IDEAS home Printed from https://ideas.repec.org/a/eme/jmlcpp/jmlc-07-2023-0112.html
   My bibliography  Save this article

How to identify norms, laws, and regulations that facilitate illicit financial flows and related financial crimes

Author

Listed:
  • Tiago Cardao-Pito

Abstract

Purpose - Illicit financial flows are targeted by the United Nations’ (UN) sustainable development goals (SDGs). However, these illicit flows are not entirely understood. Furthermore, they can benefit from economic norms, laws and regulations that lack mechanisms to detect and penalize them. This paper aims to investigate whether a recent test, the embezzler test, can be used to identify regulatory architectures that facilitate illicit financial flows and related financial crimes. Design/methodology/approach - This paper develops a more advanced version of the embezzler test in terms of definitions and practical implementation methodology. Findings - In this test, the definition of embezzlement can be understood to be the occurrence of illicit financial flows crossing the boundaries of organizations and/or countries. This is a multistage test, which intentionally simulates illicit financial flows to observe how well equipped is the regulatory architecture to deal with other financial offences that are related with these flows, such as theft, money laundering, fraud, corruption, market manipulation and tax evasion. Research limitations/implications - Future research can use the version of this test to stress test a large range of economic norms, laws and regulations. Social implications - This test’s new version can assist achieve the UN SDGs’ illicit financial flow reduction target. Furthermore, it can be used to study both existing and proposed norms, laws and regulation. Originality/value - To the best of the author’s knowledge, this is the first explicit test that has been presented to identify norms, laws and regulations that facilitate illicit financial flows and related financial crimes.

