Protecting the financial system from abuse: Challenges to banks in implementing AML/CFT standards

Abstract

Purpose

To examine the implications of the changing compliance environment confronting banks as the international anti‐money laundering/combating the financing of terrorism (AML/CFT) standards have become more rigorous and more attention is paid to integrity related concerns by supervisors and market participants.

Design/methodology/approach

The paper describes recent regulatory and financial sector developments and draws analytical lessons.

Findings

Banks are facing increasing pressure from a number of sources to improve their compliance with AML/CFT and integrity related standards, and a number of institutions are responding positively to the challenge to establish robust AML/CFT regimes. However, there is a risk of disruption of legitimate business lines.

Practical implications

Striking the right balance in protecting systems from abuse while avoiding disruption to legitimate business lines will require further research on how best to implement the standards.

Originality/value

The paper initiates a discussion on the cost/benefit analysis of the implementation of the AML/CFT standard and outlines some of the challenges involved in going forward.

Citation

Barry Johnston, R. and Carrington, I. (2006), "Protecting the financial system from abuse: Challenges to banks in implementing AML/CFT standards", Journal of Money Laundering Control, Vol. 9 No. 1, pp. 48-61. https://doi.org/10.1108/13685200610645210