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Open Access
Article
Publication date: 12 September 2022

Howard Chitimira and Sharon Munedzi

The anti-money laundering (AML) frameworks of many countries were generally influenced by the international best practices of money laundering that were first established in 1988…

3836

Abstract

Purpose

The anti-money laundering (AML) frameworks of many countries were generally influenced by the international best practices of money laundering that were first established in 1988 through the Basel Committee on Banking Supervision (BCBS). The general belief is that these international best practices are applicable in all jurisdictions, although most countries are still affected by money laundering. The international best practices are universal measures that were developed as a yardstick to control and curb money laundering globally. Nonetheless, international best practices for money laundering are not tailor-made for specific jurisdictions and/or countries. Therefore, it remains the duty of respective jurisdictions and/or countries to develop their own context-sensitive AML measures in accordance with international best practices. An overview of the AML international best practices that were developed and adopted by several countries are analysed in this paper. These include customer due diligence measures established by the BCBS, the financial action task force (FATF) standards, as well as the ongoing monitoring and the risk-sensitive approach that were implemented to curb money laundering globally.

Design/methodology/approach

The article analyses the AML international best practices that were developed and adopted by several countries. These include customer due diligence measures established by the BCBS, the FATF standards, as well as the ongoing monitoring and the risk-sensitive approach that were implemented to curb money laundering globally.

Findings

It is hoped that policymakers and other relevant persons will use the recommendations provided in the paper to enhance the curbing of money laundering in financial institutions globally.

Research limitations/implications

The paper does not provide empirical research.

Practical implications

The study is useful to all policymakers, lawyers, law students and regulatory bodies globally.

Social implications

The study seeks to curb money laundering in the economy and society globally.

Originality/value

The study is original research on the use of AML/counter financing of terrorism international best practices to curb money laundering activities globally.

Details

Journal of Money Laundering Control, vol. 26 no. 7
Type: Research Article
ISSN: 1368-5201

Keywords

Open Access
Article
Publication date: 6 December 2023

William Gaviyau and Athenia Bongani Sibindi

The purpose of this study is to examine the South African banks’ customer due diligence (CDD) practices in the fintech era to mitigate money laundering (ML) risks and ensure…

Abstract

Purpose

The purpose of this study is to examine the South African banks’ customer due diligence (CDD) practices in the fintech era to mitigate money laundering (ML) risks and ensure financial stability. Financial technologies have brought substantial transformations to the financial services sector. However, such technologies have exposed the sector to emerging risks that threaten the integrity and stability of the financial system globally. Before any bank–customer relationship is established, proper customer background checks must be conducted. These background checks enable financial institutions to validate information provided and ensure customers are properly risk profiled. Failure to risk profile customers could result in financial institutions being used as conduits for ML. Undoubtedly, CDD procedures are pivotal to overall anti-money laundering efforts and curbing financing terrorism in a regulatory framework.

Design/methodology/approach

A qualitative research approach was adopted to address the research questions of the study. Given the confidentiality associated with the financial services sector, data triangulation was used in blending mainly secondary and primary data sources. Secondary data sources used in the study were published reports available in the public domain that were corroborated with subject matter experts’ interviews.

Findings

Based on the findings of this study, it is concluded that in South Africa, technological solutions have been incorporated into CDD functions, which is now risk-based (enhanced due diligence). Also, legally, South Africa has incorporated the biometrics, integration with Department of Home Affairs and Companies and Intellectual Property Commission databases, customer consent to third-party sources with the Financial Intelligence Centre Act and the Protection of Personal Information Act.

Originality/value

The shift towards digital banking in South Africa results in increased data and dynamic risk profiling. This study advocates a policy shift requiring a risk-based approach to mitigating emerging ML risks (in particular digital laundering), especially in the wake of South Africa’s recent greylisting by the Financial Action Task Force.

Open Access
Article
Publication date: 2 February 2023

Bernice Bissett, Philip Steenkamp and Duane Aslett

In the aftermath of the 2021 Financial Action Task Force Mutual Evaluation Report, legislators, supervisory bodies, law enforcement and the like are focusing on preventing South…

1552

Abstract

Purpose

In the aftermath of the 2021 Financial Action Task Force Mutual Evaluation Report, legislators, supervisory bodies, law enforcement and the like are focusing on preventing South Africa from being greylisted. This paper performs an analysis of the 2021 South African Financial Action Task Force (FATF) Mutual Evaluation, specifically Recommendation 8 and Immediate Outcome 10. The purpose of this paper is to address the concerns raised and assist those tasked with implementing remediation measures.

