Abstract
Do banks enable organized crime? Does bank regulation insulate financial intermediation from criminal activity? I address these questions using evidence from the drug trade in Mexico, finding that local drug cartel activity causes an increase in bank deposits. Branch networks grow in affected areas; this growth is not driven by increased lending opportunities. Post-election of a law-and-order government, effects attenuate, with liquidity flowing into branches of U.S. banks along the border. I interpret this as evidence that finance follows crime in weak institutional environments, and that, absent transnational policy coordination, regulatory arbitrage via cross-border liquidity flows undermines banking regulation.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