Suggested Citation

  • Tiago Cardao-Pito, 2023. "How to identify norms, laws, and regulations that facilitate illicit financial flows and related financial crimes," Journal of Money Laundering Control, Emerald Group Publishing Limited, vol. 27(4), pages 674-686, August.
    • Handle: RePEc:eme:jmlcpp:jmlc-07-2023-0112
    DOI: 10.1108/JMLC-07-2023-0112
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/JMLC-07-2023-0112/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/JMLC-07-2023-0112/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/JMLC-07-2023-0112?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. María T. Álvarez-Martínez & Salvador Barrios & Diego d'Andria & Maria Gesualdo & Gaetan Nicodeme & Jonathan Pycroft, 2022. "How large is the corporate tax base erosion and profit shifting? A general equilibrium approach," Economic Systems Research, Taylor & Francis Journals, vol. 34(2), pages 167-198, April.
    2. Rasha Kassem, 2021. "How could external auditors assess the rationalization of fraud?," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 29(4), pages 1458-1467, October.
    3. Jakob Svensson, 2005. "Eight Questions about Corruption," Journal of Economic Perspectives, American Economic Association, vol. 19(3), pages 19-42, Summer.
    4. Norman Gemmell & Richard Kneller & Ismael Sanz, 2014. "The growth effects of tax rates in the OECD," Canadian Journal of Economics, Canadian Economics Association, vol. 47(4), pages 1217-1255, November.
    5. James F. Gilsinan & James E. Fisher & Muhammad Islam & Henry M. Ordower & Wassim Shahin, 2020. "The undeserving rich: can they be redeemed? Policy options for curbing illegal wealth," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 27(4), pages 1075-1087, March.
    6. Neu, Dean & Everett, Jeff & Rahaman, Abu Shiraz & Martinez, Daniel, 2013. "Accounting and networks of corruption," Accounting, Organizations and Society, Elsevier, vol. 38(6), pages 505-524.
    7. Albert F. Tellechea, 2008. "Economic crimes in the capital markets," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 15(2), pages 214-222, May.
    8. Alberto Chong & Florencio Lopez-De-Silanes, 2015. "Money Laundering and Its Regulation," Economics and Politics, Wiley Blackwell, vol. 27(1), pages 78-123, March.
    9. Johnson, Paul E. & Grazioli, Stefano & Jamal, Karim, 1993. "Fraud detection: Intentionality and deception in cognition," Accounting, Organizations and Society, Elsevier, vol. 18(5), pages 467-488, July.
    10. Gullkvist, Benita & Jokipii, Annukka, 2013. "Perceived importance of red flags across fraud types," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 24(1), pages 44-61.
    11. Cumming, Douglas & Ji, Shan & Peter, Rejo & Tarsalewska, Monika, 2020. "Market manipulation and innovation," Journal of Banking & Finance, Elsevier, vol. 120(C).
    12. Nella Hendriyetty & Bhajan S. Grewal, 2017. "Macroeconomics of money laundering: effects and measurements," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 24(1), pages 65-81, January.
    13. Joanna Gray & Elspeth Fennell, 1996. "Theoretical Perspectives on Regulatory Enforcement," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 3(4), pages 334-348, February.
    14. Emily M. Homer, 2020. "Testing the fraud triangle: a systematic review," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 27(1), pages 172-187, January.
    15. Shefali Saluja & Arun Aggarwal & Amit Mittal, 2021. "Understanding the fraud theories and advancing with integrity model," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 29(4), pages 1318-1328, August.
    16. John Walker, 1999. "How Big is Global Money Laundering?," Journal of Money Laundering Control, Emerald Group Publishing Limited, vol. 3(1), pages 25-37, March.
    17. Petter Gottschalk, 2010. "Categories of financial crime," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 17(4), pages 441-458, October.
    18. Mary Alice Young & Amber Phillips, 2022. "Challenges in policing financial crime," Chapters, in: Barry Rider (ed.), A Research Agenda for Financial Crime, chapter 5, pages 89-104, Edward Elgar Publishing.
    19. Angelopoulos, Konstantinos & Economides, George & Kammas, Pantelis, 2007. "Tax-spending policies and economic growth: Theoretical predictions and evidence from the OECD," European Journal of Political Economy, Elsevier, vol. 23(4), pages 885-902, December.
    20. Lino, André Feliciano & Azevedo, Ricardo Rocha de & Aquino, André Carlos Busanelli de & Steccolini, Ileana, 2022. "Fighting or supporting corruption? The role of public sector audit organizations in Brazil," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 83(C).
    21. Jacqui-Lyn McIntyre & Duane Aslett & Nico Buitendag, 2022. "Implementing unexplained wealth orders in South Africa – what are the options?," Journal of Money Laundering Control, Emerald Group Publishing Limited, vol. 26(7), pages 85-98, December.
