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Encyclopedia of Law and Economics pp 1–6Cite as

Money Laundering

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Abstract

Money laundering is any activity aimed to hide the origin and/or the destination of a flow of money in order to reduce the probability of sanctions. In order to describe the economics of money laundering, the starting point is the definition of its microeconomic foundations, which are based on the existence of a rational actor who derives revenues from a criminal activity and from the assumption that his/her expected utility depends on four key elements: expected revenues, laundering costs, likelihood of being caught, and magnitude of the sanction.

The micro basis of the money laundering can explain its macroeconomic effects. Money laundering can function as a multiplier mechanism of the weight of the illegal sector in a given territory or country. In order to prevent and combat the polluting effects of money laundering, an effective regulation has to be designed, based on a correct incentives alignment between the supervisors and the financial intermediaries.

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References

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Authors and Affiliations

  1. Department of Economics, Bocconi University, Via Roentgen 1, 20136, Milan, Italy

    Donato Masciandaro

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  1. Donato Masciandaro
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Correspondence to Donato Masciandaro .

Editor information

Editors and Affiliations

  1. Lehrst. Finanzwissenschaft/ Finanzsoziologie, University of Erfurt, Erfurt, Thüringen, Germany

    Jürgen Backhaus

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© 2014 Springer Science+Business Media New York

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Masciandaro, D. (2014). Money Laundering. In: Backhaus, J. (eds) Encyclopedia of Law and Economics. Springer, New York, NY. https://doi.org/10.1007/978-1-4614-7883-6_69-1

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  • DOI: https://doi.org/10.1007/978-1-4614-7883-6_69-1

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  • Publisher Name: Springer, New York, NY

  • Online ISBN: 978-1-4614-7883-6

  • eBook Packages: Springer Reference Economics and FinanceReference Module Humanities and Social SciencesReference Module Business, Economics and Social Sciences

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Chapter history

  1. Latest

    Money Laundering
    Published:
    27 February 2022

    DOI: https://doi.org/10.1007/978-1-4614-7883-6_69-2

  2. Original

    Money Laundering
    Published:
    23 June 2014

    DOI: https://doi.org/10.1007/978-1-4614-7883-6_69-1

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