Modelling the money launderer: Microtheoretical arguments on anti-money laundering policy

McCarthy, K., van Santen, P. & Fiedler, I., 2014, In : International Review of Law and Economics. 43, p. 148-155 8 p.

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  • Modelling the money launderer Microtheoretical arguments on anti-money laundering policy

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The existing literature treats the criminal – who generates criminal proceeds – and the launderer – who converts the ‘dirty’ dollars into ‘clean’ ones – as one and the same. And with good reason: it is clear from the evidence that such ‘standard’ vertically integrated launderers exists. Because professionals and institutions are also routinely prosecuted for money laundering transgressions, however, it appears that the market for money laundering is also supplied by third party, ‘professional’ launderers, whose core business lies outside the criminal sector, but who chooses to spend time supplying the market for money laundering.

In this paper we introduce the professional launder to the literature, and consider the process by which the launderer and the criminal bargain, to agree on a price for the money laundering service. We then consider the effects of three anti-crime, or anti-money laundering measures – namely, (1) increasing the probability that the criminal is caught, (2) increasing the probability that the launderer is caught, and (3) increasing the probability that the bargaining process itself is detected – on the way in which the negotiation is concluded. Of the various combinations available to the policy maker, we conclude that more resources should be spend on specialized police-units to tackle money laundering and, when the budget is fixed, less should be spent on financial scrutiny. Current approaches, we find, do not deter money launderers from supplying the market, but simply increase the profitability of money laundering and decrease the profitability of legitimate business.
Original languageEnglish
Pages (from-to)148-155
Number of pages8
JournalInternational Review of Law and Economics
Publication statusPublished - 2014

ID: 20846495