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Strategies to avoid blacklisting: The case of statistics on money laundering

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  • Joras Ferwerda
  • Ioana Sorina Deleanu
  • Brigitte Unger

Abstract

Financial and legal entities (e.g. banks, casinos, notaries etc.) have to report money laundering suspicions. Countries’ engagement in fighting money laundering is evaluated–among others–with statistics on how often these suspicions are reported. Lack of compliance can result in economically harmful blacklisting. Nevertheless, these blacklists repeatedly become empty–in what is known as the emptying blacklist paradox. We develop a principal-agent model with intermediate agents and show that non-harmonized statistics can lead to strategic reporting to avoid blacklisting, and explain the emptying blacklist paradox. We recommend the harmonization of the standards to report suspicion of money laundering.

Suggested Citation

  • Joras Ferwerda & Ioana Sorina Deleanu & Brigitte Unger, 2019. "Strategies to avoid blacklisting: The case of statistics on money laundering," PLOS ONE, Public Library of Science, vol. 14(6), pages 1-13, June.
    • Handle: RePEc:plo:pone00:0218532
    DOI: 10.1371/journal.pone.0218532
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    1. Raffaella Barone & Donato Masciandaro & Friedrich Schneider, 2022. "Corruption and money laundering: You scratch my back, i’ll scratch yours," Metroeconomica, Wiley Blackwell, vol. 73(1), pages 318-342, February.
    2. Bartolozzi, D. & Gara, M. & Marchetti, D.J. & Masciandaro, D., 2022. "Designing the anti-money laundering supervisor: The governance of the financial intelligence units," International Review of Economics & Finance, Elsevier, vol. 80(C), pages 1093-1109.
    3. Carmela D’Avino, 2023. "Money laundering and AML regulatory and judicial system regimes: investigation of FinCEN files," European Journal of Law and Economics, Springer, vol. 55(2), pages 195-223, April.

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