Mahmood, Hamza; Ash a , Bada Nadeem
A icle
Religion and he money launde ing isk
Economies
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Sugges ed Ci a ion: Mahmood, Hamza; Ash a , Bada Nadeem (2025) : Religion and he money
launde ing isk, Economies, ISSN 2227-7099, MDPI, Basel, Vol. 13, Iss. 4, pp. 1-16,
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A icle
Religion and he Money Launde ing Risk
Hamza Mahmood and Bada Nadeem Ash a *
LSBU Business School, London Sou h Bank Uni e si y, London SE1 0AA, UK; [email p o ec ed]
*Co espondence: [email p o ec ed]
Abs ac : In his pape , we in es iga e he impac o eligion on he money launde ing isk,
ocusing speci ically on P o es an ism compa ed o o he eligions. P o es an ism is o en
associa ed wi h g ea e indi idual sel -discipline and s onge ins i u ional economic go e -
nance. Analysing da a om 27 EU membe s a es, we ind ha P o es an coun ies exhibi
a lowe isk o money launde ing. Addi ionally, ou indings indica e ha P o es an ism
exe s a dis inc in luence ha is sepa a e om he o e all eligiosi y le els o coun ies. Ou
esul s emain obus ac oss a ious es ima ion models and when inco po a ing addi ional
go e nance and cul u al con ol a iables. This s udy enhances ou unde s anding o he
signi ican ole ha eligion plays in shaping indi idual beha iou owa d inancial aud,
pa icula ly money launde ing.
Keywo ds: eligion; P o es an ism; money launde ing; Eu opean Union
1. In oduc ion
Globally, money launde ing, he p ocess o disguising he illici o igins o unds,
ca ies a signi ican cos . Es ima es sugges ha i cos s he wo ld economy be ween
USD 1.4 illion and USD 3.5 illion annually (EY,2023). La ge-scale money launde ing
e odes go e nance, uels co up ion, weakens public se ices, widens income inequali y,
and des abilises poli ical sys ems, ul ima ely hinde ing sus ainable de elopmen . Despi e
ongoing e o s by in e na ional o ganisa ions like he Financial Ac ion Task Fo ce (FATF)
and he In e na ional Mone a y Fund (IMF), he a e age global money launde ing (ML)
isk ose om 2022 o 2023, highligh ing po en ial sho comings in he cu en egula o y
amewo ks and hei implemen a ion.
The g a i y o his p oblem has spu ed esea ch in o ac o s in luencing he ML isk
ac oss na ions. A key a ea o ocus is he ole o in o mal cul u al ins i u ions. S udies like
ha o Yamen e al. (2019) sugges a lowe ML isk in coun ies cha ac e ised by highe
unce ain y a oidance, indi idualism, and longe - e m o ien a ion. Simila ly, Mej i e al.
(2022) link igh e cul u es wi h a lowe ML isk compa ed o loose ones. Ex ending his
discussion, we in es iga e he in luence o ano he cul u al ace — eligion—on he ML isk.
In pa icula , we examine whe he coun ies wi h dominan P o es an eligious alues
exhibi a lowe money launde ing isk.
Religious alues exe a p o ound in luence on bo h indi idual e hics and socie al
go e nance. Social no m heo y posi s ha indi idual beha iou is shaped by a complex
in e play o psychological ac o s and he b oade sociocul u al con ex (D. T. Campbell,
1975). Bisin and Ve die (2001) u he demons a e he in e gene a ional ansmission o
cul u al alues, including e hnici y and eligion, h ough ma iage and socialisa ion, which
signi ican ly impac indi idual p e e ences. Religious belie s ha e been shown o s ongly
in luence economic g ow h h ough cha ac e ai s such as hones y, wo k e hic, and h i
(Ba o & McClea y,2003,2019).
