Cash payment anomalies and money laundering: An econometric analysis of Italian municipalities

摘要

In this study we analyse cash payment anomalies in Italy, at the level of municipality. Cash payments are measured as a share of total payments credited to bank accounts. By estimating an econometric model, we show that the levels of, respectively, income and financial deepening of Italian municipalities are negatively related to the use of cash, as predicted by the theory, whilst the latter is positively affected by the local intensity of criminal activity and money laundering. The analysis allows us to identify the Italian municipalities where the amount of cash transactions is farthest above what is explained by the local socioeconomic 'fundamentals'. In these municipalities one can observe the highest share of cash inflows explained by measures of local illegal activities. Based on the results, we provide territorial indicators of the risk associated to anomalous cash handling. The econometric findings, and the related distribution of money laundering provincial risk, are shown to be robust to different model specifications (cross-section GLM and linear fixed-effects panel). From the perspective of a Financial Intelligence Unit, the study has relevant operational implications: risk indicators help target on-site as well as off-site activities on riskiest municipalities. Judicial authorities and law enforcement agencies, too, could benefit in their activities from the geographical distribution of (cash-related) money laundering risk emerging from the methodology developed in this study. (C) 2018 Elsevier Inc. All rights reserved.