Know Your Red Flags: Geographical Risks in the Monitoring of (Conspicuous) Transactions

The article presents a novel concept for geographical risk assessment with the money laundering risk of financial transactions, which is relevant both to the administrative as well as for commercial use. The concept is based on the assumption that financial secrecy creates a criminogenic environment in which illicit financial flows can be more easily hidden and moved. Since illicit financial flows sensitive to changes in the area of financial secrecy, it is important for effective risk assessment in large financial data sets is crucial, confidentiality measures. Our approach combines transaction volumes (as a proxy for the potential amount of damage) with the values of financial secrecy index (as a proxy for geographical markers of financial secrecy) in order to calculate a risk value.