Hiding Filthy Lucre in Plain Sight: Theory and Identification of Business-Based Money Laundering
Keith Maskus (),
Alessandro Peri () and
Anna Rubinchik ()
No 9019, CESifo Working Paper Series from CESifo
Proceeds from illicit activities percolate into the legal economy through several channels. We exploit international regulations targeting money laundering via the ﬁnancial sector to identify the ﬂows of “dirty money” into legitimate establishments: business-based money laundering (BBML). Our variant of the monopolistic competition model embeds a drug cartel that channels illicit proceeds into an offshore ﬁnancial investment and into BBML. Tighter regulations in one channel increase the ﬂow in the other. We use a research design that links U.S. county business activity to the evolution of anti-money-laundering regulations in Caribbean jurisdictions to provide the ﬁrst empirical evidence of the phenomenon.
Keywords: money laundering; business establishment; Panama Papers; anti-money-laundering regulations; monopolistic competition (search for similar items in EconPapers)
JEL-codes: D58 F30 G28 H00 K40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-law and nep-pay
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Persistent link: https://EconPapers.repec.org/RePEc:ces:ceswps:_9019
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