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Banking Secrecy and Global Finance: Economic and Political Issues


Author: Donato Masciandaro and Olga Balakina

Publisher: Palgrave Macmillan


Publish Date: August 12, 2015

ISBN-10: 1137400099

Pages: 283

File Type: PDF

Language: English

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Book Preface

Is the era of banking secrecy over? Probably not. If you assume that banking secrecy is the result of market mechanisms, it is easy to discover that the worldwide demand for and supply of banking secrecy are likely to be relevant for a long time to come.

The bottom line of our book is that the growth of criminal and illegal activities systematically generates the demand for banking secrecy, while economic and political incentives can motivate national politicians and international banks to supply banking secrecy.

By applying the tools of economics and political economy, it is possible to show that, so far, international efforts to combat banking secrecy are likely to be ineffective, or at worst counterproductive. Banking secrecy is unlikely to be a disappearing phenomenon; it is more accurate to describe it as a dynamic variable with booms and busts that are motivated by the changing preferences both of the offshore and onshore policymakers. Banking secrecy is a like a tango: it takes two to dance it.

In order to analyze the economics and politics of banking secrecy, it is necessary to step over a methodological threshold. Traditionally, monetary and financial economics have focused on legal financial transactions, while the economics of crime – following Becker – has neglected financial aspects. Hence, the phenomena of banking secrecy, in which finance is related to illegal or criminal activities, has been caught between two stools.

Our aim is to study in a systematic way the financial transactions which are characterized by a very special purpose: namely, hiding the original criminal or illegal source of the flows involved.

In order to shed light on the economics and politics of banking secrecy, we aim to model the behavior and process of making dirty money appear clean. This necessitates a multidisciplinary approach, since the behavior and process of opaque banking, besides the economic aspects, involve features of regulation and political economy as well.

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