From Blacklists to Bankers: International Institutions and Market-Driven Compliance

In the absence of legalized enforcement, how do multilateral institutions incentivize states to comply with their rules?  My dissertation highlights a new causal pathway for generating compliance, arguing that institutional monitoring in the form of a blacklist can drive policy change by outsourcing enforcement to market actors.  I test my theory through an analysis of the Financial Action Task Force (FATF), an intergovernmental body that issues non-binding recommendations about how states should combat money laundering and the financing of terrorism.  Using quantitative analysis, interview data, and case studies, I show how the FATF's use of a blacklist, which publicly identifies non-compliant jurisdictions, has ultimately led countries to criminalize terrorist financing, and is thus responsible for improving compliance in close to 40 states. In a chapter that explores the causal mechanism, I explicitly address selection concerns by harnessing a natural experiment that uses whether states end up just above a blacklisting eligibility threshold as an instrument for blacklisting.  My analysis shows that blacklisted countries are viewed as higher risk and less ideal business environments.  The dissertation concludes by laying out policy lessons for practitioners working to develop effective institutions in other issue areas.

A more detailed description of the dissertation is available in the following document:

Morse_DissertationSummary_Sept2016.pdf71 KB