The effectiveness of national anti-money laundering systems has become an increasingly important issue. This paper provides the first empirical analysis of the effect of anti-money laundering inspections on banks' compliance with the obligation to report suspicious transactions. With reference to 2012-2013, the results show that supervisory actions in Italy led to an increase in the suspicious transaction reports filed by banks with no prejudice to their average quality.
After an inspection, banks increase the number of suspicious transaction reports they file with the UIF; the rise is not limited to low-quality reports, but also affects high-quality ones. Such a positive effect is mainly observed when supervisors intervene in some way following an inspection.