Economies 2025,13, 96 h ps://doi.o g/10.3390/economies13040096
Economies 2025,13, 96 2 o 16
D awing on ins i u ional heo y, No h (1990) a gues ha dominan eligions o en
play a pi o al ole in shaping legal no ms and en o cemen mechanisms, os e ing bo h
o mal and in o mal go e nance amewo ks wi hin communi ies. Williamson’s (2000)
ins i u ional amewo k echoes his sen imen , highligh ing he in luence o cul u al alues
as a p ima y in o mal ins i u ion ha shapes lowe -le el o mal ins i u ions, including go -
e nance s uc u es and human beha iou . Religious commi men , cha ac e ised by mo al
conduc , eamwo k, and adhe ence o he ule o law, has been shown o con ibu e posi-
i ely o bo h go e nmen al e ec i eness and economic p og ess
(Ba o & McClea y,2003).
Max Webe ’s (1905) seminal wo k highligh ed he signi icance o he ‘wo k e hic’ in
P o es an ism, pa icula ly i s ole in shaping alues conduci e o economic de elopmen .
The cha ac e is ics o he P o es an wo k e hic, such as diligence, mo al ec i ude, and
sel -discipline, align closely wi h he de elopmen o capi alism. A uñada (2010) u he
suppo s he ole o P o es an ism, p oposing an al e na i e ‘social e hics’ a gumen . He
con ends ha P o es an ism p omo es a social en i onmen whe e indi iduals moni o each
o he ’s conduc , suppo poli ical and legal ins i u ions, and adhe e o mo e homogeneous
alues. In his analysis, P o es an ism appea s o acili a e capi alis de elopmen no
h ough he Webe ian psychological wo k e hic bu by os e ing a social e hic ha enhances
impe sonal ade.
Recen esea ch sugges s ha P o es an -majo i y socie ies gene ally exhibi s onge
legal amewo ks, highe egula o y quali y (La Po a e al.,1999), g ow h in o mal
inancial ins i u ions, and anspa ency (S ulz & Williamson,2003), as well as enhanced
legal accoun abili y and in eg i y (Lich e al.,2007).
Based on he p eceding li e a u e, we hypo hesise ha P o es an -dominan socie ies
may exhibi a lowe money launde ing (ML) isk. This an icipa ed e ec is a ibu ed o
bo h indi idual-le el ac o s, such as heigh ened e hical beha iou and he a oidance o
inancial c imes like ML, and ins i u ional-le el ac o s, including s onge go e nance
s uc u es and egula o y amewo ks, o en associa ed wi h a P o es an in luence.
Fo ou empi ical analysis, we use da a om 27 Eu opean Union (EU) membe s a es
om 2012 o 2022. EU membe s a es p o ide an ideal con ex o ou analysis because hey
sha e a common an i-money launde ing legal amewo k a he union le el, which elies
hea ily on coun y-le el o mal and in o mal ins i u ions o implemen a ion. The e o e,
he a ying le els o money launde ing isk among EU membe s a e likely due o di e -
ences in hese ins i u ions, a he han di e ences in he de ini ion o egula ion o money
launde ing. We measu e he isk o money launde ing in each o he EU membe s a es
wi h he annual BASEL AML index. The main independen a iable is a bina y indica o ,
coded as 1 i he dominan eligion in a coun y is P o es an .
Ou indings indica e ha he isk o money launde ing is signi ican ly lowe in
cul u es wi h a P o es an majo i y. We con i m ha ou esul s a e no in luenced by gene al
le els o eligiosi y. Ou analysis suppo s he heo y ha cul u al and eligious ac o s,
pa icula ly P o es an ideals, a e impo an o mo e e ec i e an i-money launde ing
sys ems.
Ou esea ch con ibu es o he exis ing li e a u e in wo signi ican ways. Fi s ly, we
show he subs an ial in luence o eligion on he money launde ing (ML) isk, expanding
upon ecen s udies ha explo ed c oss-coun y cul u al de e minan s o he ML isk
(Yamen e al.,2019;Mej i e al.,2022). Speci ically, we demons a e ha he ML isk is lowe
in p o es an coun ies.
Secondly, ou s udy adds o he body o esea ch examining he ole o eligion in
inancial c ime p e en ion. While mos p io s udies ha e ocused on he ela ionship
be ween eligion o eligiosi y and ax e asion, ou wo k ex ends his inqui y o he ealm
o ML isk. These p e ious s udies ha e yielded mixed esul s. Some ha e ound lowe ax
Economies 2025,13, 96 3 o 16
e asion a es in coun ies wi h speci ic eligions o among eligious indi iduals (Richa dson,
2008;Schneide e al.,2015;Nu unnabi,2018), while o he s ha e epo ed unclea indings
(Boone e al.,2013;Khalil & Sidani,2020) o e en highe ax e asion a es (Cason e al.,2016).
