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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.
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.
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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.
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