Does Anti-Money Laundering and Countering the Financing of Terrorism Drive the Economic Growth of Emerging Economies?

This paper examines the impact of the Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) regime on the economic performance of emerging economies. This study uses a panel dataset of 44 emerging economies and constitutes of four economic variables, namely, the GDP growth rate, Basel AML Index, annual growth rate of exports of goods and services, and annual growth rate of gross capital formation, for the 10-year period from 2012 to 2021. The Panel Dynamic Ordinary Least Squares technique is used to estimate the impact of selected economic variables on the economic performance of emerging economies. The findings reveal that the Basel AML Index has a negative yet insignificant relationship with the GDP growth, whereas the annual growth rates of exports of goods and services and gross capital formation have a positive and significant association with the GDP growth rate of emerging economies. The lack of indicators to measure and reflect the status of AML/CFT regimes of countries, and the limited sample, as the BASEL AML Index being relatively new, are the major limitations faced during the study. In the meantime, money laundering and terrorist financing may take a relatively long time to create real repercussions in the economy. Therefore, a sample with a longer timeframe, and additional variables can be considered in future studies about this area.