Recently, the Dutch government, through its top prosecutor, decided to press charges against
ABN AMRO, for money laundering. ABN AMRO is a Dutch bank. Interestingly enough, since
being bailed out during the recent crisis, its stock is 56% percent owned by ... the Dutch
government. The prosecutor is looking to fine ABN AMRO if the bank is indeed found to be
guilty of money laundering. a. Is the government creating or reducing an asymmetric information
problem in pressing charges? Explain your answer, and explain what asymmetric information
you have in mind. (5 points) b. Suppose that the prosecutor finds that the money laundering has
generated mostly interest income, and hardly any non-interest income. In what way would that
affect the interpretation of the findings of Bos, Lamers and Purice (2014, part of the course
literature), assuming for the moment that ABN AMRO is a US bank? (5 points) c. Suppose that
the (as yet, alleged) money laundering gains are much smaller than the fine, again assuming that
ABN AMRO is a US bank, what constraint in the model used by Bos, Lamers and Purice (2014)
becomes more binding? Explain your answer!