Design/methodology/approach

Secondary sources such as legislation, case law, textbooks and peer-reviewed publications are used in addressing the concerns. A major focus is placed on the evaluation itself, with an analysis of Recommendation 8 and Immediate Outcome 10.

Findings

Despite the non-compliance rating and a low level of effectiveness received regarding non-profit organisations, authorities might not place a large focus on remediating this, as more pertinent issues arise in the report. The lack of focus in this area adds to the likelihood of grey listing by FATF. However, with co-operation from the relevant stakeholders, these low ratings can be improved.

Originality/value

Since the Mutual Evaluation’s release in October 2021 there have not been any papers addressing the highlighted issues in the non-profit sector in South Africa, to the best of the authors’ knowledge. This paper will be the first of its kind and will be of use to authorities as regards mitigating the concerns raised by FATF.

Open Access
Article
Publication date: 23 October 2023

Daniel Cookman

This study aims to identify European positioning on the use of remote customer onboarding solutions in combating financial crime.

Abstract

Purpose

This study aims to identify European positioning on the use of remote customer onboarding solutions in combating financial crime.

Design/methodology/approach

This study is a desktop research that examines European Banking Authority (EBA) policy statements relating to the use of innovative solutions in combating financial crime.

Findings

Technological advancements in biometric data and software tools provide a unique opportunity to address potential paper customer onboarding process deficiencies. Electronic remote customer onboarding solutions equip credit, financial institutions and investment firms with an alternative FTE cost-saving solution, in their pursuit of revenue generation. Whilst the EBA and Financial Action Task Force have provided approval for the utilisation of innovative solutions and AML technologies in combatting financial crime. Hesitancy remains on the ability of credit and financial institutions to use technological solutions as a “magic solution” in preventing the materialisation of money laundering/terrorist financing related risks. Analysis of policy suggests a gravitation towards the increased use of the aforementioned technologies in the interim.

Originality/value

Capitalisation of European banking authority.

Details

Journal of Money Laundering Control, vol. 26 no. 7
Type: Research Article
ISSN: 1368-5201

Keywords

Open Access
Article
Publication date: 31 August 2023

Cayle Lupton

Illegal wildlife trade (IWT) is a transnational organized crime that generates billions in criminal proceeds each year. Yet, it is not regarded by many countries as a serious…

1471

Abstract

Purpose

Illegal wildlife trade (IWT) is a transnational organized crime that generates billions in criminal proceeds each year. Yet, it is not regarded by many countries as a serious crime. There is also no general consensus on its recognition as a predicate offence for money laundering. In this regard, banks are misused in different ways to facilitate financial flows linked to IWT. This paper aims to illustrate the importance of the banking sector in combating money laundering relating to IWT. It also aims to demonstrate the need for a general recognition of IWT as a predicate offence for money laundering.

Design/methodology/approach

This study investigates the implementation of money laundering controls by banks in the illegal-wildlife-trade context. As background to this investigation, it provides an overview of IWT, which is followed by an exploration of some of the general characteristics of the banking sector, before discussing the relevant Financial Action Task Force (FATF) recommendations.

Findings

This study finds that the banking sector is well-placed to combat money laundering relating to the IWT and is, by virtue of its international nature and strong focus on compliance, able to be effective in preventing the use of the proceeds of IWT as well as in identifying broader trafficking networks. Moreover, the banking sector is well-equipped to develop appropriate platforms to facilitate the swift, easy and effective sharing of financial intelligence between banks at the local, regional and especially international level.

Research limitations/implications

This study draws on publicly available information on financial flows relating to IWT. Little data and research are available on the financial flows and consequently the money laundering techniques used in cases suspected of IWT.

Originality/value

There has been little scholarly research on the relationship between money laundering and the IWT as well as the financial flows of IWT in general. This study highlights some of the money laundering techniques used in relation to IWT by drawing on the works of various international organizations, including the FATF.