No ably, Ben O hman e al. (2024) obse ed a gene al decline in ax e asion associa ed wi h
eligiosi y, al hough his e ec was no appa en in de eloped coun ies.
This pape is o ganised as ollows. In Sec ion 2, we b ie ly e iew he ela ed li e a u e.
Sec ion 3p esen s ou da a collec ion p ocedu es. Sec ion 4ou lines he easons o use he
EU con ex . Sec ion 5in oduces he empi ical me hodology and a iables. In Sec ion 6, we
epo he empi ical esul s. The inal sec ion concludes he s udy.
2. Theo e ical F amewo k and Hypo hesis
2.1. De e minan s o ML Risk
Money launde ing, ini ially classi ied as a whi e-colla c ime due o i s associa ion wi h
high-s a us indi iduals, has e ol ed in o a signi ican inancial c ime, in ol ing money
o igina ing om illici ac i i ies, including ax e asion, co up ion, and e o ism inancing
(Go schalk,2010;Rusano & Pudo ochkin,2021). The isk o money launde ing a ies
ac oss coun ies. Exis ing esea ch has examined a ious ac o s in luencing he money
launde ing (ML) isk, including cul u al, go e nance, mac oeconomic, and socioeconomic
a iables. Explana ions o hese a iables a e g ounded in a i udes and oppo uni ies,
which de e mine he likelihood o becoming in ol ed in inancial c ime.
Cul u al alues and no ms ep esen accep able beha iou s wi hin a social g oup
and may in luence he ex en o inancial c imes. Exis ing s udies ha e examined he
in luence o he cul u al dimensions o Ho s ede (Ho s ede,1980,2001;Ho s ede e al.,
2010) and he cul u al igh ness a iable (Gel and e al.,2011) on he ML isk. Fo ins ance,
Yamen e al. (2019) ound ha coun ies wi h highe le els o cul u al alues such as
unce ain y a oidance, indi idualism, and long- e m o ien a ion end o ha e a lowe ML
isk. Simila ly, Mej i e al. (2022) linked igh e cul u al no ms o a educed ML isk.
Rega ding go e nance ac o s, esea ch has highligh ed he impo ance o democ a ic
accoun abili y and he ule o law in mi iga ing he ML isk. Kalokoh (2024) demons a ed
ha democ a ic accoun abili y can dec ease he ML isk. Regana i and Oli a (2018) u he
emphasised he ole o go e nance by highligh ing egional dispa i ies wi hin coun ies,
wi h a highe ML isk obse ed in a eas cha ac e ised by co up ion and o ganised c ime.
The in e play be ween cul u e and go e nance has also been explo ed. Al Qudah
e al. (2019) ound ha he con ol o co up ion and ule o law a iables mode a e he
in luence o cul u e on e o ism inancing. In ano he ecen s udy, AlQudah e al. (2022)
ound ha he di ec ela ionship be ween cul u e and he ML isk diminishes when public
go e nance is conside ed as a media ing ac o . This sugges s ha he e ec o cul u e on
he ML isk is channelled h ough he ins i u ional en i onmen o a coun y.
Economic ac o s migh a ec he likelihood o economic and inancial c imes. Achim
and Bo lea (2020) a gue ha unde de eloped coun ies ha e highe le els o inancial c ime.
Speci ically ocusing on he ML isk, Ghulam and Szalay (2023) examined he in luence o
a ious mac oeconomic a iables, including he ne p ima y income om ab oad, GDP
g ow h a e, expo olume, and exchange a es. While he ne p ima y income and GDP
g ow h a e we e ound o ha e no signi ican impac , hey obse ed a posi i e co ela ion
be ween he expo olume and ML isk and a nega i e co ela ion wi h exchange a es.
