POLITICAL ECONOMY OF CORRUPTION AND ITS IMPLICATIONS ON FINANCIAL SYSTEM

The corruption in transitional societies has undisputed qualification of "systemic corruption.. The result is the corruption money from corrupt activities, which enters financial systems and destroys the basic postulates of the financial profession, and at the macroeconomic level weakens national and regional financial systems. The authors focused their research in two directions. On the one hand, the authors point out the open theoretical and ideological dilemmas on the nature of the occurrence of corruption: (1) Whether the corruption is linked to the inability of the government to establish effective control of public flows through the legal system and to prevent the use of public service for private ends, or (2) The corruption is linked to the lack of markets and creation of an opportunity for the establishment of a monopoly in decision making. The answer to this dilemma determines the strategy and measures to prevent corruption. On the other hand, the authors explore the international standards and anti-corruption policies and they analyse trends of regulation and supervision of financial markets, which would constitute a barrier to the use of the financial systems for the legalization of corruption.