No Country for Dirty Money? The Economic Footprint of Anti-Money Laundering Standards
Abstract
We provide the first comprehensive causal analysis of the economic impact of international anti-money laundering (AML) standards by leveraging the staggered timing of Financial Action Task Force (FATF) evaluations. Stronger AML policies lead to a 4% decline in bilateral trade, primarily in categories susceptible to trade-based money laundering, but this effect is reduced when trading partners' policies become more aligned. FDI increases by 8%. FATF assessments increase detection of money laundering cases by 37% but show no measurable effect on fraud or drug and human trafficking. Our findings highlight the benefits and costs of coordinating global anti-money laundering efforts.