Socioeconomic ac o s, such as educa ion, ha e also been linked o he ML isk. Rega-
na i and Oli a (2018) ound ha highe le els o educa ional a ainmen a e associa ed wi h
a lowe ML isk, sugges ing ha educa ion can play a ole in educing he ulne abili y o
ML ac i i ies.
Economies 2025,13, 96 4 o 16
2.2. The In luence o Religion on Financial C ime
Religious belie s signi ican ly in luence human beha iou . As Adam Smi h empha-
sised, eligious mo ali y can mo i a e indi iduals o ac in socially accep able ways, os e -
ing eelings o p ide o i uous ac ions and guil o ansg essions (T. Campbell,2014).
Recen in e disciplina y esea ch on eligion and economics sugges s ha eligion
plays a signi ican ole in shaping an indi idual’s inancial and economic beha iou (Guiso
e al.,2003;B amme e al.,2007). Howe e , he di ec ion o his e ec is no s aigh o wa d.
While almos all eligions o en emphasise undamen al mo al alues like hones y and ai
dealing (Vi ell,2009;Walke e al.,2012), hey a y in hei eligious o ganisa ions. Some a e
mo e hie a chical han o he s, wi h an emphasis on g oup belonging and ma e ial bene i s.
Highe eligiosi y also comes wi h some d awbacks, such as lowe le els o gene al social
us among membe s o a socie y (Be gg en & Bjø nsko ,2011) and eligious in-g oup
a ou i ism (Dunkel & Du on,2016).
The li e a u e on he e ec s o eligion on economic and inancial c ime issues, in-
cluding co up ion, he shadow economy, and ax e asion, p esen s mixed and some imes
con adic o y indings.
Rega ding co up ion, Xu e al. (2017) iden i y a nega i e co ela ion be ween eligios-
i y and bu eauc a ic co up ion in Chinese p o inces, obse ing ha his ela ionship is
s onge o Taoism and Buddhism han o Ch is iani y and Islam. In con as , Gokcekus
and Ekici (2020) epo ha highe le els o na ional eligiosi y a e associa ed wi h inc eased
co up ion, ega dless o speci ic eligious denomina ions, such as Ca holicism, Islam, o
P o es an ism. Thei indings ely on Wo ld Values Su ey da a o ca ego ise coun ies by
eligious a ilia ion, a me hod ha may in oduce classi ica ion challenges. Addi ionally,
Niu e al. (2022) obse e ha , in coun ies wi h high le els o eligiosi y, bo owe s pe cei e
g ea e co up ion in bank lending.
In examining he shadow economy, o en de ined as un egis e ed o cash-based eco-
nomic ac i i ies, esea che s ha e also iden i ied complex links wi h eligiosi y. Highe
le els o shadow economy ac i i y can acili a e ax e asion and aise he isk o money
launde ing. Schneide e al. (2015) ind ha gene al eligiosi y ends o inc ease he size o
he shadow economy; howe e , his e ec is somewha a enua ed in P o es an -majo i y
coun ies, which hey a ibu e o he eplacemen o in o mal eligious no ms wi h o mal
ins i u ions ha egula e ansac ions. Simila ly, Achim e al. (2019) measu e eligiosi y
using Wo ld Values Su ey da a and conclude ha highe eligiosi y co ela es wi h a la ge
shadow economy ac oss 31 Eu opean coun ies. In con as , Dada e al. (2024) no e ha
eligious di e si y appea s o educe he shadow economy’s size in 13 A ican na ions.
S udies on ax e asion also p esen di e gen pe spec i es among eligions. While ax
e asion is deemed une hical in Jewish, Mo mon, and Baha’i eachings, i is no uni e sally
condemned in Ca holic and Islamic adi ions (McGee,2006). Empi ical analyses p esen
addi ional complexi ies: Richa dson (2008) inds ha he ax e asion a es a e lowe in
coun ies wi h highe le els o eligiosi y, while Nu unnabi (2018) shows ha g ea e
adhe ence o Sha iah p inciples co ela es wi h educed ax e asion in 38 Muslim-majo i y
coun ies. Howe e , in Lebanon, Khalil and Sidani (2020) ind no signi ican di e ence in
ax e asion beha iou s be ween Ch is ians and Muslims.
