Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/235389 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9019
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
Proceeds from illicit activities percolate into the legal economy through several channels. We exploit international regulations targeting money laundering via the financial sector to identify the flows of “dirty money” into legitimate establishments: business-based money laundering (BBML). Our variant of the monopolistic competition model embeds a drug cartel that channels illicit proceeds into an offshore financial investment and into BBML. Tighter regulations in one channel increase the flow in the other. We use a research design that links U.S. county business activity to the evolution of anti-money-laundering regulations in Caribbean jurisdictions to provide the first empirical evidence of the phenomenon.
Subjects: 
money laundering
business establishment
Panama Papers
anti-money-laundering regulations
monopolistic competition
JEL: 
F30
K40
G28
H00
D58
Document Type: 
Working Paper
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