Banks’ vulnerabilities to money laundering activities

Abstract

Purpose

This paper aims to provide insights as to why money laundering persists in banks and their weaknesses as gatekeepers.

Design/methodology/approach

This paper contextualizes the design and proliferation of anti-money laundering (AML) measures; investigates the different manners of conceptualizing them; and provides insights pertaining to probable limitations of these measures. The paper relies on primary data from statutes and secondary data from published sources.

Findings

The paper’s findings suggest that competitive pressures, shareholders return imperative, and lucrative misaligned incentives for management contributed to weaknesses in effective compliance in banks.

Practical implications

Insights drawn from this paper reinforces the notion that banks need to seriously review their business approaches, as well as their roles as gatekeepers.

Social implications

Given the slew of corporate scandals and other materially harmful misjudgments in money-laundering compliance, banks might need to seriously review their role and obligations in the economy.

Originality/value

Much has been said about money-laundering activities enabled by the banking sector. This paper contributed to insights as to why they persist despite AML rules, and what measures could be further taken to enhance compliance effectiveness.

Citation

Yeoh, P. (2020), "Banks’ vulnerabilities to money laundering activities", Journal of Money Laundering Control, Vol. 23 No. 1, pp. 122-135. https://doi.org/10.1108/JMLC-05-2019-0040