Global money laundering appeal index: application of principal component analysis
| DOI | https://doi.org/10.1108/JMLC-10-2021-0108 |
| Published date | 20 October 2021 |
| Date | 20 October 2021 |
| Pages | 205-211 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Milind Tiwari,Adrian Gepp,Kuldeep Kumar |
Global money laundering appeal
index: application of principal
component analysis
Milind Tiwari
Bond University, Gold Coast, Australia, and
Adrian Gepp and Kuldeep Kumar
Centre for Data Analytics, Bond University,
Gold Coast, Australia
Abstract
Purpose –The paper aims at developing a global ranking system determining a country’s appeal as a
destinationfor money laundering.
Design/methodology/approach –This paper uses principal componenta nalysis(PCA), with a mix
of standardised and unstandardised components relating to attractiveness, economic freedom and
moneylaunderingrisktocomeupwithanindexofmoneylaunderingappeal.
Findings –Four components relating to economic feasibility, financial liberty, government spending and
tax regime are criticalin influencing a country’s money laundering appeal.
Research limitations/implications –This paper attempts to use a standardised and replicable
methodology to condense into a single measure the complex and multifaceted phenomenon of a country’s
appeal as a destination for money laundering, thus avoiding the difficulty associated with precisely
calculatingillicit financial flows.
Practical implications –The ranking system could be usedto determine the destinations attractive for
laundering money. Such informationcan be used to come up with more effective preventative strategies to
combat phenomena responsiblefor the stagnation of economic growth through tax evasion, corruption and
creationof non-competitivemarkets.
Originality/value –It is the first attempt to use a statistical technique to understand the underlying
componentsof a country’s money laundering appeal.
Keywords Money laundering, Principal component analysis, Economic growth,
Walker gravity model
Paper type Research paper
1. Introduction
Theriseinfinancial crimes has led to a wide range of regulatory reforms to combat the problem.
The failure of regulations to accomplish the objectives has brought the regulators under pressure
to justify their actions considering political, executive and judicial scrutiny. It has eve ntually led
to risk colonisation, that is, “risk”playing an imperative role in definingthe aspects, methods and
rationale for regulations (Rothstein et al.,2006). However, instances of regulatory failures have
raised a question –whether the regulatory strategies can be adjusted to the dynamics of real-life
The authors are grateful to Basel Institute on Governance, The Heritage Foundation and Wahaj
Ahmed Khan for their assistance in providing the data. The first author is also thankful to the
Australian Government Research Training Program for their financial support of his research.
Principal
component
analysis
205
Journalof Money Laundering
Control
Vol.26 No. 1, 2023
pp. 205-211
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-10-2021-0108
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
To continue reading
Request your trial