Corruption, criminal activity and tax evasion not only undermine the community but also distort the behaviour of economic agents and market prices, reduce the effectiveness of governmental action, increase the tax burden on those who do their duty, and compress productive investment and job creation.
The structuring of CDOs can produce tranches with triple A ratings that are based on a portfolio of loans with a partly inferior rating. These tranches are riskier than traditional bonds with the same rating and generally receive a much higher coupon. The complexity of this kind of securitisation makes risk assessment very difficult.