Money Laundering and Corruption: Birds of a Feather Flock Together

20 Pages Posted: 7 Jun 2019

See all articles by Raffaella Barone

Raffaella Barone

University of Salento - Department of Law

Donato Masciandaro

Bocconi University - Department of Economics

Friedrich Schneider

Johannes Kepler University Linz - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research); Institute for the Study of Labor (IZA)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2019

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

JEL Classification: D73, K14, K20, K42

Suggested Citation

Barone, Raffaella and Masciandaro, Donato and Schneider, Friedrich G., Money Laundering and Corruption: Birds of a Feather Flock Together (June 2019). BAFFI CAREFIN Centre Research Paper No. 2019-112. Available at SSRN: https://ssrn.com/abstract=3400674 or http://dx.doi.org/10.2139/ssrn.3400674

Raffaella Barone

University of Salento - Department of Law ( email )

Campus Universitario - Via Li Tufi
LECCE, LE 73020
Italy

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

Friedrich G. Schneider

Johannes Kepler University Linz - Department of Economics ( email )

Altenbergerstrasse 69
A-4040 Linz, 4040
Austria
+43 732 2468 8210 (Phone)
+43 732 2468 8208 (Fax)

CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

Institute for the Study of Labor (IZA)

P.O. Box 7240
Bonn, D-53072
Germany

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