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Book part
Publication date: 26 November 2019

Mainak Bhattacharjee, Jayeeta Roy Chowdhury and Dipti Ghosh

The emerging market economies, in particular, have become victim to the laundering activities which have damaged investment potentials, undermined governance, fostered…

Abstract

The emerging market economies, in particular, have become victim to the laundering activities which have damaged investment potentials, undermined governance, fostered crime and corruption, and decreased tax revenues. In this chapter, we construct a macrotheoretic framework to analyze money laundering in the form of tax evasion by individuals in an economy in the events of financial autarky and free trade. In other words, our theoretical model allows us to examine if movement from autarky to a state of financial integration whets the degree of financial malpractice like money laundering.

Details

The Gains and Pains of Financial Integration and Trade Liberalization
Type: Book
ISBN: 978-1-83867-004-7

Keywords

Article
Publication date: 10 November 2022

Mohamad Mehdi Mojahedi Moakhar, Mahmoud Esavi, Amir Khademalizadeh and Fathollah Tari

The purpose of this paper is organized as follows. Section 2 reviews the literature on the subject matter, focusing on western economic literature and the Islamic economic…

Abstract

Purpose

The purpose of this paper is organized as follows. Section 2 reviews the literature on the subject matter, focusing on western economic literature and the Islamic economic paradigm, including the Quran, Sunnah, jurisprudence and Islamic philosophy thinking, to illustrate the origins of the Islamic approach to monetary systems. The money interest rate and its studies are explained, and the role of money and credit in the production function is considered. Then, it is shown that money maintains the demand for money in the overlapping generation model, as well as the consumption behavior of households. It is followed by an explanation of general Pareto optimality and the role of the money interest rate in inefficiency and nonoptimality for households and firms. Finally, Section 4 concludes the paper.

Design/methodology/approach

This paper studies the effects of money issuance and bank creation on Pareto optimality. In explaining the origins of the Islamic approach to monetary systems, the literature review, it focuses on western economics’ literature and Islamic economics paradigms such as the Quran, sunnah, jurisprudence and Islamic philosophy thinking. In modeling section, the authors show how banks’ fractional reserve credit is profitable. The authors also examine how the introduction of the money interest rate can change the Pareto optimality. In this regard, the comparison between two situations, namely, financing by the stock of money and borrowing in the credit market, indicates that welfare is reduced by the creation system and is inefficient (or nonoptimal). The result is that no money and no credits are created. The provision of this system compensates money by increasing the real money supply or deflation. To ensure Pareto optimality, it has been proven in the field of microfoundation that there should be no fixed money contracts and no money interest rates. It is necessary that the interest rate on consumption credit is zero or Qarz-al-Hasna is broken. Moreover, profit sharing is offered in the production sector.

Findings

As a result, the authors proved mathematically that the money interest rate must be zero to ensure productivity and Pareto optimality. On the other hand, the introduction of money or credit through loanable money leads to inefficiency, both in production and households and in the general equilibrium. The inflation generated by the credit system stimulates the change in the price level and perpetuates this inefficiency. Thus, if the authors want to return to the optimality condition, the interest rate on consumption credit must be zero or Qarz-al-Hasna is breached. However, the behavior of the fractional banking system and the credit mechanism teaches us that the money interest rate is an integral part of credit and loanable funds. Thus, the elimination of the money interest rate from the banking system without bank creation is implausible. Finally, to ensure Pareto optimality, it has been mathematically proven in the field of microfoundation that there should be no fixed money contracts and no money interest rate. It is necessary that the interest rate on consumption credit is zero, or Qarz-al-Hasna is broken. Moreover, profit sharing is offered in the production sector. The result is that no money and credit are created. The provision of this system compensates money by increasing the real money supply or deflation.

Originality/value

The capitalist theory of the definition of interest plays a decisive role in economic science. In this context, the authors are dealing with different vocabularies and terms for the interest rate. These different vocabularies have their origin in the different economic situations and especially determine the thinking of the schools. Because of the relationship between future and spot, the authors have to transform the variable “level” into the variable “interest rate” in the dynamic space. Finally, the exact explanations for the movement and evaluation of the economy are revealed by the correlation of the different interest rates.

