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Article
Publication date: 15 July 2020

Sisira Dharmasri Jayasekara

The purpose of this paper is to study the impact of global anti-money laundering and countering the financing of terrorism (AML/CFT) standards on combating money…

Abstract

Purpose

The purpose of this paper is to study the impact of global anti-money laundering and countering the financing of terrorism (AML/CFT) standards on combating money laundering and terrorist financing (ML/TF) efforts. This study will assess the impact of AML/CFT legal framework as well as the effective implementation of the framework on combating crimes.

Design/methodology/approach

The author develops an AML/CFT effectiveness index using the results of 11 immediate outcomes in mutual evaluation reports to measure the overall effectiveness of regimes in combating ML/TF. In addition to this index, the AML/CFT compliance index is used to measure the strength of the AML/CFT legal framework of countries. A model was developed and tested to measure the impact of the AML/CFT legal framework and its effective implementation on corruption, bribery, terrorism and crimes.

Findings

The results suggest that the effective implementation of the AML/CFT legal framework is important to combat ML/TF. The existence of a sound AML/CFT legal framework alone will not be sufficient to combat ML/TF. Therefore, countries are required to implement their legal framework effectively to achieve the AML/CFT goals of the country as well as the global policymaker. The empirical results show a significant relationship between the AML/CFT effectiveness index with the proxies the author used to capture corruption, bribes and crimes. Considering the wide range of implications of the crimes, which are related to ML/TF, this study suggests the global policymakers to further strengthen the monitoring mechanism of AML/CFT deficient countries to protect the global financial systems from criminals.

Practical implications

There is a dearth of studies on the impact of the effectiveness of the AML/CFT regime on combating ML/TF. Therefore, this study will lay the foundation for future studies on measuring the effectiveness of an AML/CFT regime. More appropriate measures will be developed in the future based on this foundation.

Originality/value

This paper is an original work done by the author, which discusses the impact of Financial Action Task Force standards on combating ML/TF. The AML/CFT effectiveness index is the original idea of the author, which can be used as a quantitative measure to capture the effectiveness of the AML/CFT regimes in future studies.

Details

Journal of Money Laundering Control, vol. 24 no. 2
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 6 August 2021

Sisira Dharmasri Jayasekara

The purpose of this paper is to study the impact of the model of an financial intelligence unit (FIU) and the availability of resources of an FIU on the strength of the…

Abstract

Purpose

The purpose of this paper is to study the impact of the model of an financial intelligence unit (FIU) and the availability of resources of an FIU on the strength of the anti-money laundering and countering the financing of terrorism (AML/CFT) legal framework and the overall effectiveness of the AML/CFT regime.

Design/methodology/approach

The authors use FIU specific characteristics to measure the impact on the developed AML/CFT Compliance Index (Jayasekara, 2020a) and AML/CFT Effectiveness Index (Jayasekara, 2020b) in measuring the overall effectiveness of an AML/CFT regime. In addition, the impact of an AML/CFT regime on the cost to exports and gross domestic product are modeled.

Findings

The empirical results suggest that the model of an FIU is an important determinant of an effective AML/CFT regime. The administrative model of FIU shows a negative relationship with the overall effectiveness of the AML/CFT regime. The availability of resources which was measured in terms of human resources at FIUs shows a significant positive relationship with the effectiveness. However, the model of an FIU and the availability of resources of an FIU are not significant determinants of a sound AML/CFT legal framework. The results further reveal that effective AML/CFT regimes promote economic growth and also international trade by reducing the cost of exports. Therefore, policymakers are required to reassess the administrative model FIU of the country and have to adopt a suitable model which has been assigned more power to implement the regime.

Practical implications

This study was initially designed to capture more FIU specific variables using a questionnaire to widen the scope of the study. However, the low response rate to the questionnaire forced us to rely on publicly available data on FIU characteristics. Therefore, appropriate FIU specific variables may be developed in future research based on this foundation.

