Determinants of money laundering: evidence from Italian regions

Author:Filippo Reganati, Maria Oliva
Position:Università degli Studi di Roma La Sapienza, Rome, Italy
Pages:402-413
SUMMARY

Purpose The main purpose of this paper is to analyze the determinants of money laundering in Italy. Given the high heterogeneity in terms of economic, social and institutional characteristics, Italy is a compelling case study. Design/methodology/approach By using annual data over the period 2008 to 2013, the authors estimate a balanced panel data linear model using feasible... (see full summary)

 
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Determinants of money
laundering: evidence
from Italian regions
Filippo Reganati and Maria Oliva
Università degli Studi di Roma La Sapienza, Rome, Italy
Abstract
Purpose The main purpose of this paper is to analyze the determinants of money laundering in Italy.
Given the high heterogeneity in terms of economic, social and institutional characteristics, Italy is a
compellingcase study.
Design/methodology/approach By using annual data over the period 2008 to 2013, the authors
estimate a balanced panel data linear model using feasible generalized least squares. Following the main
literature on the economics of crime, the authors regress the crimerate in each region-year against a set of
determinantsthat include socio-economic, enforcement and crime-specicfactors.
Findings The authorsndings reveal that, in most Italian regions, enforcement activities do exert
signicant deterrence on criminal behaviors: and a negative relationship between enforcement and money
launderingcan be identied only when there are high levels ofenforcement efforts. Moreover, the authorsnd
that the major determinants inuencing the rate of money laundering differ between northern, central and
southern regions, conrming the existenceof regional dualism. In particular, the crime rate in the northern
and central area is positively related to the level of corruption and the incidence of maa-type crimes and
negatively relatedto educational attainment, whereas in the southernregions, money laundering is positively
related tothe size of the gaming and gambling sector.
Originality/value The present paper contributes to the extantliterature on the economics of crime in
several ways.First, it explicitly analyzes a specic type of nancial crime,which presents the higher degree of
sanctioning regime in the Italian legislation. Second, Italy offers an important country study becauseof the
forcefulpresence of maa clans and organized crime systems operating in the illegal market.
Keywords Italy, Money laundering, Law enforcement, Crime determinants
Paper type Research paper
Introduction
Money laundering is the process of taking the proceeds generated by criminal activity
and giving such proceeds an appearance of legality[1]. Money laundering not only allows
criminals to move their money through society freely, without attracting attention to the
underlying activity or people involved, but also prevents the funds from being
conscated by the judiciary authority[2]. The International Monetary Fund (IMF)
estimates that the amount of money laundered globally in one year is between 2 and 5 per
cent of global GDP, or roughly US$1-2tn (annually). According to the United Nations
Ofce on Drugs and Crime (UNODC), in 2009, criminals laundered around US$1.6tn,
which corresponds to 2.7 per cent of global GDP.
Traditionally,money laundering has been described as a process that takes place in three
distinct stages. In the initial or placementstage, money launderers introduce their illegal
proceeds into the nancial system through deposits, wire transfers or other means. In the
second or layering stage, money launderers move such funds around the world to
separate them from their original source. Finally, in the third integration stage, money
JMLC
21,3
402
Journalof Money Laundering
Control
Vol.21 No. 3, 2018
pp. 402-413
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-09-2017-0052
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm

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