Do Islamic banks gain from corruption and money laundering (ML)?
Journal of Money Laundering Control
ISSN: 1368-5201
Article publication date: 18 October 2021
Issue publication date: 31 October 2022
Abstract
Purpose
This paper aims to examine the impact of corruption and money laundering (ML) on the profitability and stability of Islamic banks.
Design/methodology/approach
This study used the data of 53 conventional and 19 Islamic banks of Pakistan and Malaysia to have comparative insights. The empirical methods include the fixed effect and random effect regression and generalized methods of moment for robust results.
Findings
The results indicate that Islamic banks gain from corruption and ML. Corruption and ML affect bank profitability and stability positively in a less corrupt environment, i.e. Malaysia; however, corruption hurts Islamic banks’ performance, and ML favours Islamic banking profitability and stability in a more corrupt environment, i.e. Pakistan.
Originality/value
The present study pioneers the debate on corruption and ML related to Islamic banking profitability and stability. This study provides important insights to regulators and Shariah advisors to build a real model of Islamic banking.
Keywords
Acknowledgements
These data were derived from the following resources available in the public domain:www.sbp.org.pk/departments/stats/FSA-2006-09(F).pdfwww.sbp.org.pk/departments/stats/fsa-2008-12%20.pdfwww.sbp.org.pk/departments/stats/FSA-2012-16.pdfhttps://baselgovernance.org/sites/default/files/2019-02/basel_aml_index_10_09_2018.pdfwww.transparency.org/en/cpi/2018http://bursa.listedcompany.com/ar.html and from individual bank website as per requirement.
Citation
Aish, K., Hassan, M.K., Zaman, Q.U., Ehsan, S., Abbas, K. and Shah, I.H. (2022), "Do Islamic banks gain from corruption and money laundering (ML)?", Journal of Money Laundering Control, Vol. 25 No. 4, pp. 909-929. https://doi.org/10.1108/JMLC-09-2021-0094
Publisher
:Emerald Publishing Limited
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