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Macroeconomics of money laundering: effects and measurements

Macroeconomics of money laundering: effects and measurements PurposeThe purpose of this paper is to review studies focusing on the magnitude of money laundering and their effects on a country’s economy. The relevant concepts are identified on the basis of discussions in the literature by prominent scholars and policy makers. There are three main objectives in this review: first, to discuss the effects of money laundering on a country’s macro-economy; second, to seek measurements from other scholars; and finally, to seek previous findings about the magnitude and the flows of money laundering.Design/methodology/approachIn the first part, this paper outlines the effects of money laundering on macroeconomic conditions of a country, and then the second part reviews the literature that measures the magnitude of money laundering from an economic perspective.FindingsMoney laundering affects a country’s economy by increasing shadow economy and criminal activities, illicit flows and impeding tax collection. To minimise these negative effects, it is necessary to quantify the magnitude of money laundering relative to economic conditions to identify the most vulnerable aspects of money laundering in a country. Two approaches are used in this study: the first is the capital flight approach, as money laundering will cause flows of money between countries; the second is the economic approach for measuring money laundering through economic variables (e.g. tax revenue, underground economy and income generated by criminals) separately from tax evasion.Originality/valueThe paper offers new insights for the measurement of money laundering, especially for developing countries. Most methods in quantifying money laundering have focused on developed countries, which are less applicable to developing countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Crime Emerald Publishing

Macroeconomics of money laundering: effects and measurements

Journal of Financial Crime , Volume 24 (1): 17 – Jan 3, 2017

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1359-0790
DOI
10.1108/JFC-01-2016-0004
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to review studies focusing on the magnitude of money laundering and their effects on a country’s economy. The relevant concepts are identified on the basis of discussions in the literature by prominent scholars and policy makers. There are three main objectives in this review: first, to discuss the effects of money laundering on a country’s macro-economy; second, to seek measurements from other scholars; and finally, to seek previous findings about the magnitude and the flows of money laundering.Design/methodology/approachIn the first part, this paper outlines the effects of money laundering on macroeconomic conditions of a country, and then the second part reviews the literature that measures the magnitude of money laundering from an economic perspective.FindingsMoney laundering affects a country’s economy by increasing shadow economy and criminal activities, illicit flows and impeding tax collection. To minimise these negative effects, it is necessary to quantify the magnitude of money laundering relative to economic conditions to identify the most vulnerable aspects of money laundering in a country. Two approaches are used in this study: the first is the capital flight approach, as money laundering will cause flows of money between countries; the second is the economic approach for measuring money laundering through economic variables (e.g. tax revenue, underground economy and income generated by criminals) separately from tax evasion.Originality/valueThe paper offers new insights for the measurement of money laundering, especially for developing countries. Most methods in quantifying money laundering have focused on developed countries, which are less applicable to developing countries.

Journal

Journal of Financial CrimeEmerald Publishing

Published: Jan 3, 2017

References