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The economic consequences of money laundering: a review of empirical literature

Imen Khelil (Department of Accounting, Prince Sultan University-Riyadh-KSA, Riyadh, Saudi Arabia)
Hichem Khlif (Department of Accounting, Faculty of Economics and Management of Sfax, University of Sfax, Sfax, Tunisia)
Imen Achek (Faculty of Economics and Management of Mahdia, University of Monastir, Monastir, Tunisia)

Journal of Money Laundering Control

ISSN: 1368-5201

Article publication date: 28 November 2023

Issue publication date: 14 August 2024

865

Abstract

Purpose

The purpose of this study is to provide a timely synthesis of the empirical literature focusing on the economic consequences of money laundering, as this topic has been gaining momentum among policymakers and academic researchers due to its adverse effects.

Design/methodology/approach

Empirical studies are collected by consulting accounting and finance journals in diverse digital sources (e.g. Science Direct, Blackwell, Taylor and Francis, Springer, Sage and Emerald). Key words used to identify relevant papers include “money laundering” and “anti-money laundering regulations,” with specific focus on the economic consequences. Our search strategy includes 24 published papers over the period of 2018–2023.

Findings

Findings show that most studies represent cross-country investigations; the main topics investigated focus on accounting field (e.g. audit fees, real and accrual earnings management), tax evasion, financial stability, sustainability, economic indicators (inflation, economic growth, foreign direct investment) and financial inclusion; and the economic consequences of money laundering have been also examined within banking industry (e.g. banking profitability, banking stability). Reported findings of reviewed studies suggest that money laundering has diverse adverse impacts at the country level (e.g. increased tax evasion, higher inflation rate, less sustainability and foreign direct investments), at the firm level (e.g. increased audit risk and aggressive real and accrual earnings management) and within banking industry through negative impact of money laundering on bank’s loan portfolio quality, stability and profitability.

Practical implications

With respect to policymakers, strengthening anti-money laundering regulations may play a critical role in reducing money laundering activities. Furthermore, financial institutions should implement specific rules dealing with anti-money regulations to ensure adequate compliance and disclosure. Finally, policymakers should be aware about the importance of digital transformation to combat money laundering activities since it facilitates the detection of financial crimes due to their traceability.

Originality/value

The summary of the empirical literature focusing on the economic consequence of money laundering represents a historical record and an introduction for accounting researchers. It also urges them to further explore the economic implications of anti-money laundering disclosure within banking industry.

Keywords

Acknowledgements

The authors would like to thank Prince Sultan University for their support.

Citation

Khelil, I., Khlif, H. and Achek, I. (2024), "The economic consequences of money laundering: a review of empirical literature", Journal of Money Laundering Control, Vol. 27 No. 5, pp. 901-916. https://doi.org/10.1108/JMLC-09-2023-0143

Publisher

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Emerald Publishing Limited

Copyright © 2023, Emerald Publishing Limited

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