Unintended Consequences of Money-Laundering Regulations

Arbeitspapier

Tighter money-laundering regulations in offshore financial havens may inadvertently spur incentives to launder money domestically. Our study exploits regulations targeting financially based money laundering in Caribbean jurisdictions to uncover the creation of front companies in the United States. We find that counties exposed via offshore financial links to these jurisdictions experienced an increase in business activities after the tightening of anti-money-laundering regulations. The effect is more pronounced among small firms, in sectors at high risk of money laundering, and in regions with high intensities of drug trafficking. Our work provides the first empirical evidence of the real effects of policy-induced money-laundering leakage.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: RF Berlin - CReAM Discussion Paper Series ; No. 03/24

Classification and Topics

• Classification: Wirtschaft ; International Finance: General ; Legal Procedure, the Legal System, and Illegal Behavior: General ; Financial Institutions and Services: Government Policy and Regulation ; Public Economics: General ; Computable and Other Applied General Equilibrium Models
• Subject: Money laundering ; money-laundering leakage ; business establishments ; offshore leaks ; regulatory reforms ; monopolistic competition

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Colella, Fabrizio ; Maskus, Keith ; Peri, Alessandro
• Event: Veröffentlichung
• (who): Rockwool Foundation Berlin (RF Berlin) and Centre for Research & Analysis of Migration (CReAM)
• (where): Berlin and London
• (when): 2024

Further information

• Last update: 10.03.2025, 11:44 AM CET