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

77 Pages Posted: 23 Apr 2021

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 2 versions of this paper

Date Written: 2021

Abstract

Proceeds from illicit activities percolate into the legal economy through several channels. We exploit international regulations targeting money laundering via the financial sector to identify the flows of “dirty money” into legitimate establishments: business-based money laundering (BBML). Our variant of the monopolistic competition model embeds a drug cartel that channels illicit proceeds into an offshore financial investment and into BBML. Tighter regulations in one channel increase the flow in the other. We use a research design that links U.S. county business activity to the evolution of anti-money-laundering regulations in Caribbean jurisdictions to provide the first empirical evidence of the phenomenon.

JEL Classification: F300, K400, G280, H000, D580

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 (2021). Available at SSRN: https://ssrn.com/abstract=3830224 or http://dx.doi.org/10.2139/ssrn.3830224

Keith E. Maskus (Contact Author)

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

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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