Originality/value

This paper is an original work done by the author that discusses the FIU specific characteristics on the overall strength and effectiveness of AML/CFT regimes and further extends the use of originally designed AML/CFT Compliance Index and AML/CFT Effectiveness Index.

Details

Journal of Money Laundering Control, vol. 25 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 2 July 2019

Emmanuel Senanu Mekpor

The purpose of this paper is to investigate how well countries comply with global anti-money laundering and counter-financing of terrorism (AML/CFT) regulations.

1002

Abstract

Purpose

The purpose of this paper is to investigate how well countries comply with global anti-money laundering and counter-financing of terrorism (AML/CFT) regulations.

Design/methodology/approach

With the help of an AML/CFT compliance index composed by the author, this study is able to numerically quantify countries’ AML/CFT compliance levels. Countries were selected based on their membership with the Financial Action Task Force (FATF), precisely members who have gone through at least one round mutual evaluation and have duly submitted a report to the task force. The AML/CFT index was composed by assigning numeric values to the individual country ratings across all 49 FATF recommendations contained in their mutual evaluation reports (MER).

Findings

Some notable findings include the yearly global level of AML/CFT compliance between the period 2004 and 2016, as well as compliance levels across continents for the same period. Compliance levels for the seven components of the FATF recommendations were also reported to help assess which set of recommendations countries comply with the most and why they do. It was also found that countries’ lack of compliance was as a result of high cost of compliance with FATF recommendations.

Research limitations/implications

The main limitation of this study was a lack of high-frequency AML data of countries, especially less-developed countries.

Originality/value

The uniqueness of this paper lies in the fact that the AML/CFT compliance index constructed and used in the study is the first of its kind.

Details

Journal of Money Laundering Control, vol. 22 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 23 July 2020

Sisira Dharmasri Jayasekara

The purpose of this paper is to discuss the dilemma of digital banking and the financial inclusion agenda of countries with the level of strength of the anti-money…

Abstract

Purpose

The purpose of this paper is to discuss the dilemma of digital banking and the financial inclusion agenda of countries with the level of strength of the anti-money laundering and countering the financing of terrorism (AML/CFT) regime.

Design/methodology/approach

This study develops an AML/CFT compliance index using the assessment data of FATF to measure the level compliance strength of countries to measure the impact of the strength of the AML/CFT regime on the financial inclusion. Financial literacy, literacy, number of bank branches and income level of countries are used as other control variables in regression analysis, which is used to test the developed model.

Findings

The results suggest that the AML/CFT compliance level of a country is a significant factor in determining the level of financial inclusion. Besides, the number of bank branches for 100,000 people, literacy and financial literacy are significant factors in financial inclusion. However, the results reveal that financial literacy is significant over literacy in determining financial inclusion. Therefore, having considered the importance of the AML/CFT regime for financial inclusion, regulators are required to strengthen the AML/CFT regime and make clarity on the AML/CFT regulations. This clarity will promote the digitalization and financial inclusion over time.

Practical implications

Most of the studies related to financial inclusion and AML/CFT aspects are qualitative. Therefore, this is only the start of measuring the strength of an AML/CFT regime. More appropriate measures will be developed in the future based on this foundation.

Originality/value

This paper is an original work done by the author, which discusses the issues of digital banking and financial inclusion agenda of countries with the compliance strength of the AML/CFT regime. The AML/CFT compliance index is the original idea of the author, which can be used as a quantitative measure to capture the strength of the AML/CFT regimes in future studies.

Details

Journal of Money Laundering Control, vol. 24 no. 1
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 9 July 2018

Emmanuel Senanu Mekpor, Anthony Aboagye and Jonathan Welbeck

This paper aims to compute a measure for anti-money laundering/counter-financing of terrorism (AML/CFT) compliance and investigate its determinants.

1499

Abstract

Purpose

This paper aims to compute a measure for anti-money laundering/counter-financing of terrorism (AML/CFT) compliance and investigate its determinants.

