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Portuguese Anti-money Laundering Policy: a Game Theory Approach

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Abstract

The fight against money laundering has taken center stage in the global arena. The European Union (EU), in line with various international organizations, plays an active role in the fight against this crime and promotes anti money laundering directions to its member states. The statistics regarding Portugal (a member of the EU since 1986) indicate that it lags behind most of the EU members in terms of reporting of suspicions of money laundering. This paper adopts a game theory approach to study the efficiency of the combat against money laundering in Portugal, both with regard to the financial and the non financial sector of the economy. Additionally, the paper studies the impact of the increase of sanctions, as recommended by the 4th Directive 2015/849 of the European Parliament and of the Council of 20th May of 2015, on that combat. The results show that the low probability of the institutions being caught (and fined) for not complying with their reporting duties, coupled with the low conviction rates for money laundering crimes, justifies the reduced number of suspicious transactions reported. The findings highlight that an increase of sanctions, on both financial and non financial institutions, would tend to augment the efficiency of the combat against money laundering in Portugal.

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Notes

  1. Retrieved from http://uk.reuters.com/article/uk-portugal-corruption-socrates-idUKKCN0J606D20141122/.

  2. Retrieved from http://www.reuters.com/article/us-portugal-bes-salgado-idUSKBN0FT0XS20140724/.

  3. Retrieved from http://uk.reuters.com/article/portugal-bpn-idUKLDE76K0KP20110721/.

  4. Retrieved from http://edition.cnn.com/2016/05/04/europe/portugal-russian-mafia-allegations/.

  5. This is the Prosecutor-General of the Portuguese Republic.

  6. This is the Criminal Police Unit which aids the PPO in the investigation.

  7. All the reports received are those sent to the FIU.

  8. This decrease is essentially due to the fall in the number of STR reported by the supervision and inspection entity of gambling activities (Serviços de Inspecção de Jogos do Turismo de Portugal).

  9. The accounting of the convicted people relates to the most serious offense for which they were accused.

  10. The intelligence stage and the investigative stage also include the PGR and the OPC, respectively, but to simplify the exposition in the model we do not directly refer to these.

  11. We assume when the game starts, these two probabilities, f and c, are common knowledge for all players.

  12. The Nash equilibria are: i) Bank / NFI: r; FIU: i; PPM: t; ii) Bank / NFI: r; FIU: i; PPM: nt; iii) Bank / NFI: nr; FIU: i; PPM: t; iv) Bank / NFI: nr; FIU: ni; PPM: nt.

  13. We show that the derivative of the darker shaded gray areas in terms of ∆ B is always positive.

  14. This is reinforced in the title of the right plot in Fig. 7 with the double increase sign (>>).

  15. Notice that before the recent EU Directive, there was no Nash equilibrium where NFI reports but as ∆NF increases, NFI starts to report in equilibrium, for high f and c.

  16. We show that the derivative of the darker shaded gray areas in terms of r is also always positive.

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Authors and Affiliations

  1. Portucalense Institute for Legal Research – IJP, Research on Economics, Management and Information Technologies – REMIT, Universidade Portucalense, Porto, Portugal

    Shital Jayantilal

  2. GOVCOPP, Departamento de Economia, Gestão, Engenharia Industrial e Turismo, Universidade de Aveiro, Aveiro, Portugal

    Sílvia Ferreira Jorge

  3. Porto, Portugal

    Ana Ferreira

Authors
  1. Shital Jayantilal
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  2. Sílvia Ferreira Jorge
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  3. Ana Ferreira
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Correspondence to Shital Jayantilal.

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Jayantilal, S., Jorge, S.F. & Ferreira, A. Portuguese Anti-money Laundering Policy: a Game Theory Approach. Eur J Crim Policy Res 23, 559–574 (2017). https://doi.org/10.1007/s10610-017-9347-0

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