Details

Journal of Money Laundering Control, vol. 26 no. 7
Type: Research Article
ISSN: 1368-5201

Keywords

Open Access
Article
Publication date: 24 August 2021

Muhammad Saleem Korejo, Ramalinggam Rajamanickam and Muhamad Helmi Md. Said

This paper aims to focus on the concept of money laundering and explores the evolution and expansion of criminalization of predicate offences to the money laundering within the…

8364

Abstract

Purpose

This paper aims to focus on the concept of money laundering and explores the evolution and expansion of criminalization of predicate offences to the money laundering within the international anti-money laundering (AML) regime over the time. It proposes how to limit the size and scope of predicate offences in designing a balanced legal definition.

Design/methodology/approach

This paper opted a content analysis focussed on the criminalization aspect of offences to money laundering in the international AML regime under the United Nations Conventions (Vienna, Palermo and Corruption Convention) and Financial Action Task Force Standards.

Findings

This paper provides how the criminalization of money laundering has evolved and its definition expanded over the time. The international definition is widely drafted with wide range of predicate offences from proceeds of drug money to corruption, including terrorist financing and terrorist acts; however, the two phenomena – money laundering and terrorist financing are quiet distinct apart. This continual expansion of predicate offences quite leads legality issues such as over-criminalization and conflict with principles of criminal law. This paper suggests an approach to limit the size and scope of predicate offences to money laundering.

Practical implications

This paper includes implications for the development of a balanced approach in defining predicate offences through a qualitative limitation approach consistent with the minimalist theory of penalization of criminal law.

Originality/value

This paper attains an identified issue how the legal definition of the money laundering offence can be improved while considering rule of law and principles of criminal law concerns.

Details

Journal of Money Laundering Control, vol. 24 no. 4
Type: Research Article
ISSN: 1368-5201

Keywords

Open Access
Article
Publication date: 19 May 2023

Georgios Pavlidis

This paper aims to critically examine the digital transformation of anti-money laundering (AML) and countering the financing of terrorism (CFT) in light of the Financial Action

7202

Abstract

Purpose

This paper aims to critically examine the digital transformation of anti-money laundering (AML) and countering the financing of terrorism (CFT) in light of the Financial Action Task Force (FATF) San Jose principles, the Organisation for Economic Co-operation and Development (OECD) principles for artificial intelligence (AI) and the proposed European Union (EU) Artificial Intelligence Act. The authors argue that AI tools can revolutionize AML/CFT and asset recovery, but there is a need to strike a balance between optimizing AML efficiency and safeguarding fundamental rights.

Design/methodology/approach

This paper draws on reports, legislation, legal scholarships and other open-source data on the digital transformation of AML/CFT, particularly the deployment of AI in this context.

Findings

A new regulatory framework with robust safeguards is necessary to mitigate the risks associated with the use of new technologies in the AML context.

Originality/value

This study is one of the first to examine the use of AI in the AML/CFT context in light of the FATF San Jose principles, the OECD AI principles and the proposed EU AI Act.

Details

Journal of Money Laundering Control, vol. 26 no. 7
Type: Research Article
ISSN: 1368-5201

Keywords

Open Access
Article
Publication date: 14 April 2023

Howard Chitimira and Sharon Munedzi

This paper explores the historical aspects of customer due diligence and related anti-money laundering measures in South Africa. Customer due diligence measures are usually…

1417

Abstract

Purpose

This paper explores the historical aspects of customer due diligence and related anti-money laundering measures in South Africa. Customer due diligence measures are usually employed to ensure that financial institutions know their customers well by assessing them against the possible risks they might pose such as fraud, money laundering, Ponzi schemes and terrorist financing. Accordingly, customer due diligence measures enable banks and other financial institutions to assess their customers before they conclude any transactions with them. Customer due diligence measures that are utilised in South Africa include identification and verification of customer identity, keeping records of transactions concluded between customers and financial institutions, ongoing monitoring of customer account activities, reporting unusual and suspicious transactions and risk assessment programmes. The Financial Intelligence Centre Act 38 of 2001 (FICA) as amended by the Financial Intelligence Centre Amendment Act 1 of 2017 (Amendment Act) is the primary statute that provides for the adoption and use of customer due diligence measures to detect and combat money laundering in South Africa. Prior to the enactment of the FICA, several other statutes were enacted in a bid to prohibit money laundering in South Africa. Against this background, the article provides a historical overview analysis of these statutes to, inter alia, explore their adequacy and examine whether they consistently complied with the Financial Action Task Force Recommendations on the regulation of money laundering.

