Green finance and money laundering: the role of trade openness in Asia

Purpose This study aims to examine how green finance affects money-laundering risks in Asian economies and assesses whether trade openness moderates this relationship. Design/methodology/approach Using panel data from 29 Asian economies for 2012–2023, this study applies a two-step GMM estimator with common correlated effects to address cross-sectional dependence, endogeneity and dynamic panel bias. Findings Green finance reduces money-laundering risks. Trade openness increases these risks, but when combined with green finance, the risks decline. Research limitations/implications The analysis focuses on Asian economies only. Future studies should extend the examination to other regions. Practical implications Policymakers should design green finance policies that expand access to transparent international capital markets, promote regional cooperation and strengthen trade-based money laundering safeguards when advancing both trade and green finance. Social implications Green finance not only helps the environment but also improves financial integrity and social trust by stopping illegal financial activities that make markets less fair and make inequality worse. Originality/value To the best of the authors’ knowledge, this is the first study to use the economic theory of crime to explain how trade openness alters the effectiveness of green finance in reducing money-laundering risks through a cost–benefit mechanism. It also identifies trade openness as a key boundary condition for when green finance works.