The Utilization of Derivative Instruments in Money Laundering Activities: A Normative Analysis

Abstract

The purpose of this Master Thesis is to analyze and examine the utilization of derivatives contracts in money laundering activities and to detect possible normative gaps in the securities and derivatives regulation. After a brief introduction to the general concept of money laundering and an overview of the problems that such activity causes to the financial system as a whole, the study focuses on the regular mechanics of the most common categories of derivatives instruments exchanged both on official exchanges and over-the-counter, while also considering how some of them can easily be used in money laundering schemes by criminal subjects. With the help of real case studies and public authorities reports it has been possible to delineate how these contracts are employed in such operations and the expedients on which criminals usually rely on to limit their risk of detection from authorities. After that, I conducted an analysis on the current European legislation against money laundering in the financial market (particular relevance is additionally given to the FATAF Recommendations), evaluating and studying also the simultaneous progressive development of the regulation as well as the gradual innovations in the money laundering processes. In the final chapter, regulatory gaps are then highlighted and examined, along with my personal contribution of constructive suggestions to supervisors.