Dancing with the Devil: Country Size and the Incentive to Tolerate Money Laundering

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dc.contributor.author GNUTZMANN, Hinnerk
dc.contributor.author MCCARTHY, Killian J.
dc.contributor.author UNGER, Brigitte
dc.date.accessioned 2011-04-19T12:47:51Z
dc.date.available 2011-04-19T12:47:51Z
dc.date.issued 2010
dc.identifier.citation International Review of Law and Economics, 2010, 30, 3, 244-252
dc.identifier.issn 0144-8188
dc.identifier.uri http://hdl.handle.net/1814/16486
dc.description.abstract The incidence of money laundering, and the zeal with which international anti-money laundering (AML) policy is pursued, varies significantly from country to country, region to region. There are, however, quite substantial social costs associated with a policy of toleration, and this begs the question as to why such a variance should exist. In this paper we claim that, due to the globalisation of crime, if a single country should break the chain of accountability, then it will provide a safe haven for criminals and attract the total financial proceeds of crime. Because smaller economies are best able to insulate themselves from the costs of crime, we argue that smaller countries bear only a tiny share of the total costs relative to the potential benefits of investment that money laundering offers, and so have a higher incentive to tolerate the practice compared to their larger neighbours. As such, we claim that the existence of a money laundering market is due to a policy of AML 'defection', and that the degree of 'defection' depends largely on the size of the country. We present a simple model of policy competition which formalises this intuition, and conclude by exploring a number of policy recommendations which flow from this. (C) 2010 Elsevier Inc. All rights reserved.
dc.language.iso en
dc.publisher Elsevier Science Inc
dc.subject Money laundering
dc.subject Policy competition
dc.subject Systems competition
dc.title Dancing with the Devil: Country Size and the Incentive to Tolerate Money Laundering
dc.type Article
dc.identifier.doi 10.1016/j.irle.2010.04.004
dc.neeo.contributor GNUTZMANN|Hinnerk|aut|
dc.neeo.contributor MCCARTHY|Killian J.|aut|
dc.neeo.contributor UNGER|Brigitte|aut|
dc.identifier.volume 30
dc.identifier.startpage 244
dc.identifier.endpage 252
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dc.identifier.issue 3

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