In this study, we investigate the role of public governance in mediating the impact of a country's culture on money laundering. We assess whether interference in the form of public governance can reduce or offset cultural effects with respect to the risks associated with money laundering across 92 countries over a 6‐year period (2012–2017).
Design/methodology/approach
This research uses structural modeling to examine the direct path between culture and money laundering, and the indirect path between culture and money laundering that passes through public governance as a mediator. We use Hofstede's cultural variables as a proxy for measuring culture, and Worldwide Governance Indicators (WGIs) to measure public governance in different countries. The Basel anti‐money laundering index is also used as a proxy for measuring money laundering risk.
Findings
Our results show that public governance fully mediates the relationship between culture and money laundering. The direct path shows a significant relationship between culture and money laundering, but this relationship becomes insignificant when public governance is introduced as a mediator.
Originality/value
This study indicates that governments can reduce money‐laundering risk by paying more attention to the quality of public governance and its potential as a tool in reducing money laundering.
