A Theory of "Crying Wolf": The Economics of Money Laundering Enforcement, 2007-2081. sayılar
International Monetary Fund, 2007 - 54 sayfa
The paper shows how excessive reporting, called "crying wolf", can dilute the information value of reports. Excessive reporting is investigated by undertaking the first formal analysis of money laundering enforcement. Banks monitor transactions and report suspicious activity to government agencies, which use these reports to identify investigation targets. Banks face fines should they fail to report money laundering. However, excessive fines force banks to report transactions which are less suspicious. The empirical evidence is shown to be consistent with the model's predictions. The model is used to suggest implementable corrective policy measures, such as decreasing fines and introducing reporting fees.
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Solving the Model
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action action pair agencies assumption auditing auditors bank monitors bank reports bank's best response called caused coarse communication comparative conditional continuous Corollary costs crime criminal crying wolf crying wolf problem curve decrease disclosure discussed economic effect efficient equation estimates evidence excessive expected false Figure filed Finally financing FinCEN fines formally Furthermore given government investigation hand harm high signal higher identify implementable implies important incentives increase instance Intuitively investigation effort Journal law enforcement Lemma likelihood low signal lower maximal optimal million money laundering enforcement monitoring and reporting needed negatives observing parameter positive possible potential precision prefers probability problem Proof Proposition prosecution provides reason relevant reporting fees reporting threshold result SARs Second Best equilibria shows signal similar social welfare solution sufficiently suspicious activity terrorism Third Best equilibria transactions transfer United volumes