These di e se indings e lec he complexi y o eligiosi y’s in luence on inancial
misconduc and sugges ha u he esea ch is needed o unde s and how eligious belie s
in e ac wi h socioeconomic and ins i u ional ac o s in shaping inancial beha iou .
2.3. P o es an ism and ML Risk
Al hough o ganised eligions sha e a ounda ion based on mo al p inciples, hey
di e ge in speci ic belie s ega ding God, he a e li e, hea en, and hell. These dis inc ions
Economies 2025,13, 96 5 o 16
in doc ine can ei he ein o ce o discou age pa icula beha iou s. Fo example, P o es-
an ism o en p omo es p ide in i uous conduc , while Ca holicism ends o emphasise
guil associa ed wi h immo al ac ions (Webe ,1905). These con as ing e hical pe spec i es
may lead o di e en mo i a ions and expe iences, e en among indi iduals pe o ming
he same ac ions, ega dless o hei mo al implica ions.
The li e a u e has ex ensi ely explo ed P o es an ism’s impac on beha iou al and
ins i u ional ou comes, especially h ough he lenses o wo k and social e hics, which
ul ima ely shape economic decision-making. Webe (1905) amously a gued ha he
P o es an wo k e hic, ma ked by diligence, mo al in eg i y, and sel -discipline, aligns
closely wi h he g ow h and success o capi alism. Building on his, A uñada (2010)
in oduced he concep o a P o es an ‘social e hic’, sugges ing ha P o es an ism no only
os e s an en i onmen in which indi iduals moni o each o he ’s beha iou o main ain
sha ed alues bu also suppo s ins i u ions ha ein o ce legal and poli ical accoun abili y.
His analysis implies ha P o es an ism’s con ibu ion o capi alis de elopmen may lie
mo e in i s social e hic, which suppo s impe sonal ade, han in Webe ’s psychological
wo k e hic.
Social us also appea s o be highe in egions wi h P o es an majo i ies. Fo ins ance,
in his s udy on de elopmen in I aly, Pu nam (1994) a ibu es lowe social us in he
Sou h o he s ong Ca holic adi ion, which emphasises a hie a chical ela ionship wi h he
Chu ch and diminishes pee - o-pee social bonds. Welch e al. (2004) ound ha membe s
o mainline P o es an denomina ions ended o epo highe le els o social us han
hose in Pen ecos al and o he Ch is ian g oups.
P o es an egions, by con as , end o exhibi lowe le els o co up ion and smalle
shadow economies. T eisman (2000) sugges s ha he P o es an adi ion o challenging
s a e-sponso ed eligious au ho i y has os e ed socie ies ha a e mo e likely o sc u inise
and expose o icial misconduc . Schneide e al. (2015) u he obse e ha P o es an -
majo i y coun ies gene ally ha e smalle shadow economies han O hodox Ch is ian coun-
ies and ha o he eligious denomina ions also co ela e wi h lowe shadow economies
compa ed o O hodox Ch is iani y.
Ins i u ional quali y is gene ally highe in P o es an -majo i y coun ies as well. Re-
sea ch by La Po a e al. (1999) shows ha na ions wi h p edominan ly P o es an popula-
ions display s onge go e nance han hose wi h Ca holic o Muslim majo i ies, a ibu ing
his o P o es an ism’s less hie a chical s uc u e. S ulz and Williamson (2003) suppo hese
indings, no ing ha P o es an -majo i y na ions end o p o ide s onge legal p o ec ions
o c edi o s han Ca holic-majo i y ones. Likewise, Lich e al. (2007) documen a posi i e
co ela ion be ween P o es an ism, he ule o law, and educed co up ion.
P o es an -majo i y egions also end o ha e companies ha a e less likely o engage
in une hical p ac ices and gene ally pe o m be e . G ullon e al. (2009) ind ha co po a e
misconduc , such as excessi e ea nings managemen , op ions backda ing, and excessi e
execu i e compensa ion, is less common in US egions wi h a highe concen a ion o
P o es an s. Simila ly, El Ghoul e al. (2012) obse e ha US i ms in mo e eligious
coun ies bene i om lowe equi y inancing cos s, a end ha is pa icula ly p onounced
in a eas wi h a la ge p opo ion o mainline P o es an s.