Details

International Journal of Islamic and Middle Eastern Finance and Management, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1753-8394

Keywords

Article
Publication date: 22 November 2022

Ines Amara, Imen Khelil, Anis El Ammari and Hichem Khlif

This paper aims to examine the association between money laundering and infrastructure quality and whether the strength of auditing and reporting standards (SARS…

Abstract

Purpose

This paper aims to examine the association between money laundering and infrastructure quality and whether the strength of auditing and reporting standards (SARS) moderates this association.

Design/methodology/approach

The sample includes 348 country-year observations over the period of 2015–2017. The authors use Basel Anti-Money Laundering reports for 2015, 2016 and 2017 to collect data concerning money laundering. Infrastructure quality and the remaining variables are gathered from the Global Competitiveness reports for the same years.

Findings

Results show that money laundering is negatively associated with infrastructure quality. This negative association remains stable for countries characterised by low SARS, while it becomes less pronounced for countries with high SARS. Additional tests for the moderating impact of the SARS, using an interaction term between money laundering and SARS dummy variable, confirm that high SARS mitigates the adverse effect of money laundering on infrastructure quality.

Originality/value

These findings are important for policymakers, as they put emphasis on the adverse effect of money laundering and financial crimes on infrastructure quality and how solid auditing and reporting standards may improve infrastructure quality and reduce the negative effect of money laundering on the same variable. Thus, strengthening legislations concerning auditing and reporting standards in one country may improve infrastructure quality and combat money laundering and its adverse impacts.

Details

Pacific Accounting Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0114-0582

Keywords

Open Access
Article
Publication date: 14 October 2022

Emilia A. Isolauri and Irfan Ameer

Money laundering continues to emerge as a transnational phenomenon that has harmful consequences for the global economy and society. Despite the theoretical and practical…

Abstract

Purpose

Money laundering continues to emerge as a transnational phenomenon that has harmful consequences for the global economy and society. Despite the theoretical and practical magnitude of money laundering, international business (IB) research on the topic is scarce and scattered across multiple disciplines. Accordingly, this study aims to advance an integrated understanding of money laundering from the IB perspective.

Design/methodology/approach

The authors conduct a systematic review of relevant literature and qualitatively analyze the content of 57 studies published on the topic during the past two decades.

Findings

The authors identify five streams (5Cs) of research on money laundering in the IB context: the concept, characteristics, causes, consequences and controls. The analysis further indicates six theoretical approaches used in the past research. Notably, normative standards and business and economics theories are dominant in the extant research.

Research limitations/implications

The authors review the literature on an under-researched but practically significant phenomenon and found potential for advancing its theoretical foundations. Hence, the authors propose a 5Cs framework and a future agenda for research and practice by introducing 21 future research questions and two plausible theories to help study the phenomenon more effectively in the future.

Practical implications

In practical terms, the study extends the understanding of the money laundering phenomenon and subsequently helps mitigating the problem of money laundering in the IB environment, along with its harmful economic and societal impacts.

Originality/value

The authors offer an integrative view on money laundering in the IB context. Additionally, the authors emphasize wider discussions on money laundering as a form of mega-corruption.

Details

Critical Perspectives on International Business, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1742-2043

Keywords

Article
Publication date: 13 October 2022

Ping He

The purpose of this paper is to introduce the background and significance of criminalization of self-money laundering in China and to analyze its application in judicial practice.

Abstract

Purpose

The purpose of this paper is to introduce the background and significance of criminalization of self-money laundering in China and to analyze its application in judicial practice.

Design/methodology/approach

This paper introduces the international and domestic background of the criminalization of self-money laundering, demonstrates the theoretical basis and practical significance of the changes of Article 191 in the 11th amendment to the criminal law and puts forward solutions to some controversial issues in judicial practice.

Findings

The 11th amendment to the Criminal Law, which came into force in March 2021, criminalizes self-money laundering under Article 191 and has brought an impact on the traditional theory of criminal law. There are no similar amendments to the other two crimes, namely, Article 312 and Article 349, which lead to some confusion in the judicial practice, especially in the understanding of the number of crimes, and the meaning of proceeds of crime. This paper puts forward solutions to some controversial issues in judicial practice.

Originality/value

This paper introduces the criminalization of self-money laundering in the 11th amendment to the criminal law in China, presents a comprehensive description of and comments on the difference between the Article 191 and its similar articles, namely, Article 312 and Article 349, to make a well understanding in the application of law in judicial practice, which would be beneficial to theoretical researchers and judicial professionals.

