Combating Black Money: Money Laundering and Terrorism Finance, International Cooperation and the G8 Role

Abstract:     
In the aftermath of September 11th, growing attention has been paid to the role of Non-Cooperative Countries and Territories (NCCT) in money laundering and terrorist financing (black money). Policymakers concentrate their attention on the possibility that NCCT jurisdictions might facilitate the task of terrorists as well as criminal organizations (black money). Two interacting principles commonly feature in the debate on the relationship between black money and NCCTs: a) money laundering is facilitated by lax financial regulation; b) countries adopting lax financial regulation do not co-operate in the international effort aimed at combating money laundering. In this paper we develop the assumption that lax financial regulation may be a strategic dependent variable for national policymakers seeking to maximize the net benefits produced by any public policy choice. Therefore, given the structural features and endowments of their own countries, policymakers may it find profitable to adopt financial regulations that attract capital of illicit origin (money laundering services) or destination (terrorism finance services), therefore choosing to be a NCCT jurisdiction.

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