Orchestrating the fight against anonymous incorporation: A field experiment

Abstract

The world’s leading governments fight money laundering and terrorist financing through the intergovernmental FATF. To prevent anonymous incorporation, an important FATF rule requires that private corporate-service providers demand certified identification documents when incorporating new companies. But serious questions arise over the FATF’s effectiveness at inducing compliance with this rule. To investigate, this study employs a randomized field experiment. Using aliases and posing as consultants, we sent requests for confidential incorporation to corporate-service providers in 180 countries. We informed them about FATF rules, invoked a threat of legal penalties (hierarchy), and appealed to global norms (collaboration). A fourth condition attributed the standards to a private intermediary, the Association of Certified Anti-Money Laundering Specialists. We found that ACAMS significantly increased compliance compared to the other conditions; information about FATF rules, penalties and norms did not significantly reduce the ease of anonymous incorporation. The results measure the relative ability of an orchestrator and a complementary intermediary to affect target behavior. Together, these factors predict orchestration: a case study reveals that the FATF strongly endorses private certification bodies.