three effects in 101 countries for the period 1990 to 2040.

Keywords: money laundering; corruption; calibration (search for similar items in EconPapers)
JEL-codes: D73 K14 K20 K42 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-law
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https://www.cesifo.org/DocDL/cesifo1_wp7687.pdf (application/pdf)

Related works:
Working Paper: MONEY LAUNDERING AND CORRUPTION: BIRDS OF A FEATHER FLOCK TOGETHER (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_7687

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