The impact of governance on money laundering: A case of middle income and developing countries
Loading...
Date
2020
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
UMT, Lahore
Abstract
Following the INTERPOL’s description, money laundering is: “any act or attempted act to conceal or disguise the identity of illegally obtained proceeds so that they appear to have originated from legitimate sources”. Many inter- governmental bodies such as FATF or AMLATFA, which are financial task force and have the responsibility to monitor and regulate the illicit flow of funds internationally. These task forces have provided recommendations to developing countries on how they can regulate money laundering in their countries. The problem with developing countries is that they need to put an intense amount of effort in order to improve and bring structural changes to their institutions. This is why it is essential to gauge whether good governance with favorable institutions can eradicate money laundering form developing countries. The independent variables used for good governance are government stability, corruption, bureaucratic quality, law& order, and democratic accountability. The proxy for dependent variables is the illicit flow of monetary funds. An empirical model was build using quantile panel regression. The data set included a hundred and twenty countries ranging from developing to middle income. The period for the data is from 1985- 2015. The findings suggested a significant relationship between good governance and money laundering. The results suggested a significant negative relationship between government stability and IFF. In order to eradicate or control money, laundering governments need to be stable, and institutions should operate under favorable conditions. However, if money launderers were to infiltrate inside these institutions with bribery and corruption, then it becomes incredibly complex to break the trap of money laundering.