Design/methodology/approach

Using the Financial Action Task Force (FATF) recommendations and assigning weights to them, the study computes a measure for AML compliance. Further, the determinants of AML compliance were investigated using ordinary least squares (OLS) data of 155 countries between 2004 and 2016.

Findings

The findings suggest that AML compliance have slightly improved over the years. Further, the OLS regression results show that technology, regulatory quality, bank concentration, trade openness and financial intelligence center significantly determined and improved AML compliance.

Practical implications

From the findings, it is evident that countries that wish to improve the AML compliance should focus more on technology, regulatory quality, structure of the banking sector, size of the economy and institution of financial intelligence center so as to enhance AML compliance.

Originality/value

To the best of the author’s knowledge, this paper reveals a first AML/CFT compliance index that measures the cross-country level of AML/CFT compliance from the year 2004 to 2016. Subsequently, this paper adopted an OLS econometric model to identify the key determinants of AML/CFT compliance among member states of FATF.

Details

Journal of Financial Regulation and Compliance, vol. 26 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

Book part
Publication date: 26 August 2019

Norhashimah Mohd Yasin, Nik Nuun Asma Nik Sulaiman and Mohd Yazid Zul Kepli

The Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Thematic Review of Banking & Insurance sectors conducted by Bank Negara Malaysia (BNM) in 2013…

Abstract

The Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Thematic Review of Banking & Insurance sectors conducted by Bank Negara Malaysia (BNM) in 2013 indicated that oversight functions are still inadequate in the areas of compliance, internal audit, board of directors and senior management. The oversight functions refer to the AML/CFT compliance programme, which financial institutions, including Islamic banks, are obliged to execute as a part of mitigating activities against money laundering and terrorist financing. The main purpose of this chapter is to analyse whether there is any improvement in the oversight functions at the Islamic banks in Malaysia since the release of the thematic review report by BNM on 17 September 2014. This research is important as penalty for non-compliance under Section 22 of the Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (AMLATFPUAA) is severe. Section 22 of AMLATFPUAA entails personal responsibility on the compliance officer of an Islamic bank and not the reporting institution as a whole. Qualitative research method via interview is employed to gauge the extent of Islamic banks’ adherence to AML/CFT compliance programme. This chapter is significant as it provides Islamic banks and future researchers with the details of the compliance study as well as the current status of AML/CFT compliance programme within the Islamic banks in Malaysia.

Details

Emerging Issues in Islamic Finance Law and Practice in Malaysia
Type: Book
ISBN: 978-1-78973-546-8

Keywords

Article
Publication date: 2 July 2018

Rhys Thompson

The purpose of this paper is to examine anti-money laundering and countering the financing of terrorism (AML/CFT) developments in Myanmar in light of its recent political…

Abstract

Purpose

The purpose of this paper is to examine anti-money laundering and countering the financing of terrorism (AML/CFT) developments in Myanmar in light of its recent political and economic transition from military rule to a civilian, democratic government. This paper will discuss the changes in Myanmar’s AML/CFT frameworks, as well as international blacklisting and sanctions that have targeted Myanmar since the late 1990s. It also highlights issues that are likely to challenge Myanmar’s ability to ensure compliance with international best practices, especially as the local financial sector expands and foreign investment increases.

Design/methodology/approach

This paper draws on available literature and open source reporting.

Findings

This review is a timely update of Myanmar’s progress with its AML/CFT frameworks at a time that it is trying to encourage foreign investment and engagement and international businesses. But while Myanmar’s “opening” is seen by many as an opportunity, it still presents significant AML/CFT risks for investors because of a considerable lack of technical expertise, as well as financial and human resources to ensure compliance and enforcement occur.

Originality/value

Myanmar is a very under-researched area and has had minimal focus on its AML/CFT frameworks or the risks present in the economy. This paper will be a useful source for researchers, academics, policymakers, lawyers and private sector actors seeking to engage or invest in Myanmar’s economy.

