Anti-money-laundering oversight and banks' reporting of suspicious transactions: some empirical evidence.

This article examines the impact of anti-money laundering (AML) supervisory inspections on Italian banks' reporting of suspicious transaction reports (STRs) to the Financial Intelligence Unit (FIU). Using a unique dataset covering 2012–2013, the study finds that banks significantly increase the number of STRs filed following an inspection, with the rise concentrated among reports assessed as high-risk by both banks and the FIU, and those that lead to investigative follow-ups by law enforcement. The analysis suggests that inspections enhance banks' detection skills ("learning channel") and reporting effort ("effort channel"), without causing a decline in report quality or an increase in low-value filings ("crying wolf" effect). These findings highlight the effectiveness of AML oversight in improving banks' compliance and the value of close cooperation between supervisory authorities and the FIU within a well-structured institutional framework.