In summa y, he P o es an emphasis on social e hics and communal moni o ing
(A uñada,2010), which cul u ally ein o ces anspa ency and accoun abili y, along wi h
highe le els o social us (Pu nam,1994;Welch e al.,2004) and gene ally lowe le els o
co up ion and smalle shadow economies (Schneide e al.,2015;T eisman,2000), may
discou age illici inancial p ac ices and limi he oppo uni ies o in ol emen in money
launde ing ac i i ies.
Economies 2025,13, 96 6 o 16
Based on his discussion, we hypo hesise ha P o es an -majo i y coun ies will exhibi
a lowe le el o money launde ing isk. Ou hypo hesis is he e o e o mula ed as ollows.
Hypo hesis 1. Coun ies wi h dominan P o es an alues a e likely o exhibi a lowe money
launde ing isk.
3. Da a Collec ion and Sample
To empi ically examine ou hypo hesis, we began cons uc ing ou sample by down-
loading da a on he BASEL AML Index o EU membe coun ies om he websi e
h ps://index.baselgo e nance.o g, accessed on 10 Oc obe 2024. The AML Index is
a ailable annually om 2012 o 2022. Da a o he P o es an a iable we e sou ced om
Na dulli e al. (2012). The eligiosi y da a we e collec ed om Meisenbe g (2011). The
annual GDP pe capi a in cu en US dolla s was ob ained om he Wo ld De elopmen
Indica o s o he Wo ld Bank. Da a on he ule o law and o he go e nance indica o s we e
downloaded om he Wo ld Go e nance Indica o s da abase o he Wo ld Bank.
A e me ging all hese da ase s, we had an unbalanced panel o 27 EU membe s a es,
wi h 294 annual obse a ions spanning he pe iod om 2012 o 2022.
4. Why he EU Con ex ?
We chose EU membe s a es as ou sample because hey p o ide an ideal con ex
o ou analysis. The EU has used a common an i-money launde ing legal amewo k
since 1991. Membe s a es a e esponsible o implemen ing his amewo k wi hin hei
espec i e ju isdic ions. The a ying le els o money launde ing isk among EU coun ies
a e likely due o he di e ences in membe s a es’ o mal and in o mal ins i u ions, a he
han he di e ences in money launde ing egula ions.
The e olu ion o An i-Money Launde ing (AML) egula ions in he Eu opean Union
(EU) demons a es he p og essi e igh ening o i s legal amewo k o comba money
launde ing and e o is inancing. Beginning wi h he Fi s AML Di ec i e in oduced by
he hen Eu opean Communi y in 1991, which mainly ocused on inancial ins i u ions and
clien iden i ica ion, he EU has successi ely b oadened i s scope and e ined i s app oach.
The Second AML Di ec i e in 2001 ex ended he equi emen s o non- inancial p o essions
and in oduced he iden i ica ion o bene icial owne ship, while he Thi d AML Di ec i e
in 2005 explici ly inco po a ed e o is inancing in o i s amewo k, in oducing enhanced
due diligence measu es o high- isk clien s and poli ically exposed pe sons.
Subsequen i e a ions o he AML amewo k add essed eme ging isks and enhanced
anspa ency. The Fou h AML Di ec i e in 2015 in oduced na ional isk assessmen s and
bene icial owne ship egis e s, while he Fi h AML Di ec i e in 2018 expanded co e age o
i ual cu encies and high- alue goods, inc easing he sc u iny o high- isk hi d coun ies.
The Six h AML Di ec i e in 2021 ha monised he de ini ions and penal ies ac oss membe
s a es and included mode n p edica e o enses such as cybe c ime. Recen de elopmen s
ocus on he c ea ion o a cen alised An i-Money Launde ing Au ho i y (AMLA) and new
egula ions o s eamline compliance and supe ision ac oss he EU. These e o s, d i en
by inancial scandals, echnological ad ances, and global coope a ion, e lec he EU’s
commi men o comba ing inancial c ime in an inc easingly complex inancial landscape.
