ABSTRACT
This chapter explores a simple model to describe, through the lawmaker payoff maximisation, the relationships between specific country features and endowments, on the one hand, and lax financial regulations, on the other hand. It discusses an empirical test of the theoretical relationship in the case of the Non-Cooperative Countries or Territories (NCCTs). The chapter also discusses the relationships among specific country features, lawmaker choices regarding lax financial regulation, and national non-cooperative attitudes with respect to the international effort to combat money laundering. The international community could do well to consider the possibility of introducing effective punitive measures, such as a financial quarantine for every country that does not adhere to the internationally set standards. The inflow of black and grey foreign capital produces national revenues, increasing the activity of the financial industry and then throughout the traditional macroeconomic multiplier effects. The chapter concludes with the policy consequences on the pros and cons of international blacklisting procedures.
