Corruption and Money Laundering as a Threat to Financial Stability: 'Lava Jato' Case Study

Abstract

In order to demonstrate that the crime of money laundering may lead to financial instability, this paper is going to use the economic theory of crime and address the issue as one deriving from information asymmetry. It is intended to demonstrate how the crime of corruption could trigger contagion effect for the entire financial system. Due to the lack of statistics on the topic, we are going to suggest an approach based on a risk matrix to assess the money laundering threats to the stability of the domestic or global financial system. By the end of this paper, we plan to have clearly shown how serious this issue is and the need for special attention to the collection of statistic data; monitoring focused on mapping the micro and macroprudential problems, both in the financial sector and the real economy sector; intrusive, skeptical, comprehensive, adapted, proactive, and conclusive oversight; regulation adjustments, as the case may be; and dissuasive punishment.