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Money Laundering

Selected e-articles

Abstract: There is a broad political consensus that states must not facilitate money laundering, especially as relates to the proceeds of foreign grand corruption. Over the past 30 years, an elaborate regulatory regime has been put in place in most countries to ensure that proceeds of crime are interdicted and confiscated. It rests on the technically non-binding recommendations of the Financial Action Task Force, an influential intergovernmental grouping. Despite this progress and the adoption of international treaties against corruption and organized crime, international law contains no express treaty rule that enjoins states from facilitating money laundering. Furthermore, there are formidable legal and practical obstacles to invoking international legal responsibility of states that do choose to benefit from enabling money laundering. This article explores the disconnect between international law as it stands and the widely accepted political imperative that states must not facilitate money laundering. It argues in favour of recognizing a self-standing customary rule to that effect, and outlines the content and likely impact of such a rule.

Abstract: Despite a pervasive anti-money laundering regime worldwide and growing media attention, the scant academic attention on the threat side of money laundering has led to an insufficient understanding of the actors, processes, and behaviors involved. Existing empirical studies show that money launderers are not a set of unitary and homogenous actors. However, criminological literature still lacks a systematic analysis that links distinct types of offenders with specific practices for money laundering. To address this knowledge gap, the present study analyzes 348 money laundering investigations conducted by Italian law enforcement agencies over the period 2016–2022 by the means of a multiple correspondence analysis. Italian mafias tend to launder illicit proceeds by integrating them into the legitimate economy, whereas foreign organized crime groups often favor schemes that operate independently of the financial system. Concurrently, other organized crime groups operating in Italy, as well as non-organized crime offenders, exhibit a broader spectrum of laundering behaviors. The study concludes by discussing implications for both research and policy.

Abstract: German financial firms’ stocks react negatively to Frankfurt as the new AMLA seat. Concurring member states experience negative abnormal returns to the announcement.•The remaining European financial institutions profit from the decision. Our results are validated through linear regressions. The decision to establish the European authority for anti-money laundering and counter-terrorism financing (AMLA) in Frankfurt sets the stage for a natural experiment, offering insight into how the decision for the AMLA headquarter location and the future proximity to regulatory oversight influence the market value of financial institutions. Our results show that, while the introduction of a regulatory institution in Europe appears to have a significant positive impact on European markets, this effect, however, appears to be mitigated in countries directly affected by the decision of the geographical location of the new founded authority.

Abstract: Cryptocurrencies have vast potential, but they also present significant risks related to money laundering and terrorist financing due to their technical characteristics. Crypto-assets are essentially applications of blockchain technology, which entails a public, encrypted, and secure ledger distributed across a network of validated computers. Each computer operates with common software that fosters consensus on new entries and prevents unauthorized alterations to the agreed-upon register. The Financial Action Task Force (FATF) has issued numerous guidelines on virtual assets, and in September 2020, the European Commission embraced the Digital Finance Package to bring the EU in line with the digital age. A pivotal component of this package is Regulation (EU) 2023/1114 of the European Parliament and of the Council, dated May 31, 2023, on markets in crypto-assets, known as MiCA Regulation (...).

Abstract: The Financial Action Task Force (FATF) is the primary authority for setting standards in the fields of anti-money laundering and countering the financing of terrorism. However, there are legitimate concerns regarding the unintended adverse effects resulting from the expansion of FATF standards. This paper aims to examine the dark side of FATF standards, focusing on the issues of de-risking, financial exclusion, and the unwarranted targeting of Non-Profit Organizations. While the FATF standards themselves are not the sole causes of these phenomena, they can contribute to their persistence and exacerbation. Addressing these effects necessitates a thorough understanding of FATF's risk-based approach, adherence to the principle of proportionality, and a sense of ownership in the design and implementation of FATF standards.

Abstract: How is authority legitimated when global policy leads to the delegation of implementation and monitoring tasks to private actors? This paper shows that putting private actors at the forefront of compliance gives them significant interpretation autonomy, with knock-on effects for how rule-making authority is legitimated. I show that actors can mobilize to claim expertise based on their practice in, and input to, transnational administration and that professional associations are important arenas for establishing and legitimating these claims. The paper explores these dynamics through an empirical focus on the global anti-money laundering regime (...).

Abstract: This paper studies the implications of money laundering for the optimal design of central bank digital currency (CBDC). I build a general equilibrium framework to explicitly allow money laundering by agents and income audits by a government. I find that as long as CBDC offers less anonymity than cash, introducing CBDC will decrease money laundering. However, if CBDC still offers a relatively high level of anonymity but a low interest rate, then introducing CBDC will decrease the output from not only agents who launder money but also agents who do not. If CBDC instead offers low anonymity and a high interest rate, then introducing CBDC can increase aggregate welfare without lowering output. Furthermore, introducing CBDC needs not increase the funding costs of banks or decrease bank lending.

