Maryna Brychko

Department of Finance, Banking, and Insurance, 

Sumy State University,

Ukraine 

m.brychko@uabs.sumdu.edu.ua

ORCID 0000-0002-9351-3280

Illegal activities of financial intermediaries: A burden of trust crisis

Taras Savchenko

Department of Accounting and Taxation, 

Sumy State University,

Ukraine 

t.savchenko@uabs.sumdu.edu.ua

ORCID 0000-0001-5639-3008

Tetiana Vasylieva

Department of Finance and Entrepreneurship, 

Sumy State University,

Ukraine 

tavasilyeva@fem.sumdu.edu.ua

ORCID 0000-0003-0635-7978

Paweł Piotrowski

Institute of Security Sciences, 

Higher School of Criminology and Penitentiary Science in Warsaw, Warsaw, Poland

pawel.piotrowski@wskip.edu.pl 

ORCID 0000-0002-3251-7579

Abstract. Based on the explication of structural and functional relations, a scientifically methodical approach to modeling the relationship between financial intermediaries' illegal activities, the trust crisis in the financial sector, and its deformations have been developed. Based on the construction and analysis of the relevant structural equations, it has been empirically confirmed that the probability of financial intermediaries' involvement in shadow transactions increases with the aggravation of the trust crisis in the financial sector. Using the tools of the structural equations modeling, a mediator analysis was performed, the results of which confirmed the hypothesis that the financial sectors’ trust crisis contributes to the degeneration of financial institutions and markets with regard to their depth, access, security and efficiency, which, accordingly, results in higher shadow transactions involving financial intermediaries.

Received: April, 2020

1st Revision: June, 2020

Accepted: March, 2021

DOI: 10.14254/2071-8330.2021/14-1/12

JEL Classification: E32, E71, G41, O16, O17

Keywords: illegal activities, financial intermediaries, financial system, financial institutions, financial markets, public security, trust crisis