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A Theory of “Crying Wolf” :, The Economics of Money Laundering Enforcement, Elöd Takáts

Abstract
The paper shows how excessive reporting, called "crying wolf", can dilute the information value of reports. Excessive reporting is investigated by undertaking the first formal analysis of money laundering enforcement. Banks monitor transactions and report suspicious activity to government agencies, which use these reports to identify investigation targets. Banks face fines should they fail to report money laundering. However, excessive fines force banks to report transactions which are less suspicious. The empirical evidence is shown to be consistent with the model's predictions. The model is used to suggest implementable corrective policy measures, such as decreasing fines and introducing reporting fees
Table Of Contents
Contents; I. Introduction; II. Money Laundering Enforcement; III. Model Setup; A. Economy and Players; Text Figures; 1. Model Scheme; B. Timing; C. Signal Structure; D. Action Set; E. Final Assumptions; IV. Solving the Model; A. Equivalent Problem; B. First Best Benchmark; C. Second Best; D. Second Best with Exogenous Fines; V. Comparative Statics; A. First Best Investigation: I * o and I * o; 2. Information Laffer curve; B. Minimal Optimal Fine: F*; C. Maximal Optimal Fine: F**; VI. Empirical Evidence; Text Tables; 1. Comparative Statics; A. Money Laundering Volumes
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (56 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9780145271176

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