Hiding Filthy Lucre in Plain Sight: Theory and Identification of Business-Based Money Laundering

73 Pages Posted: 26 Feb 2021 Last revised: 18 Jan 2022

See all articles by Keith E. Maskus

Keith E. Maskus

University of Colorado at Boulder - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Alessandro Peri

University of Colorado Boulder

Anna Rubinchik

Western Galilee College - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: February 9, 2021

Abstract

Money laundering is the process of moving proceeds from illicit activities into the legal economy. We develop a monopolistic competition model incorporating a criminal enterprise which chooses between laundering through offshore financial investments or by acquiring legitimate establishments, called business-based money laundering. We use off-shore accounts links to measure the exposure of U.S. counties to the evolution of anti-money-laundering regulations in Caribbean jurisdictions. We find that the number of business establishments grows significantly more in counties that are exposed to sharper financial scrutiny. Our theory implies that there must be greater growth in the number of BBML-established businesses. This provides the first empirical evidence of substitution between the two laundering channels.

Keywords: Money Laundering, Business Establishment, Panama Papers, Anti-Money Laundering Regulations, Monopolistic Competition

JEL Classification: F30, K40, G28, H00, D58.

Suggested Citation

Maskus, Keith E. and Peri, Alessandro and Rubinchik, Anna, Hiding Filthy Lucre in Plain Sight: Theory and Identification of Business-Based Money Laundering (February 9, 2021). Available at SSRN: https://ssrn.com/abstract=3782703 or http://dx.doi.org/10.2139/ssrn.3782703

Keith E. Maskus

University of Colorado at Boulder - Department of Economics ( email )

Campus Box 256
Boulder, CO 80309
United States
303-492-7588 (Phone)
303-492-8960 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Alessandro Peri (Contact Author)

University of Colorado Boulder ( email )

Economics Building Rm 212 256 UCB
Boulder, CO 80309-0256
United States

HOME PAGE: http://https://www.colorado.edu/economics/people/faculty/alessandro-peri

Anna Rubinchik

Western Galilee College - Department of Economics ( email )

POB 2125
Akko, 24121
Israel

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