The Impact of Anti-Money Laundering Oversight on Banks' Suspicious Transaction Reporting: Evidence from Italy

34 Pages Posted: 7 Aug 2019

See all articles by Mario Gara

Mario Gara

Financial Intelligence Unit for Italy (UIF)

Francesco Manaresi

Organization for Economic Co-Operation and Development (OECD)

Domenico Junior Marchetti

Bank of Italy

Marco Marinucci

Bank of Italy

Date Written: April 29, 2019

Abstract

We provide the first thorough investigation of the effect of anti-money laundering inspections on banks' reporting of suspicious transactions. We do so by using highly detailed data from Bank of Italy and UIF (Italian authority for anti-money laundering), which include information on i) on-site inspections by authorities and follow-up actions, and ii) quantity and quality of suspicious transactions reports being filed by banks before and after inspections. Through a difference-in-differences econometric analysis we find that inspections (notably when followed by some type of intervention by the authority) induce, ceteris paribus, an increase in suspicious transaction reports being filed by banks. Crucially, the effect is not limited to low-quality reports, as feared in the literature ('crying wolf' effect) but is spread to high-quality reports. Authorities' oversight is thus shown to increase the quantity of information shared by banks without deteriorating its quality.

Keywords: money laundering, financial regulation, economic crime, banking

JEL Classification: G28, K23, L51, M21

Suggested Citation

Gara, Mario and Manaresi, Francesco and Marchetti, Domenico Junior and Marinucci, Marco, The Impact of Anti-Money Laundering Oversight on Banks' Suspicious Transaction Reporting: Evidence from Italy (April 29, 2019). Bank of Italy Occasional Paper No. 491, April 2019, Available at SSRN: https://ssrn.com/abstract=3433072 or http://dx.doi.org/10.2139/ssrn.3433072

Mario Gara

Financial Intelligence Unit for Italy (UIF) ( email )

Italy

Francesco Manaresi

Organization for Economic Co-Operation and Development (OECD) ( email )

2 rue Andre Pascal
Paris Cedex 16, 75775
France

Domenico Junior Marchetti

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy
+39 6 4792 2256 (Phone)
+39 6 4792 3720 (Fax)

Marco Marinucci (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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