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| Author: | Picard, P. Pieretti, P. |
| Title: | Bank secrecy, illicit money and offshore financial centers |
| Journal: | Journal of Public Economics
2011 : AUG, VOL 95:7-8 p. 942-955 |
| Index terms: | offshore industry capital flows legal sanctions |
| Freeterms: | money laundering compliance |
| Language: | eng |
| Abstract: | This study discusses the impact of pressure policies on offshore financial centers and also their ability to enforce the compliance of centers with anti-money laundering regulations. Offshore banks can be encouraged to comply with precise monitoring of an investor's identity and the origin of his/her funds when pressure creates enough risk of reputational harm to the investor. It is shown that such pressure policies harm both offshore and onshore investors and can be beneficial for both the bank industry and tax administrations. We show that socially optimal pressure policies are dichotomous decisions between nonexistent pressure and a pressure high enough to persuade offshore banks to comply. The pressure policies' delegation to onshore tax institutions may be inefficient. Deeper financial integration improves compliance by the offshore center. |
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