Ricardo Azevedo Araujo

Assessing the efficiency of the anti‐money laundering regulation: an incentive‐based approach

Purpose – To assess the efficiency of the anti‐money laundering regulation by using an incentive‐based approach.Design/methodology/approach – It is designed a mechanism in which competent authority is the principal and the financial institutions are the agents.Findings – The analysis shows that despite the efforts of the authorities to combat money laundering the efficiency of an incentive‐based approach has been damaged by the existence of hidden information related to the ability or willingness of banks to cope with money‐laundering prevention.Research limitations/implications – The contract approach adopted to assess the efficiency of the regulation may highlight the efficiency properties of international schemes of combat against money laundering. But, it is subject to limitations related to the hidden information.Practical implications – This is a theoretical result that points out to the necessity of creating financial intelligence units in order to concentrated the efforts of collecting information...

A Pasinettian approach to international economic relations: the pure labor case

In this paper, the pure labor version of Pasinettis model of structural change and economic dynamics is extended to consider international economic relations. The conditions for full employment, full expenditure of national income and trade balance equilibrium are established along with solutions for the systems of physical quantities and prices in an open economy. Analytical results concerning the benefits of international trade and learning are studied with formal rigor. Then static and dynamic aspects of the principle of comparative cost advantages are analyzed considering the determinants of the level of specialization and international prices.

An Inter-Temporal Model of Dirty Money

Presents a basic model by which a representative agent chooses how to allocate his savings optimally between money of legal origin and dirty money; he holds the laundered dirty money, from which the money laundering process generates a positive transaction cost. Analyses the welfare of such an economy as a result of money laundering, also the conditions for reducing the incentives for this transforming of illegal into legal money: the incentive can be minimised if the effectiveness of anti‐money laundering increases. Concludes that the welfare of an economy where there is only legal money is greater than one in which legal and illegal activities coexist.

Are labor contracts efficient to combat fraud

Purpose – The purpose of this paper is to approach the issue of fraud prevention by using the theory of incentives to design a mechanism that makes employees to reveal their true type, that is, their willingness or ability to combat corruption. Based on this information, the manager may propose particular contracts for different types of employee.Design/methodology/approach – The mechanism design approach assumes that the manager or the principal is entrusted with the power of making the employees agents – to provide effort. This methodology is adapted to assess the efficiency of the labor contracts to prevent fraud.Findings – The paper shows that the labor contracts are efficient to combat fraud when the type of the employee, measured by his/her willingness to cope with fraud prevention is known by the manager. If this workers private information not available for the manager, then the contract is not efficient due to the problem of hidden information that leads to a moral hazard. Only a second‐best sol...

The effects of money laundering and terrorism on capital accumulation and consumption

Purpose – The purpose of this paper is to study the impact of terrorist actions and money laundering on capital accumulation and consumption.Design/methodology/approach – The paper builds a general equilibrium model that considers the existence of two representative agents: a terrorist and a worker. It departs from a formalization of Linns findings about the connection between money laundering and terrorism. His results are confirmed and extended.Findings – The paper shows that the combat to money laundering is an effective way of preventing terrorist actions. Besides it is found that these actions do not affect the optimal stock of capital goods but have a negative impact on per capita consumption.Originality/value – The paper confirms Linns findings concerning money laundering and terrorism by using a formal approach. It also extends the model in order to study the impact of money laundering and terrorism on capital accumulation and consumption.