Details

Journal of Money Laundering Control, vol. 21 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 18 May 2021

Buno (Okenyebuno) Emmanuel Nduka and Giwa Sechap

Designated non-financial businesses and professions (DNFBPs) are important actors both in the formal and informal sectors owing to the nature of services they offer. The…

Abstract

Purpose

Designated non-financial businesses and professions (DNFBPs) are important actors both in the formal and informal sectors owing to the nature of services they offer. The DNFBPs are key players in financial and economic development and thus are highly vulnerable to money laundering (ML) and terrorist financing (TF) risks. Globally, and indeed, within the West African region, typologies studies have indicated several instances of misuse of DNFBPs for the laundering of proceeds of crime and to a lesser extent, TF. Factors that make DNFBPs vulnerable to ML and TF in the region, include limited understanding of ML/TF risk and anti-money laundering and combating the financing of terrorism (AML/CFT) obligations, and poor implementation of AML/CFT measures by the sector. As reporting institutions, DNFBPs are required to implement appropriate measures to mitigate the ML/TF risk facing them. Mutual evaluation reports (MERs) of countries in the region noted weak implementation of AML/CFT measures by DNFBPs compares to financial institutions. These coupled with the general poor monitoring and supervision of DNFBPs for compliance, make them a weak link in member states’ AML/CFT regime. This study examined how Economic Community of West African States member states can plug the loopholes in the DNFBPs to strengthen their AML/CFT regime and thus improve their performance during mutual evaluation. This study reviewed data from the publications of Inter-Governmental Action Group against Money Laundering in West Africa (GIABA), Financial Action Task Force (FATF) and other credible sources.

Design/methodology/approach

This study is more of desk-review based on secondary data, including information obtained from GIABA, and FATF publications, and websites as well as information obtained from reliable sources on the internet. The authors reviewed the MERs of GIABA member states that have been assessed under the second round, especially that of Ghana, Senegal, Cape Verde, Mali and Burkina Faso, with particular focus on sections of the reports relating to preventive measures and supervision. In general, this paper adopts a policy approach with a view to explaining the importance and benefits of implementing AML/CFT preventive measures by reporting entities, especially the DNFBPs.

Findings

This study found that there is a general lack of information on the exact size of DNFBPs across member states, the risk of ML/TF associated with DNFBPs is generally identified as high across member states (albeit at different levels), the extent and level of monitoring/supervision of DNFBPs for AML/CFT compliance trails what is obtainable in financial institutions; the institutional and operational frameworks for regulating, supervising and monitoring DNFBPs are either weak or poorly defined in many member states; and the focus of AML/CFT technical assistance has been more on financial institutions than DNFBPs. Although the number of MERs reviewed for this work may be few, the findings and conclusions in the concluded MERs reflect regional peculiarities, including high informality of the economies, preponderance use of cash in transactions, diversity of DNFBPs and the general weak application of AML/CFT preventive measures by these entities, and the weak AML/CFT supervision or monitoring of DNFBPs which cut across all GIABA member states. Although efforts to address the weaknesses in the DNFBPs, including training and supervision, have commenced, in most member states, these are still at rudimentary levels.

Research limitations/implications

However, this study is limited by the fact that it was desk-based review without direct inputs of industry players (DNFBPs and their supervisors).

Practical implications

In general, this paper adopts a policy approach with a view to explaining the importance and benefits of implementing AML/CFT preventive measures by reporting entities, especially the DNFBPs. It aims to bring to the fore the weaknesses of the DNFBPs in the implementation of AML/CFT preventive measures and therefore will be useful to national authorities who are striving toward strengthening their national AML/CT regimes and to DNFBPs who wish to protect the integrity and stability of their system.

Originality/value

It is imperative to mention that the weak compliance by DNFBPs, and indeed other challenges inhibiting effective implementation of preventive measures, is not peculiar to West Africa. A review of MERs of 17 African countries (eight countries in the Eastern and Southern Africa Anti Money Laundering Group region, five in GIABA region and three in the Middle East and North Africa region assessed under the current round as on October 2020, show a similar pattern of weak ratings under Immediate Outcome 4.

