AML‐CTF: a forced marriage post 9/11 and its effect on financial institutions

Abstract

Purpose

The purpose of this paper is to explain the incompatibility of anti‐money laundering (AML) and counter‐terrorist financing (CTF) measures as a hasty over‐reaction after 9/11, focusing on the compliance burdens that this imposes on the regulated sector, most notably financial institutions.

Design/methodology/approach

This paper explains the fundamental differences between money laundering and terrorist financing. It follows the evolution of the marriage between AML and CTF measures in the USA and the UK, comparing the pre and post‐9/11 phases. Consequently, the specific legal burdens placed on financial institutions as a result of this marriage are discussed.

Findings

The paper, while recognising the importance of targeting terrorist money, contends that inherent differences exist between money laundering and terrorist financing, and fusing them together is a hasty reaction to the 9/11 attacks. It argues that the need of the hour is to focus on terrorist profiling, rather than attempting to target terrorist financing through the AML regime. It also concludes that financial institutions are unfairly burdened with the task of “suspecting” terrorist funds, while receiving little or no guidance in this respect.

Originality/value

This paper is of value to governments, regulators, and financial institutions considering the effective implementation of the AML‐CTF regime in the UK and the USA.

Citation

Sinha, G. (2013), "AML‐CTF: a forced marriage post 9/11 and its effect on financial institutions", Journal of Money Laundering Control, Vol. 16 No. 2, pp. 142-158. https://doi.org/10.1108/13685201311318494