Membe s a es ha e been la gely esponsible o implemen ing he p o isions o
EU AML di ec i es in hei espec i e ju isdic ions. Howe e , wi h he es ablishmen
o he An i-Money Launde ing Au ho i y (AMLA), he EU will ake on a mo e di ec
supe iso y ole, pa icula ly o e high- isk en i ies and c oss-bo de inancial ins i u ions
(Sunde ,2021).
Economies 2025,13, 96 7 o 16
5. Me hodology
We speci y he ollowing pooled panel o dina y leas squa es model o examine he
e ec o eligion on he money launde ing isk:
Yj, =αi+β1P o es an j+
l
∑
l=1
βlXl
j, +
T−1
∑
=1
ϵ D +
C−1
∑
c=1
ϵjCj+εj, (1)
whe e he jand subsc ip s ep esen he coun y and yea , espec i ely.
The dependen a iable, Y, s ands o he isk o ML, measu ed by he Basel AML
Index.
αi
is a cons an e m. P o es an is he main explana o y a iable.
Xl
j,
deno es
coun y-le el con ol a iables, including he GDP pe capi a and ule o law. D
is a se o
yea dummy a iables, con olling o changes in he o e all ML isk in EU coun ies o e
ime.
Cj
is a se o coun y dummy a iables o con ol o o he coun y-speci ic ac o s.
εj, is an idiosync a ic e o e m.
The Basel AML Index measu es he money launde ing isk based on coun ies’ ulne -
abili y o money launde ing and ela ed inancial c imes (h ps://baselgo e nance.o g/
basel-aml-index (accessed on 10 Oc obe 2024)). The index is cons uc ed using a composi e
me hodology ha inco po a es 17 indica o s om publicly a ailable sou ces such as he
Financial Ac ion Task Fo ce (FATF), T anspa ency In e na ional, and he Global Ini ia i e
Agains T ansna ional O ganized C ime. I e alua es coun ies ac oss i e c i ical domains
ha con ibu e o he money launde ing isk: he quali y o he AML/CFT/CPF amewo k,
e lec ing he e ec i eness o measu es o comba money launde ing, e o ism inancing,
and p oli e a ion inancing; co up ion and aud isks, indica ing he le els o co up ion
and suscep ibili y o audulen ac i i ies; inancial anspa ency and s anda ds, assessing
he adhe ence o global inancial s anda ds and p ac ices; public anspa ency and accoun -
abili y, which measu es openness and accoun abili y in public go e nance; and legal and
poli ical isks, cap u ing he s abili y and eliabili y o he legal and poli ical en i onmen .
Highe index alues indica e a highe isk o money launde ing in a gi en coun y, while
lowe alues e lec a educed isk.
The a iable ‘P o es an ’ is bina y, coded as 1 i he dominan eligion in a coun y is
P o es an and 0 o he wise. This classi ica ion is based on da a om he Composi ion o
Religious and E hnic G oups (CREG) P ojec by he Cline Cen e o Democ acy a he Uni-
e si y o Illinois (Na dulli e al.,2012). The CREG P ojec compiles da a on he pe cen age
o he popula ion iden i ying wi h majo eligious g oups, including Muslim, O hodox,
Roman Ca holic, P o es an , Jewish, Buddhis , Hindu, Bahai, Sikh, and non eligious. Fo
ou sample o 27 Eu opean Union membe s a es, we code he P o es an a iable as 1 i he
P o es an popula ion exceeds 20% in a coun y. This classi ica ion elies on da a om 2013,
he la es yea a ailable in he CREG P ojec . Fi e coun ies a e classi ied as P o es an :
Denma k (87.3% P o es an ), Sweden (84.2%), Finland (83.5%), Ge many (39.7%), and
Hunga y (22.5%).
The GDP pe capi a (cu en USD) measu es he a e age economic ou pu pe pe son
in a coun y. We ake he na u al loga i hm o he GDP pe capi a, Log(GDP pe capi a), o
accoun o di e ences in economic de elopmen ac oss he sample coun ies.
The ule o law a iable measu es pe cep ions o he ex en o which indi iduals and
ins i u ions ha e con idence in and adhe e o he ules o socie y. This includes he quali y
o con ac en o cemen , p ope y igh s, policing, judicial sys ems, and he p e alence o
c ime and iolence.
