Are Higher Suspicious Transaction Report Volumes Associated with More Future Money-Laundering Convictions?

Abstract Almost all countries require banks to file suspicious transaction reports (STRs) to help authorities detect and prosecute money laundering. The number of STRs filed in a country is an often-cited metric in international anti-money laundering (AML) compliance evaluations. However, it remains unclear if the volume of STRs filed in a country is associated with the country’s future number of money laundering convictions. Using data from Europol, the World Bank, the International Monetary Fund, and the European Sourcebook of Crime and Criminal Justice Statistics, we examine if STR volumes can be associated with future money-laundering conviction volumes in countries in the European Union. Our analysis employs pooled and fixed-effects regression models with one- to five-year lags, controlling for population sizes, shadow-economy estimates, and police force sizes. In our pooled and country-specific fixed-effects models, STR volumes appear to be positively associated with future convictions. However, the association weakens and becomes insignificant when we control for both country-specific and common time effects. Our results provide a caution against assuming that STR volumes, by themselves, are reliable indicators of future money-laundering convictions and, to the extent convictions reflect outcomes, AML effectiveness.