Corruption and money laundering: You scratch my back, i'll scratch yours

This paper is the first to theoretically and empirically analyse the three-way nexus among corruption, money laundering and anti-money-laundering policies. Assuming that the goal of criminals involved in corruption is to minimize the probability of being detected, corruption represents a demand for money laundering (a trigger effect). In this case, money laundering serves as an effective way to clean the revenues from corruption for reinvestment (a multiplier effect). At the same time, criminals can try to maximize the likelihood that anti-money-laundering activities will be ineffective. Corruption can be an effective tool for maximizing this likelihood, as organized crime may corrupt financial institutions-both regulators and regulated firms-in order to prevent crime detection and, thereby, facilitate money laundering (an accelerator effect). The three-way nexus is simulated using a sample of 100 countries for the period 1990 to 2040.