Re-thinking de-risking: a systems theoretical approach

Abstract

Purpose

This paper aims to explain the de-risking phenomenon through Luhmann’s risk/danger model and demonstrate that de-risking should be facilitated and encouraged.

Design/methodology/approach

The paper applies Luhmann’s system theory and more specifically his risk/danger model to describe the de-risking phenomenon and identify recommendations to address its consequences.

Findings

The paper finds that re-defining risk and the anti-money laundering (AML)’s community’s understanding of it can support key stakeholders’ understanding of money laundering (ML) risk and the way to better address consequences of AML decisions.

Practical implications

The paper has implications for the banking and regulatory community in relation to the interpretation of de-risking. As systems aim to minimise their exposure to risk, they should not be prevented from de-risking.

Originality/value

This paper aims to move away from a narrative description of AML phenomena and presents a theoretical foundation for the analysis of ML risk. The current response to de-risking which demonises it and aims to prevent it is deconstructed through this theoretical lens.

Citation

També Bearpark, N. and Demetis, D. (2022), "Re-thinking de-risking: a systems theoretical approach", Journal of Money Laundering Control, Vol. 25 No. 1, pp. 27-49. https://doi.org/10.1108/JMLC-04-2021-0030