Insider Trading and Organized Crime: A Legal and Regulatory Perspective

Abstract

Despite regulatory advancements, insider trading remains a persistent challenge, particularly when linked to organized crime, which exacerbates financial fraud, money laundering, and market manipulation. This study explores the regulatory gaps that allow criminal organizations to exploit financial loopholes and collaborate with corporate insiders to evade detection. The primary research question examines the extent to which insider trading is facilitated by organized crime and the effectiveness of existing enforcement mechanisms in countering these threats. Using a comparative legal analysis, this study evaluates enforcement frameworks across jurisdictions, focusing on the U.S. SEC’s stringent policies, the EU’s Market Abuse Regulation (MAR), and India’s SEBI Regulations, 2015. It examines whistleblower protections, AI-driven surveillance, and international regulatory cooperation as critical tools in mitigating insider trading risks. Findings indicate that while robust regulatory structures exist, enforcement challenges, jurisdictional disparities, and technological advancements continue to create vulnerabilities. Strengthening cross-border cooperation, enhancing AI-based financial monitoring, and reinforcing corporate governance are essential to improving market integrity. This research contributes to financial crime prevention by providing policy recommendations and emphasizing the need for future studies on the impact of decentralized finance (DeFi) and blockchain technologies in insider trading regulation.