    22. Tiago Cardao-Pito, 2021. "Fisher-Modigliani-Miller organisational finance theory and the financialisation of contemporary societies," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 28(4), pages 499-522, July.
    23. Ylönen, Matti & Laine, Matias, 2015. "For logistical reasons only? A case study of tax planning and corporate social responsibility reporting," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 33(C), pages 5-23.
    24. Tālis J. Putniņš, 2012. "Market Manipulation: A Survey," Journal of Economic Surveys, Wiley Blackwell, vol. 26(5), pages 952-967, December.
    25. Ach Maulidi & Jake Ansell, 2020. "The conception of organisational fraud: the need for rejuvenation of fraud theory," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 28(3), pages 784-796, November.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Tiago Cardao-Pito, 2021. "An embezzler test for norms, standards and regulations," Journal of Financial Crime, Emerald Group Publishing Limited, vol. 29(3), pages 878-889, August.
    2. Kostarakos, Ilias & Varthalitis, Petros, 2020. "Effective tax rates in Ireland," Research Series, Economic and Social Research Institute (ESRI), number RS110.
    3. Zhang, Guike & Gao, Zengan & Dong, June & Mei, Dexiang, 2023. "Machine learning approaches for constructing the national anti-money laundering index," Finance Research Letters, Elsevier, vol. 52(C).
    4. Nazila Alinaghi & W. Robert Reed, 2021. "Taxes and Economic Growth in OECD Countries: A Meta-analysis," Public Finance Review, , vol. 49(1), pages 3-40, January.
    5. Colin Davis & Ken‐ichi Hashimoto, 2018. "Corporate Tax Policy And Industry Location With Fully Endogenous Productivity Growth," Economic Inquiry, Western Economic Association International, vol. 56(2), pages 1136-1148, April.
    6. Anesa, Mattia & Gillespie, Nicole & Spee, A. Paul & Sadiq, Kerrie, 2019. "The legitimation of corporate tax minimization," Accounting, Organizations and Society, Elsevier, vol. 75(C), pages 17-39.
    7. Kemme, David M. & McInish, Thomas H. & Zhang, Jiang, 2022. "Market fairness and efficiency: Evidence from the Tokyo Stock Exchange," Journal of Banking & Finance, Elsevier, vol. 134(C).
    8. Neu, Dean & Everett, Jeff & Rahaman, Abu Shiraz, 2015. "Preventing corruption within government procurement: Constructing the disciplined and ethical subject," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 28(C), pages 49-61.
    9. Cumming, Douglas J. & Firth, Christopher & Gathergood, John & Stewart, Neil, 2021. "Covid, work-from-home, and securities misconduct," CFS Working Paper Series 666, Center for Financial Studies (CFS).
    10. Liu, Jie & Wu, Chonglin & Yuan, Lin & Liu, Jia, 2022. "Opening price manipulation and its value influences," International Review of Financial Analysis, Elsevier, vol. 83(C).
    11. Saffet A. Uygur & Christopher J. Napier, 2024. "Understanding Fraud in the Not-For-Profit Sector: A Stakeholder Perspective for Charities," Journal of Business Ethics, Springer, vol. 190(3), pages 569-588, March.
    12. Richard Kneller & Florian Misch, 2017. "A Survey On The Output Effects Of Tax Reforms From A Policy Perspective," Contemporary Economic Policy, Western Economic Association International, vol. 35(1), pages 165-192, January.
    13. Weill, Laurent, 2011. "How corruption affects bank lending in Russia," Economic Systems, Elsevier, vol. 35(2), pages 230-243, June.
    14. Luiz Paulo Fávero & Joseph F. Hair & Rafael de Freitas Souza & Matheus Albergaria & Talles V. Brugni, 2021. "Zero-Inflated Generalized Linear Mixed Models: A Better Way to Understand Data Relationships," Mathematics, MDPI, vol. 9(10), pages 1-28, May.
    15. Colin C. Williams, 2023. "A Modern Guide to the Informal Economy," Books, Edward Elgar Publishing, number 18668.
    16. Hauser, Shmuel & Kedar-Levy, Haim & Milo, Orit, 2022. "Price discovery during parallel stocks and options preopening: Information distortion and hints of manipulation," Journal of Financial Markets, Elsevier, vol. 59(PA).
    17. Luippold, Benjamin L. & Kida, Thomas & Piercey, M. David & Smith, James F., 2015. "Managing audits to manage earnings: The impact of diversions on an auditor’s detection of earnings management," Accounting, Organizations and Society, Elsevier, vol. 41(C), pages 39-54.
    18. Brassiolo, Pablo & Estrada, Ricardo & Fajardo, Gustavo & Vargas, Juan, 2021. "Self-Selection into corruption: Evidence from the lab," Journal of Economic Behavior & Organization, Elsevier, vol. 192(C), pages 799-812.
    19. David Talbot & Olivier Boiral, 2021. "Public organizations and biodiversity disclosure: Saving face to meet a legal obligation?," Business Strategy and the Environment, Wiley Blackwell, vol. 30(5), pages 2571-2586, July.
    20. Ye-Feng Chen & Shu-Guang Jiang & Marie Claire Villeval, 2015. "The Tragedy of Corruption. Corruption as a social dilemma," Working Papers 1531, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jmlcpp:jmlc-07-2023-0112. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.