EXAMINING THE NEXUS BETWEEN DIGITALIZATION AND FINANCIAL CRIME: A STUDY OF EMERGING ECONOMIES

Abstract

This research aims to explore the relationship between digitalization and financial crime, with governance acting as a moderator. Financial crime is considered the dependent variable, digitalization the independent variable, and governance the moderating factor. Financial crime is measured by the Corruption Perceptions Index (CPI), while digitalization is assessed through two proxies: e-government and e-participation. The study uses quantitative panel data from 2008 to 2022. Econometric analysis reveals that digitalization has a significant and positive impact on financial crime. Both proxies of e-participation and e-governance demonstrate a positive and significant impact on financial crime. This indicates that digitalization without proper governance mechanisms can lead to misuse and harm the country’s economy. Additionally, when governance is added as a moderator, the positive relationship between digitalization and financial crime persists but is notably weakened. The study highlights that technology will be beneficial only when supported by effective policies for its adoption and use.