Article (Scientific journals)
Bank secrecy, illicit money and offshore financial centers
Picard, Pierre M.; Pieretti, Patrice
2011In Journal of Public Economics, 95 (7-8), p. 942-955
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Keywords :
money laundering; offshore banking; compliance
Abstract :
[en] International and national institutions regularly put pressure on offshore financial centers and their clients to enforce compliance with anti-money laundering regulations and that in spite of the existence of bank secrecy. This paper discusses the winners and losers of such policies. Surprisingly, aggregate profits and tax revenues can increase under those policies. In addition, we show that offshore banks can be encouraged to comply with rigorous monitoring of the investor's identity and the origin of his/her funds when the pressure creates sufficiently high risk of reputational harm to this investor. Nevertheless, the efficient pressure policy is dichotomous in the sense that a social planner chooses zero pressure or the pressure that just entices offshore banks to comply. By contrast, the implementation of those pressure policies on an onshore institution may be inefficient. Finally, we show that deeper financial integration fosters compliance by the offshore center while it also gives better incentives for delegated organizations to effectively induce compliance.
Disciplines :
Economic systems & public economics
Microeconomics
Identifiers :
UNILU:UL-ARTICLE-2012-245
Author, co-author :
Picard, Pierre M. ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Pieretti, Patrice ;  University of Luxembourg > Faculty of Law, Economics and Finance (FDEF) > Center for Research in Economic Analysis (CREA)
Language :
English
Title :
Bank secrecy, illicit money and offshore financial centers
Publication date :
August 2011
Journal title :
Journal of Public Economics
ISSN :
0047-2727
Publisher :
Elsevier Science, Lausanne, Switzerland
Volume :
95
Issue :
7-8
Pages :
942-955
Peer reviewed :
Peer Reviewed verified by ORBi
Available on ORBilu :
since 27 November 2013

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