Details

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

Keywords

Article
Publication date: 11 October 2022

Hafizah Mohd Latif, Norazida Mohamed, Morrison Handley-Schachler and Azhan Jalaludin

Money laundering weakens the role of the construction industry in stimulating economic growth. The purpose of this paper is to explore the connection between money

Abstract

Purpose

Money laundering weakens the role of the construction industry in stimulating economic growth. The purpose of this paper is to explore the connection between money laundering on the construction sites and undocumented foreign workers, based on a narrative drawn from a qualitative research.

Design/methodology/approach

Throughout the study, qualitative methods, i.e. interviews, site visits and document analysis, were used. However, the data for this paper was primarily derived from an interview. Thematic analysis was used to analyse the data.

Findings

The findings show that construction personnel who have access to the business’s financial affairs are the most likely to engage in illicit transactions. The size of the project as well as the multiple layers of organisations involved made it easy for launderers to operate. The appealing commission provided incentives to opportunistic personnel. In this regard, the wages for undocumented workers, which were primarily paid in cash, provided a considerable opportunity for the subcontracting organisations to engage in money laundering.

Research limitations/implications

While the single narrative method with an omniscient narrator allows for the conceptualisation of a human experience with money laundering, the depth of information and interpretations is limited. Emerging qualitative research methods may be incorporated in the future to provide a more extensive information due to the fact that money laundering data is complex and sensitive that few people want to discuss.

Originality/value

The multidisciplinary approach of this research provides a pedagogical way that focuses primarily on the disciplines of construction management and business ethics to demonstrate real-world money laundering practice. Understanding such phenomenon on sites opens up key avenues for future research into developing an anti-money laundering regime for the construction industry.

Details

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

Keywords

Article
Publication date: 31 October 2022

Abdinur Ali Mohamed and Mohamed Ibrahim Nor

The purpose of this study was to examine the macroeconomic impact of mobile money in Somalia using quarterly data from 2010 to 2020.

Abstract

Purpose

The purpose of this study was to examine the macroeconomic impact of mobile money in Somalia using quarterly data from 2010 to 2020.

Design/methodology/approach

This study applied the structural vector autoregressive approach to examine the response of the macroeconomic variables to the mobile money shocks.

Findings

The results show that mobile money increases consumer spending by reducing transaction costs and enhancing access to finance, which promotes the expansion of aggregate output. This study also finds that mobile money helps exchange rate stability and price level maintenance, boosting trade openness. Moreover, mobile money is linked to the rise in real income due to productivity improvement and price stability. The results of this study indicated that mobile money has a short-run relationship with aggregate output, household consumption, price level, trade openness and real income. Through the Granger causality test, this study finds that mobile money has a unidirectional relationship with the exchange rate, price level, household consumption and trade openness.

Originality/value

The empirical findings of this study imply that mobile money can create a wide range of financial services to improve the financial system in rural and urban areas; hence, it enables poor and rural members of society to make payments and receive-and-transfer money using their mobiles.

Details

Journal of Financial Economic Policy, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1757-6385

Keywords

Article
Publication date: 17 August 2021

Todor Kolarov

The purpose of this paper is to evaluate the existing legal basis, and its practical application, of an arbitrator’s competence to raise on her own initiative money

Abstract

Purpose

The purpose of this paper is to evaluate the existing legal basis, and its practical application, of an arbitrator’s competence to raise on her own initiative money laundering issues.

Design/methodology/approach

The research focusses on presenting the essence of the problem through evaluation of the legal basis for the arbitrators to raise money laundering concerns on their own initiative and the examples of so being done in international commercial arbitration.

Findings

This paper concludes that arbitrators do not presently have a solid legal basis that authorises them to act sua sponte against money laundering.

Originality/value

The originality and value of this paper lies in its emphasis on theoretical and practical issues related to money laundering in international commercial arbitration. It argues in favour of an explicit recommendation to be incorporated in the 2012 Recommendations of the Financial Action Task Force (FATF) that international commercial arbitrators address money laundering on their own initiative.

Details

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

Keywords

Article
Publication date: 5 September 2022

Tareq Na’el Al-Tawil

The purpose of this paper is to provide a high-level analysis of the intersection emerging cryptocurrency sector with anti-money laundering (AML) regulations and…

Abstract

Purpose

The purpose of this paper is to provide a high-level analysis of the intersection emerging cryptocurrency sector with anti-money laundering (AML) regulations and risk-based AML diligence systems maintained by financial institutions.