Design/methodology/approach

The paper provides an overview analysis of the historical aspects of the regulation and use of customer due diligence to combat money laundering in South Africa. In this regard, a qualitative research method as well as the doctrinal research method are used.

Findings

It is hoped that policymakers and other relevant persons will adopt the recommendations provided in the paper to enhance the curbing of money laundering in South Africa.

Research limitations/implications

The paper does not provide empirical research.

Practical implications

The paper is useful to all policymakers, lawyers, law students and regulatory bodies, especially, in South Africa.

Social implications

The paper advocates for the use of customer due diligence measures to curb money laundering in the South African financial markets and financial institutions.

Originality/value

The paper is original research on the South African anti-money laundering regime and the use of customer due diligence measures to curb money laundering in South Africa.

Details

Journal of Money Laundering Control, vol. 26 no. 7
Type: Research Article
ISSN: 1368-5201

Keywords

Open Access
Article
Publication date: 19 September 2022

Christian Leuprecht, Caitlyn Jenkins and Rhianna Hamilton

This study aims to explain how cryptocurrency is leveraged for illicit purposes across the global financial system. Specifically, it establishes how cryptocurrency has been…

3597

Abstract

Purpose

This study aims to explain how cryptocurrency is leveraged for illicit purposes across the global financial system. Specifically, it establishes how cryptocurrency has been changing the nature of transnational and domestic money laundering (ML). It then assesses the effectiveness of conventional anti-money laundering (AML) policy and legislation against the proliferation of crypto laundering, using Canada as a critical case study.

Design/methodology/approach

Data was collected from court cases and secondary sources to build cross-case trends of cryptocurrency use in ML. Illicit International Political Economy forms the theoretical foundation for this study, whose contribution is situated in the current literature on crypto-ML.

Findings

This study finds that Bitcoin is common among crypto-money launderers, though most also use some form of alt-coin, and that the use of third-party currency exchanges is a prevalent method to create illicit funds and conceal proceeds of crime. The findings validate two hypotheses that illicit use of crypto is prevalent in the first two stages of ML, and that crypto is most often used in conjunction with other fiat currencies. Although law enforcement is improving on monitoring and understanding popular cryptocurrencies such as Bitcoin, alt-coins pose a significant challenge for criminal intelligence. New regulations for third-party currency exchanges are having a positive impact on curtailing crypto-laundering but are shown to be insufficient per se to contain the use of crypto in criminal activity.

Originality/value

This study contributes to a more robust understanding of the use of virtual currency in transnational and domestic ML. It contributes to an emerging body of literature on the role of technological change in enabling the global flow of illicit funds. It also informs public policy on virtual currency in general, and on AML regulation in Canada in particular.

Details

Journal of Financial Crime, vol. 30 no. 4
Type: Research Article
ISSN: 1359-0790

Keywords

Open Access
Article
Publication date: 3 May 2022

Elissavet-Anna Valvi

The aim of the present study is to shed light on the role of legal practitioners, namely, lawyers and notaries, in the fight against money laundering: Are they considered as…

3061

Abstract

Purpose

The aim of the present study is to shed light on the role of legal practitioners, namely, lawyers and notaries, in the fight against money laundering: Are they considered as facilitators or obstacles against money laundering? How does the global and the EU legal framework deal with the legal professionals?

Design/methodology/approach

The research follows a deductive approach attempting to respond to questions such as: How do the lawyers’ and notaries’ societies react in front of the anti-money laundering measures that concern them and why? What are the discrepancies between the lawyers’ professional secrecy and the obligations that EU anti-money laundering legislation assigns them?

Findings

This study disclosures the response of the European union and international legal and regulatory framework as well as the reflexes of the international and European legal professionals’ associations to this danger. It also demonstrates the reaction of lawyers against European union anti-money laundering legislation, to the point that it limits not only the confidentiality principle but also the position of the European judicial systems to the contradiction between this principle and the lawyers’ obligation to report their suspicions to the authorities.

Research limitations/implications

To fulfil the study goals, it was necessary to overcome some obstacles, like the limitation of existing sources. Indeed, transnational empirical research considering the professionals who facilitate money laundering is narrow. Besides, policymakers and academics only recently expressed more interest in money laundering and its facilitators.

Originality/value

This paper fulfils an identified need to study the legal professionals’ role not only in money laundering practices but also in anti-money laundering policies.

1 – 10 of over 1000