Economies 2025,13, 96 8 o 16
6. Empi ical Analysis
6.1. Summa y S a is ics
Table 1p esen s he summa y s a is ics o he main a iables. The Basel AML Index
has an a e age alue o 4.31, wi h a s anda d de ia ion o 0.77. I anges om 1.78 o 6.78,
sugges ing signi ican di e ences in he money launde ing isk among he sample coun ies.
The mean alue o P o es an shows ha 19% o he obse a ions a e om coun ies wi h
mo e han 20% P o es an popula ions. The eligiosi y a iable has a mean o 7.03 and
mode a e a ia ion (s anda d de ia ion o 1.17), anging om 5.07 o 9.18. Coun ies a y
in hei economic de elopmen , as shown by he 0.62 s anda d de ia ion o he Log(GDP
pe capi a) a iable. Finally, he ule o law a iable a ies om
−
0.16 o 2.12, wi h a
mean alue o 1.07 sugges ing signi ican di e ences in legal ins i u ions and go e nance.
These s a is ics highligh he di e se c oss-coun y dynamics in go e nance, eligiosi y,
and economic de elopmen , which a e essen ial in unde s anding a ia ions in he money
launde ing isk.
Table 1. Summa y s a is ics.
Va iable Mean S.D. Min Max
Basel AML Index 4.31 0.77 1.78 6.78
P o es an 0.19 0.39 0.00 1.00
Religiosi y 7.03 1.17 5.07 9.18
Log(GDP pe capi a) 10.26 0.62 8.86 11.80
Rule o law 1.07 0.60 −0.16 2.12
No e: This able p esen s desc ip i e s a is ics o he key a iables used in he analysis. The Basel AML Index
measu es he money launde ing isk. P o es an is a bina y a iable ha akes he alue o 1 o coun ies
whe e he P o es an popula ion exceeds 20% and 0 o he wise. Religiosi y measu es eligiosi y in he popula ion.
Log(GDP pe capi a) cap u es he le el o economic de elopmen . Rule o law is a measu e o go e nance quali y.
The s a is ics include he mean, s anda d de ia ion (S.D.), minimum, and maximum alues o each a iable.
6.2. Co ela ions
Table 2p o ides pai wise co ela ions be ween he main a iables. The AML Index
has a nega i e co ela ion wi h he P o es an dummy a iable, indica ing ha he isk o
money launde ing is lowe in P o es an coun ies. The coe icien is signi ican a he 5%
le el. The co ela ion be ween Log(GDP pe capi a) and ule o law is 0.82, showing ha
coun ies wi h be e ule o law a e mo e de eloped.
Table 2. Pai wise co ela ions.
(1) (2) (3) (4) (5)
(1) Basel AML Index 1.00
(2) P o es an −0.20 * 1.00
(3) Religiosi y 0.24 * −0.46 * 1.00
(4) Log(GDP pe capi a) 0.10 0.28 * −0.22 * 1.00
(5) Rule o law −0.13 * 0.41 * −0.37 * 0.82 * 1.00
No e: This able p esen s pai wise co ela ions be ween he key a iables used in he analysis. The Basel AML
Index measu es he money launde ing isk. P o es an is a bina y a iable ha akes he alue o 1 o coun ies
whe e he P o es an popula ion exceeds 20% and 0 o he wise. Religiosi y measu es eligiosi y in he popula ion.
Log(GDP pe capi a) cap u es he le el o economic de elopmen . Rule o law is a measu e o go e nance quali y.
* indica es signi icance a he 5% le el.
6.3. Mul i a ia e Reg ession Resul s
Table 3 epo s he main eg ession esul s. The coe icien o he P o es an dummy is
nega i e and s a is ically signi ican , indica ing ha coun ies wi h a signi ican P o es an
popula ion expe ience lowe le els o ML isk. This esul is consis en wi h ou hypo hesis
ha P o es an cul u al and e hical no ms discou age inancial c imes.
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au ho (s) and con ibu o (s) and no o MDPI and/o he edi o (s). MDPI and/o he edi o (s) disclaim esponsibili y o any inju y o
people o p ope y esul ing om any ideas, me hods, ins uc ions o p oduc s e e ed o in he con en .
