Purpose:The purpose of this study is to review the literature on money laundering and its related areas. The main objective is to identify any gaps in the literature and direct attention towards addressing them.Design/Methodology/Approach: A systematic review of the money laundering literature was conducted with an emphasis on the Pro-Quest, Scopus and Science-Direct databases. Broad research themes were identified after investigating the literature. The theme about the detection of money laundering was then further investigated. The major approaches of such detection are identified as well as research gaps that could be addressed in future studies. Findings:The literature on money laundering can be classified into the following six broad areas: (i) anti-money laundering framework and its effectiveness, (ii) the effect of money laundering on other fields and the economy, (iii) the role of actors and their relative importance, (iv) the magnitude of money laundering, (v) new opportunities available for money laundering and (vi) detection of money laundering. Most studies about the detection of money laundering have focused on the use of innovative technologies, banking transactions, or real estate and trade-based money laundering. However, the literature on the detection of shell companies being explicitly used to launder funds is relatively scarce.Originality/Value: This paper provides insights into an area related to money laundering where research is relatively scant. Shell companies incorporated in the UK alone were identified to be associated with laundering 80 billion pounds of stolen money between 2010 and 2014. The use of these entities to launder billions of dollars as witnessed through the laundromat schemes and several data leaks clearly indicate the need to focus on illicit financial flows through such entities.
Over one billion US dollars were invested in blockchain in 2016. The potential application of blockchain extends far beyond cryptocurrencies. One use of blockchain is an Initial Coin Offering (ICO), a digital method of raising finance involving issuance of tokens in exchange for cryptocurrencies or fiat money. It is a cheaper, easier and quicker way to raise funds compared with traditional public offerings. However, it has raised a new opportunity for fraud. An estimated ten percent of ICO funds have been lost to fraud. Using case-study analysis, this study determines characteristics of such fraud schemes and the regulatory changes made in response to them. The study reveals key lessons for investors in terms of proactive steps that can be taken to protect themselves from being victims, for issuers to ensure awareness and take steps to secure investors' trust, and for regulators to promote a safe environment. To the best of our knowledge, this study is the first to document the effect of ICO fraud schemes on the regulatory environment, which is going through a series of amendments to provide protection against such fraudulent schemes. Additionally, it provides direction for future research to further investigate the risks of this new method of raising funds. This is a post-peer-review, pre-copyedit version of an article published in Crime, Law and Social Change.
Purpose The prevention of fraudulent activities, particularly within a financial context, is of paramount significance in all spheres, as it not only impacts the sustainability of corporate entities but also has the potential to have a broader economy-wide impact. This paper aims to focus on dual implications associated with financial distress, the first being associated with the temptation to launder funds due to financial distress, and the second being the potential for illicit activities, such as fraud, money laundering or terror financing, to give rise to financial distress. Design/methodology/approach The paper examines the literature on financial distress and uses theories of financial crime to establish a link between financial distress and financial crime. Findings In recent years, there has been a surge in corporate financial distress, particularly in the aftermath of concurrent crises such as the COVID-19 pandemic and the Russia–Ukraine war. Through a comprehensive examination of literature pertaining to financial distress and financial crime, this study identifies a proclivity towards fraudulent conduct arising from instances of financial distress. Moreover, the engagement in such illicit activities subsequently exacerbates the financial distress. An analysis of the relationship between financial crime and financial distress reveals the existence of a vicious cycle between the two. Originality/value The results of this study have the potential to advance understanding of the relationship between financial distress and financial crime, which has been previously underexplored.
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