Money laundering in rural areas with illicit crops: empirical evidence for Colombia Hernando Bayona-Rodríguez 1,2 # Springer Nature B.V. 2019 Abstract This research presents the first evidence on the existence of money laundering in rural areas dedicated to the production of illicit crops. This paper uses, as money laundering (ML) measure, Financial Intelligence Reports (FIR). FIR is a more accurate ML measure than Suspicious Transaction Report (STR) since it implies more rigorous and detail analysis. The present research uses a new panel of municipal data for the period 2000– 2013 which has information that measure: ML dynamics, economic activity, violence, conflicts, institutional presence and interdiction. Using a fixed-effects model by munic- ipality and year, this study found a positive relationship between ML, measured as the value of FIR, and illicit crops. The results are maintained throughout specifications and robustness exercises. This paper found that a 1% increase in cultivated area in the municipality implies 3.04% increase in the FIR value. If one representative municipality of the sample is taken, an increase of 1% in cultivated area would be translated into 641 million COP (342.705 USD) in money laundering reported in FIR. Thus, the existence of money laundering in rural areas dedicated to illicit crops is concluded. Keywords Money laundering . Illicit crops . Suspicious operations reports . Reporte de Operaciones Sospechosas . ROS . STR JEL classification K42 . C81 . H56 Introduction Money laundering (ML) is undertaking every possible action the aim of which is to disguise illegally obtained resources as legal ones. This felony is often attributed with Crime, Law and Social Change https://doi.org/10.1007/s10611-019-09822-z * Hernando Bayona-Rodríguez hbayonar@unal.edu.co; h.bayona28@uniandes.edu.co 1 School of Economics, Universidad Nacional de Colombia, Bogotá, Colombia 2 School of Education, Universidad de los Andes, Bogotá, Colombia