| dc.description.abstract | The following research presents the intersection between cash, anti-money legislation, and crime via the combination of an etiological model (Wright et al., 2014) for street crime, money laundering as a multiplier for crime (Masciandaro, 1999), and a model describing the motivations behind money laundering (Ferwerda, 2009), itself based on the famous “crime deterrents” (G.S. Becker, 1968). The result is an augmented etiological model describing Italian crime. The goal was to quantify the effect of Italian anti-money laundering legislation on Italian crime; a simple econometric specification has been constructed and the effects are shown to be significant. Therefore effect of anti-money laundering legislation on crime is likely to be negative. Anti-money laundering legislation had its debut in Europe in the early ’90s. For Italy, the first law was introduced in 1991, and adjustments were made in following years (2007, 2008, 2010, 2011, 2012). Among the effects of this anti-money laundering legislation, was the change of a ceiling for the use of cash in commercial transactions. The changes to this ceiling relevant to this paper occur in in 1991, 2010, 2011, and 2012, in which the ceiling changed from €12.500, €5.000, €2.500, to €1.000 respectively. These ceilings influence the aggregate transaction cost presented in the Masciandaro model for money laundering as a multiplier for crime. The more stringent anti-money laundering legislation is (the lower the ceiling for cash is, e.g. the ceiling changed from €2.500, to €1.000), the higher this transaction cost “c” will be; this means that less money laundering is possible and therefore deflate the crime multiplier. Anti-money legislation in 1991 was found to be associated with a 37,99% increase in reported crime, which is expected as a reported crime either implies that the criminal was spotted yet got away, or that she was unsuccessful or caught. Further effects in 2010, show a ceteris paribus decrease in reported crime by 22,67% and in 2011, an increase of 18,20% in registered crime. Finally in 2012 we observe a relative decrease of reported crime from 18,20% to 9,69%. This last change probably presents a more accurate estimate between observed reported crime, and actual crime that happened in Italy since the yearly changes in legislation haven’t provided criminals with time to adapt to the new ceilings. To test the validity of the “cash as a motivator for crime” and in order to test its role in money laundering, a “placebo” regression has been estimated. This regression showed that anti-money laundering legislation had no significant effect or relationship on homicides (a crime that is unlikely to be motivated by the obtainment of cash). Interestingly, Germany, Italy, and France happen to be the main issuers of Euro banknotes (cash) and also happen to have the highest crime rates amongst countries in the EU-28 (Eurostat). The findings of this research present a starting point for more European research, in the ever-long attempt in finding the motivators behind crime as well as explaining its gradual decline (in developed economies) in the past 20 years. | |