Abstract: AML regulation is important to create cybersecure blockchain-based sharing economy.Financial inclusivity and privacy in permissionless DeFi can lead to cyberattacks.Cyber risks can be mitigated in AML-compliant permissioned DeFi. User base training and artificial intelligence integration are policy suggestions.Cybersecurity can add to trust in the context of blockchain-based sharing economy. This study displays the importance of anti-money laundering (AML) regulations among prosumers in decentralized finance (DeFi) in establishing cybersecurity (...).

Abstract: Traditionally, the emphasis of trade-based money laundering policy development has been directed towards financial transactions where the origin of capital is illegal, neglecting private sector companies utilising trade to launder money. Thus, can commercial businesses which engage in trade misinvoicing through crossborder trade be prosecuted for money laundering? With limited understanding of the money laundering cycle in international trade, it will be difficult for prosecutors to bring money laundering charges against commercial businesses operating in this sector.

Abstract: In order to launder large amounts of money, (drug) criminals can seek help from financial facilitators. According to the FATF, these facilitators are operating increasingly business-like and even participate in professional money laundering networks. This study examines the extent to which financial facilitators in the Netherlands exhibit business-like characteristics and the extent to which they organize themselves in money laundering networks. We further examine the relationship between business-like behavior and individual money launderers’ position in the social network. Using police intelligence data, we were able to analyze the contacts of 198 financial facilitators who were active in the Netherlands in the period 2016–2020, all having worked for drug criminals (...).

Abstract: This paper analyses the role of money laundering in contemporary financial capitalism and how it consolidates synergies between corporations, crime and corrupt governments. Through a case study of a fuel smuggling operation by an alleged criminal syndicate based in Malta, it examines how systems criminality operates across a continuum of legality and illegality driven by a strategic network of individual, corporate and state actors. It also examines the wider socio-economic, political and imperialist implications of money laundering on both the local and global spheres. As the rise in money laundering merges with the proliferation of other criminal offences, dissecting this crime nexus calls for increased synergies in transnational solidarities against capitalism, imperialism, and systems criminality.

Abstract: Despite the wide reach of anti-money laundering legislation worldwide and increasing media attention, fostered by journalistic leaks such as Panama Papers, empirical knowledge on how criminals launder their illicit proceeds is still scarce. The few available empirical studies show that money laundering (ML) schemes are often less sophisticated than they are depicted in the political and media debate. To contribute to the empirical knowledge of ML behaviour, and test this hypothesis, the present study analyses the ML activities related to 2818 Italian offenders included in the ML section of the LexisNexis’ WorldCompliance database (...).

Abstract: Money laundering (ML) is a critical source of extracting the money illegally from the financial system. It is linked to various types of crimes, including corruption, exploitation of a specific community, drug use, and many others. Detection of ML operations is a difficult task on a global scale due to the large volume of financial transactions. However, it also allows criminals to use financial systems to carry out fraudulent transactions. It mainly concern minimizing the potentially risks associated with money laundering. Anti-money laundering-(AML) tools based on AI-driven applications are now tracking transactions to overcome this challenge (...).

Abstract: We propose a deep learning approach to qualify and raise anti-money laundering alarms in banks. The motivating idea is to replace predefined rules with latent features automatically extracted from transaction sequences. To this end, we experiment with recurrent and Transformer encoder layers. We test the approach with a large data set from Spar Nord Bank. Our best model employs gated recurrent units and self-attention. When used to qualify alarms raised by a traditional AML system, the model is able to reduce the number of false positives by more than 33.3% while retaining 98.8% of all true positives. In a small experiment, we also use the model to raise 75 new alarms on clients with high risk scores but with no traditional alarm inquiries in the last 12 months. After expert review, this prompted 26 clients to be reported to Danish authorities. Deep learning may reduce the number of false positive money laundering alarms. Deep learning may spot new (otherwise overlooked) cases of money laundering. Attention heatmaps may be used to illustrate suspicious transaction patterns.

Abstract: The banking sector is identified as the main means for laundering illicit money, these banks generally have access to both banking mechanism and legal authority to make decisions. Money launderers and those financing terrorism are conveniently accessing financial institutions and its mechanism. These institutions provide all financial funds transfers both domestic and international range. Anti-money laundering (AML) laws and other data protection laws that keep getting stricter have forced many financial institutions to put in place long, expensive processes to stay in compliance (...).

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