Article
Publication date: 1 June 2022

Meiryani Meiryani, Gatot Soepriyanto and Jessica Audrelia

Money laundering and terrorism financing use the banking sector system illegally and result in enormous losses for the state and nation. Regulatory Technology (RegTech) is…

Abstract

Purpose

Money laundering and terrorism financing use the banking sector system illegally and result in enormous losses for the state and nation. Regulatory Technology (RegTech) is an important part of effectively preventing money laundering and terrorism financing. However, the implementation of RegTech related to the prevention of money laundering and terrorist financing, especially in the Indonesian banking sector, has not been widely studied and discussed. Therefore, this study aims to provide empirical testing evidence regarding the effectiveness of RegTech implementation in the Indonesian banking sector to prevent money laundering and terrorist financing.

Design/methodology/approach

This study uses primary data obtained through a survey distributed to 160 bankers who work in eight different banks in Indonesia with a 95% confidence level and a confidence interval of 7.75. The criteria needed to determine the sample in this study are individuals who actively work as staff whose work is directly related to banking; individuals who are actively working in banks registered with OJK; individuals who have been actively working in the banking sector in Indonesia for at least three years. The data that has been obtained were analyzed using the SmartPLS application to test the validity and reliability, descriptive statistics and structural models (inner model).

Findings

The results of this study indicate that electronic know your customer (eKYC), transaction monitoring (TM), cost and time efficiencies (CTE) influence the prevention of anti-money laundering (AML) and countering financing of terrorism (CFT) in the Indonesian banking sector. However, eKYC and CTE have little influence on AML-CFT in the Indonesian banking sector. Meanwhile, TM has a moderate influence on AML-CFT in the Indonesian banking sector. In addition, in general, most bankers agree that the bank they work for has followed the guidelines, policies and regulations that have been given.

Originality/value

This study uses the Indonesian banking sector as a research subject that raises the effectiveness of the implementation of the use of RegTech to prevent money laundering and terrorism financing.

Details

Journal of Money Laundering Control, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 24 August 2020

Irfan Hassan Jaffery and Riffat Abdul Latif Mughal

The purpose of this paper is to examine the effectiveness of anti-money laundering/combating of financing of terrorism (AML/CFT) measures in Pakistan. Key variables of…

Abstract

Purpose

The purpose of this paper is to examine the effectiveness of anti-money laundering/combating of financing of terrorism (AML/CFT) measures in Pakistan. Key variables of AML/CFT regulations of Pakistan are used. This study explores the impact of customer due diligence, record keeping, wire transfers, correspondent banking, reporting of transactions, new technology and internal controls/compliance/trainings on money-laundering risk.

Design/methodology/approach

Data is collected with the help of questionnaires developed in light of Financial Actions Task Force (FATF) recommendations and the AML/CFT regulations of Pakistan.

Findings

Results show that customer due diligence, correspondent banking and new technology may help control money-laundering risk in Pakistan, whereas impact of record keeping, wire transfers and reporting of transactions did not have an effect on money-laundering risk. This study suggests a better implementation of these measures.

Research limitations/implications

The current study was limited to Pakistani banks. For more conclusive results, future studies should replicate similar studies in other countries.

Practical implications

Findings of this study may help the State Bank of Pakistan in taking measures to simplify the process of implementing FATF rules and regulations regarding AML/CFT, regular monitoring and trainings to the staff of banks and development finance institutions in customer due diligence, correspondent banking and new technology. Further, it helps to take appropriate measures in resolving banks-specific issues related to AML/CFT.

Social implications

Effective AML/CFT control measures would strengthen socio-economic growth in a country. Further, formalization, compliance and integrity would eliminate money laundering risk. It would create an economy that works with equity and promotes transparency.

Originality/value

This research paper supports implementation of AML/CFT regulations, proper monitoring and novel supervision of banks.

Details

Journal of Money Laundering Control, vol. 23 no. 3
Type: Research Article
ISSN: 1368-5201

Keywords

1 – 10 of 97