Money Laundering and Institutional Quality

Abstract

Money laundering is considered an illegitimate global phenomenon that deteriorates any country's economic stability. The main objective of this chapter is to investigate the relationship between money laundering and institutional quality by considering several variables such as government stability, corruption, bureaucracy quality, law and order, and democratic accountability. The study investigates these relationships by using panel quantile regression. The findings suggest a significant relationship between good governance and money laundering and a significant negative relationship between government stability and illicit financial flows. In order to eradicate or control money laundering, governments need to be stable, and institutions should operate under favorable conditions. However, if money launderers manage to infiltrate these institutions with bribery and corruption, then it becomes incredibly difficult to stop the planned crimes like money laundering.