Money Laundering Regulation and Bank Compliance Costs. What Do Your Customers Know? Economics and Italian Experience

Abstract

The objective of this paper is to point up the link between the effectiveness of the anti-laundering regulations and the characteristics of the relative compliance costs for banks, with particular attention to the bank - customer relationships. The work is organized as follows. The second section contains the economic framework, that starts with the assumption that intermediaries have an information advantage and then demonstrates, by means of a principal-agent model, how this advantage can produce collective advantages in the war against money laundering only if the regulations take the problem of compliance costs into due consideration.

Based on the economic results, then, section three presents an empirical part, comprising a survey conducted in conjunction with an Italian bank present in 11 of Italy's 20 regions, on how banks perceive the relationship of customers with the obligations imposed by the anti-laundering regulations. The survey provides a better understanding of the nature and extent of compliance costs within banking operations. Section four contains the concluding remarks.

Note: This is a description of the paper and not the actual abstract.

Keywords: Money laundering banks law

JEL Classification: G21, K40, O50