<p> This research focused on hawala regulations in multiple jurisdictions, strategies of international bodies to mitigate illicit transfers, and implementation of a standardized approach to monitor money remittances. Transfer mechanisms used to remit funds internationally appeal to individuals, organized crime groups, terrorist financiers, and money launderers. Literature reviewed consisted of government studies, financial body reports, media articles, and peer-reviewed journals. Evaluation of different methodologies and the Financial Action Task Force&rsquo;s supervisory controls was completed. It was determined that economic pressure may impact financial networks and encourage compliance if regional government bodies have the necessary authority to enforce regulations. Research revealed recommendations for education programs to aid jurisdictions in setting up financial intelligence units, developing statutes tailored to their economies, and enforcement of supervisory controls. This report further suggested accountability amongst jurisdictions to reduce the ability of criminals and terrorist financiers to move their financial activities to areas with lax enforcement and corrupt governments that do not enforce regulatory recommendations. It also encouraged tracking financial activity and implementing licensing requirements to mitigate de-risking of high-risk customers with the provision of education to customers and third-parties through formal financial institutions. Reduction of unlicensed money remittances and mitigation of illicit funding benefiting organized crime and terrorism is the ultimate goal.</p>

The number of multinational banks (MNBs) has increased in Central Europe, while the amount of real credit has decreased. This dissertation investigates whether there is a causal link between increased international financial competition (IFC) and the decline of real credit in Poland and Hungary, and what the impact of declining real lending is on investment across industries. First, based on the Hungarian and Polish experiences I analyze whether there is a link between greater IFC and less real credit. I provide an argument that links the number of MNBs to capital levels for domestic banks, and hence to their lending capacity. I test this argument empirically using data from central banks, central statistical offices, and private institutions, and exploring alternative explanations for declining real credit. The evidence suggests that Polish and Hungarian banks are placed in a paradoxical situation since greater IFC raises their need for capital, but also limits their ability to attract it. The evidence indicates further that the efficiency increases from competition do not outweigh the limits on domestic banks' capital, which in turn helps to explain the decline in real credit. Second, I use panel and time series data to test whether early IFC has partially caused declining real lending. I test this hypothesis based on a credit supply function for domestic banks, and on data for 9 regional and 5 specialized Polish banks for 39 months. The estimation results indicate that domestic banks increase lending in anticipation of greater international financial competition, but that they decrease their lending once MNBs have established operations. As a net result of these two effects the supply of credit declines. Third, I study how the decline in real credit has affected the amount of investment in Polish industries. I use a model that links finance and investment, and a data set of 23 observations for 25 industries. The panel estimation results suggest that internal and external finance are significant in determining investment, and that industries prefer internal over external finance.