Designing the Anti-Money Laundering Supervisor: Theory, Institutions and Empirics

26 Pages Posted: 11 Dec 2019

See all articles by Diego Bartolozzi

Diego Bartolozzi

Bocconi University - Baffi Carefin Centre

Mario Gara

Financial Intelligence Unit for Italy (UIF)

Domenico Junior Marchetti

Bank of Italy

Donato Masciandaro

Bocconi University - Department of Economics

Date Written: December 10, 2019

Abstract

Using a unique data set, this paper studies the governance of anti-money laundering supervisors known as Financial Intelligence Units (FIUs). Starting from a theoretical framework that highlights four key properties of FIU governance – financial powers, law enforcement features, independence and accountability – we build the first quantitative index of FIU governance. The proposed metrics are then applied in an analysis of 71 countries that explores the drivers of FIU governance properties. Our results show that FIUs’ financial powers tend to be weaker in bank-based economies and stronger in countries with more affiliations with international anti-money laundering organizations. FIU independence and FIU accountability are stronger in countries with higher-quality governments and less opacity in the fiscal and legal systems. With regards to the nexus between country fundamentals and our overall FIU Governance Index, the index generally appears stronger for richer and more transparent countries. It is also stronger for countries with civil (rather than common) law. Finally, given the distinction between administrative FIUs and law enforcement FIUs, we find that overall FIU governance as well as independence and accountability are all weaker in countries with law enforcement FIUs.

Keywords: Money laundering, Financial Supervision, Anti-Money Laundering Regulation

JEL Classification: E26, G28, H11, L51

Suggested Citation

Bartolozzi, Diego and Gara, Mario and Marchetti, Domenico Junior and Masciandaro, Donato, Designing the Anti-Money Laundering Supervisor: Theory, Institutions and Empirics (December 10, 2019). BAFFI CAREFIN Centre Research Paper No. 2019-126. Available at SSRN: https://ssrn.com/abstract=3501650 or http://dx.doi.org/10.2139/ssrn.3501650

Diego Bartolozzi

Bocconi University - Baffi Carefin Centre ( email )

Via Roentgen 1
Milan
Italy

Mario Gara

Financial Intelligence Unit for Italy (UIF) ( email )

Italy

Domenico Junior Marchetti

Bank of Italy ( email )

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

Donato Masciandaro (Contact Author)

Bocconi University - Department of Economics ( email )

Via Gobbi 5
Milan, 20136
Italy

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