A Survey of Money Laundering Backgrounds and its Impact on the Economic Growth in Iran

Money laundering is defined as the act of altering or transferring a property for the purpose of concealing its illegal origin, or assisting one who commits it. Some of the difficulties that this may create for the economy are: disturbance in the large – scale policy making of the country, undermining the private sector, hindering the process of privatization, increasing inflation, weakening the integrity of financial markets, increasing the credit risks, disrupting the long-term export and import investments, encouraging clandestine operations, facilitating profit making in criminal activities, and finally escalating the government, s expenses and the flight of capital. The causes for this in Iran are economic corruption, smuggled goods and drugs and lack of sufficient supervision over tax-collecting system. To examine the negative effects of money laundering on the economic growth in Iran, the Solow - Swan growth model has been adopted. The negative sign in the variables of logcrime 1 (embezzlement, graft, forgery) and logcrime 2 (discovery of smuggled drugs) confirms the negative relation between money laundering and economic growth.