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How to identify norms, laws, and regulations that facilitate illicit financial flows and related financial crimes

Tiago Cardao-Pito (ISEG, Universidade de Lisboa, Lisbon, Portugal)

Journal of Money Laundering Control

ISSN: 1368-5201

Article publication date: 31 August 2023

Issue publication date: 4 June 2024

147

Abstract

Purpose

Illicit financial flows are targeted by the United Nations’ (UN) sustainable development goals (SDGs). However, these illicit flows are not entirely understood. Furthermore, they can benefit from economic norms, laws and regulations that lack mechanisms to detect and penalize them. This paper aims to investigate whether a recent test, the embezzler test, can be used to identify regulatory architectures that facilitate illicit financial flows and related financial crimes.

Design/methodology/approach

This paper develops a more advanced version of the embezzler test in terms of definitions and practical implementation methodology.

Findings

In this test, the definition of embezzlement can be understood to be the occurrence of illicit financial flows crossing the boundaries of organizations and/or countries. This is a multistage test, which intentionally simulates illicit financial flows to observe how well equipped is the regulatory architecture to deal with other financial offences that are related with these flows, such as theft, money laundering, fraud, corruption, market manipulation and tax evasion.

Research limitations/implications

Future research can use the version of this test to stress test a large range of economic norms, laws and regulations.

Social implications

This test’s new version can assist achieve the UN SDGs’ illicit financial flow reduction target. Furthermore, it can be used to study both existing and proposed norms, laws and regulation.

Originality/value

To the best of the author’s knowledge, this is the first explicit test that has been presented to identify norms, laws and regulations that facilitate illicit financial flows and related financial crimes.

Keywords

Acknowledgements

The author acknowledge the support from the ADVANCE Research Centre at ISEG, Universidade de Lisboa [University of Lisbon] and the Portuguese National Funding Agency for Science, Research and Technology, under Project UIDB/04521/2020.

Citation

Cardao-Pito, T. (2024), "How to identify norms, laws, and regulations that facilitate illicit financial flows and related financial crimes", Journal of Money Laundering Control, Vol. 27 No. 4, pp. 674-686. https://doi.org/10.1108/JMLC-07-2023-0112

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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