NCJ Number
176588
Journal
Journal of Money Laundering Control Volume: 2 Issue: 1 Dated: Summer 1998 Pages: 49-58
Date Published
1998
Length
10 pages
Annotation
This paper presents an economic analysis of money laundering by developing micro and macro models of crime and money laundering.
Abstract
Money laundering exists whenever a given potential flow of purchasing power is turned into an effective one. The initial purchasing power of money gained from a criminal enterprise is potential because, coming from illegal activities, nobody can use it either for consumption or for investment purposes without increasing the likelihood of having the criminal activities and the criminals detected. Many of the agents conducting either illegal or criminal activities need a money laundering service to make their activities grow, thereby minimizing the risks. The crucial agent to analyze is the person who needs the "clean" money (the money launderer); his goal is to turn "dirty" liquidity, coming from any criminal or illegal activity, into "clean" money that can be used without risk for consumption, saving, investment in legal sectors, as well as for new investment in illegal markets. The word "clean" means that the money is free of those traces that link it to the original crimes. Having defined the micro foundations of money laundering, it can be shown that, in a given economy, the total volume of economic activity that concerns criminal agents can be linked to the growth of money laundering activity, and vice versa. This analysis can be examined by using the traditional multiplier approach in a new macro framework, the Masciandaro 1996 model. To show crime and money laundering in a given regulatory framework, this paper examines efforts to counter money laundering by organized crime in Italy. 5 references, 2 tables, and 6 figures