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Review of Law & Economics

Editor-in-Chief: Parisi, Francesco / Engel, Christoph

Ed. by Cooter, Robert D. / Gómez Pomar, Fernando / Kornhauser, Lewis A. / Parchomovsky, Gideon / Franzoni, Luigi

CiteScore 2017: 0.30

SCImago Journal Rank (SJR) 2017: 0.195
Source Normalized Impact per Paper (SNIP) 2017: 0.410

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Volume 5, Issue 2


The Risk-Based Approach in the New European Anti-Money Laundering Legislation: A Law and Economics View

Lucia Dalla Pellegrina / Donato Masciandaro
Published Online: 2009-12-31 | DOI: https://doi.org/10.2202/1555-5879.1422

In 2005 the European Commission adopted the Third Directive on Anti-Money Laundering (AML), which was to be implemented into national laws at the latest by December 2007. The key feature that characterizes the Third Directive is the idea that the regulatory framework should be risk-based (RBA). The aim of this regulation is to elicit a high level of outcome in terms of AML effectiveness from self-interested financial institutions (FIs) who hold private information. In this paper we study how to increase the effectiveness of AML rules, using a principal-agent framework to describe the regulatory setting in which an RBA is applied. We focus on incentive problems arising in a three-layer hierarchy, which includes public authorities (policymakers), financial institutions, and supervisors.

About the article

Published Online: 2009-12-31

Citation Information: Review of Law & Economics, Volume 5, Issue 2, Pages 931–952, ISSN (Online) 1555-5879, DOI: https://doi.org/10.2202/1555-5879.1422.

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