Projects

Follow the Money - Deciphering the Link between Shadow Banking Sector and the Illicit Financial Flows

Ing. Mária Širaňová, MA., PhD.

Members of project
Prof. Dr. Ing. Menbere Workie Tiruneh, PhD., doc. Ing. Brian König, PhD., Ing. Timotej Klepanec, Ing. David Hojdan, doc. Ing. Martin Hodula, PhD., Ing. Boris Fišera, PhD., prof. Dr. Jarko Fidrmuc

• Basic informations
• Characteristics

• Duration of the project: 07/2021 - 06/2025
  ID number: APVV-20-0499

• Volume of illicit financial flows has been steadily increasing over the last decade bringing about severe socioeconomic consequences. While it was historically believed that the illicit financial flows target predominantly lowincome economies with insufficient quality of institutions, low public trust and underdeveloped financial markets, recent experience has also highlighted the role of wealthy individuals and multinational companies residing in developed countries who are often involved in sophisticated schemes aimed at transferring capital outside official oversight. However, the existing empirical economic literature has remained relatively negligent to the increasing contribution of non-bank finance industry (i.e. shadow banking) to the pervasiveness of illicit financial flows in current global financial landscape. Shadow banking can be described in broad terms as financial activities occurring outside the regulated (i.e. traditional) banking sector. In the EU the non-bank financial intermediation sector constitutes around 40 percent of the financial system. The main objective of this project is to create a comprehensive framework enabling examination of the involvement. of shadow banking sector in facilitating the IFFs. Additionally, the project aims to investigate possible consequences of such ‘coupling’ on domestic and international financial system, being it short-term impact during periods of financial stress or long-term effect on overall financial development. Outcomes of this project will contribute to the ongoing economic discussion in various areas, e.g. potential implications for financial stability in countries serving as destinations of illicit financial flows, role of regulation of the shadow banking sector due to its potential inclination towards illicit financial flows, or ‘too-much-finance‘ issue in shadow banking sector resulting from accumulated illicit financial flows.