Design/methodology/approach

The analysis begins with a description of cryptocurrencies, focusing specifically on how the supporting technologies and applications increase vulnerabilities. The information will lay the foundation for examining the vulnerabilities existing in the architecture of cryptocurrency technology, as well as potential targets for regulations. The second part of the analysis will then shift focus to defining the scope of the money laundering problem associated with cryptocurrencies. An in-depth understanding of the problem is necessary to inform tailored AML legislation and regulations. The third part of the analysis will explore emerging AML regulations that govern cryptocurrencies, focusing specifically on those being developed and implemented in the United Arab Emirates (UAE). The UAE regulations will then be compared to those of the USA and European Union (EU) for comparative analysis and best practices.

Findings

The UAE has a robust legal system aimed at bolstering AML efforts while supporting widespread integration of crypto assets into business and government operations. A review of the UAE’s legislative framework reveals critical issues. First, the current regulations do not cover decentralized finance (DeFi) and non-fungible tokens (NFTs). The absence of clear regulations for DeFi and NFT protocols has created a leeway for money laundering and related criminal activities. Second, there is a high level of fragmentation in the UAE’s legislative landscape. The UAE does not have uniform, national laws that apply to all the Emirates. Fragmentation is not unique to the UAE but a major global problem that affects the USA and EU. Therefore, it is necessary to adopt a tailored approach where standard rules and regulations are responsive to the diverse aspects of cryptocurrencies. The strategy is vital, as it will be impractical to create a single legislation or law that will cover all the crypto assets, including their diverse applications. Furthermore, the Financial Action Task Force (FATF) should develop a global standard that will support a unified/harmonized application of AML/counter-terrorist financing (CTF) laws and regulations related to cryptocurrencies and the blockchain technology.

Originality/value

The borderless nature of digital currency and exchanges means that the existing laws and regulations are inadequate to address cross-border money laundering activities. Thus, there is an urgent need of harmonizing global regulations to ensure uniformity in applications. The quest for harmonization should be a priority as the FATF works towards developing a global standard. The global standard will support a uniform application of AML/CTF laws and regulations related to cryptocurrencies and the blockchain technology.

Details

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

Keywords

Article
Publication date: 4 October 2022

Samra Chaudary, Sohail Zafar and Thomas Li-Ping Tang

Following behavioral finance and monetary wisdom, the authors theorize: Decision-makers (investors) adopt deep-rooted personal values (the love-of-money

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Abstract

Purpose

Following behavioral finance and monetary wisdom, the authors theorize: Decision-makers (investors) adopt deep-rooted personal values (the love-of-money attitudes/avaricious financial aspirations) as a lens to frame critical concerns (short-term and long-term investment decisions) in the immediate-proximal (current income) and distal-omnibus (future inheritance) contexts to maximize expected utility and ultimate serenity across context, people and time.

Design/methodology/approach

The authors collected data from 277 active equity traders (professional money managers and individual investors) in Pakistan’s two most robust investment hubs—Karachi and Lahore. The authors measured their love-of-money attitude (avaricious monetary aspirations), short-term and long-term investment decisions and demographic variables and collected data during Pakistan's bear markets (Pakistan Stock Exchange, PSX-100).

Findings

Investors’ love of money relates to short-term and long-term decisions. However, these relationships are significant for money managers but non-significant for individual investors. Further, investors’ current income moderates this relationship for short-term investment decisions but not long-term decisions. The intensity of the aspirations-to-short-term investment relationship is much higher for investors with low-income levels than those with average and high-income levels. Future inheritance moderates the relationships between aspirations and short-term and long-term decisions. Regardless of their love-of-money orientations, investors with future inheritance have higher magnitudes of short-term and long-term investments than those without future inheritance. The intensity of the aspirations-to-investments relationship is more potent for investors without future inheritance than those with inheritance. Investors with low avaricious monetary aspirations and without inheritance expectations show the lowest short-term and long-term investment decisions. Investors' current income and future inheritance moderate the relationships between their love of money attitude and short-term and long-term decisions differently in Pakistan's bear markets.

Practical implications

The authors help investors make financial decisions and help financial institutions, asset management companies, brokerage houses and investment banks identify marketing strategies and investor segmentation and provide individualized services.

Originality/value

Professional money managers have a stronger short-term orientation than individual investors. Lack of wealth (current income and future inheritance) motivates greedy investors to take more risks and become more vulnerable than non-greedy ones—investors’ financial resources and wealth matter. The Matthew Effect in investment decisions exists in Pakistan’s emerging economy.

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