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1 – 10 of 107This study aims to evaluate the suspicious transaction reporting (STR) as a financial intelligence tool to identify the potential strengths and limitations of STR and to come up…
Abstract
Purpose
This study aims to evaluate the suspicious transaction reporting (STR) as a financial intelligence tool to identify the potential strengths and limitations of STR and to come up with the criteria, which will make this tool an effective one in early detection of terrorist financing activities.
Design/methodology/approach
Considering the research aim, this research uses the funnelling method for identifying effectiveness criteria. Funnelling is a method of literature review that helps find pertinent literature by refining the search through filtering the available research (Ridley, 2008). Using this method, the researcher first applied the criteria of actionable intelligence to filter the financial intelligence tools to select the most promising and important tool (suspicious transaction reporting) for early detection of terrorist financing activities. The funnelling method was also applied to derive the effectiveness criteria from the operational features, and corresponding limitations, of the suspicious transaction reporting system. The funnelling method was also used to identify those operational features and limitations of suspicious transaction reporting that have the most direct relevance to the early detection problem of suspicious transaction reporting.
Findings
There are some operational features of STR that give rise to certain limitations that undermine its effectiveness in terms of early detection of terrorist financing activities. The limitations of STR necessitate a search for criteria that will make STR effective in early detection of terrorist financing activities. Based on the operational features and their corresponding limitations, effectiveness criteria for STR have been derived in this study. It is shown how these effectiveness criteria can remove the limitations of STR.
Research limitations/implications
The list of operational features and the corresponding limitations based on which the effectiveness criteria have been derived may not be exhaustive. There may have other operational features, and corresponding limitations that also make STR largely ineffective in the early detection of terrorist financing activities, and for which more effectiveness criteria should also be derived.
Practical implications
The limitations and the effectiveness criteria will pave the way for redesigning STR in such a way that will make it highly useful for detecting financing activities relating to imminent terrorist attacks.
Social implications
The society will experience fewer terrorist attacks that will make the society peaceful, happy and vibrant.
Originality/value
In this study, the effectiveness criteria of STR for early detection of terrorist financing activities have been derived in an innovative way by deducing them from the operational features of STR and the corresponding limitations.
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A fundamental element of international anti‐money laundering (AML) systems is the requirement that financial institutions file suspicious transaction reports (STRs) with financial…
Abstract
Purpose
A fundamental element of international anti‐money laundering (AML) systems is the requirement that financial institutions file suspicious transaction reports (STRs) with financial intelligence units. Although the Financial Action Task Force (FATF) has established global standards, there is a range of national laws, practices and experiences with STR systems. The purpose of this paper is to assess the effectiveness of national STR systems, by using Switzerland as a case study.
Design/methodology/approach
Primary source documentation, complemented by observations at FATF meetings, are relied on to evaluate STR systems.
Findings
The FATF ratings of a country's compliance with international standards are objective, expert driven and consistent in application, but are limited as performance measures in that they ignore the costs of AML and STR measures. The effectiveness of the Swiss STR system is questionable because of serious under reporting of suspicious transactions. The Swiss STR system is efficient to the extent that there is a high usage of STRs and that large amounts of money are automatically frozen under the mandatory reporting obligation.
Research limitations/implications
Evaluation of national STR systems is limited because of a lack of reliable statistics on the extent of money laundering.
Practical implications
This paper is addressed to policy makers who are concerned with assessing the effectiveness of STR systems. Future research would deal with STR systems in developing countries and the role of STRs in uncovering the financing of terrorism.
Originality/value
Insider/outsider description of the FATF mutual evaluation process. Compilation and interpretation of statistical data on STR systems, as performance measures.
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Te-En Chan, Ya-Hui Chan and Shu-Ping Lin
Anti-money laundering has attracted much global attention, driving banks to invest in the establishment of suspicious transaction report mechanisms for the declaration of…
Abstract
Purpose
Anti-money laundering has attracted much global attention, driving banks to invest in the establishment of suspicious transaction report mechanisms for the declaration of suspicious transactions. However, very few studies discuss how to influence bank employees to proactively declare suspicious transactions. Therefore, the purpose of this study is to, based on an organizational commitment perspective, establish a causal model that can assist banks to identify key factors affecting the intention to declare suspicious transactions.
Design/methodology/approach
This study first summarized five factors – regulatory focus, organization climate, situational constraints, personality traits and role stress – and their composition constructs as the basis for measurements. An interview-based survey of nine Taiwanese banks was conducted. Then, this study adopted the decision-making trial and evaluation laboratory method to analyse the interplay between the five factors to identify the causal model and to explore the differences in the effects of the key factors, arising from the different organizational and job patterns, on the intention to declare suspicious transactions.
Findings
The results show that regulatory focus and organizational climate are the most important causal factors affecting employees’ intention to declare suspicious transactions, whereas role stress and personality traits are the most influenced effect factors. In addition, this study also confirmed that under different organizational and job patterns, the understanding of employees will change.
Originality/value
This paper provides insight into the interplay between the five factors based on an organizational commitment perspective. The findings can assist banks in managing and monitoring the implementation of the suspicious transaction report mechanism.
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The purpose of this paper is to systematically study the research and development history of suspicious transaction reporting (STR) system in China, and introduce the core…
Abstract
Purpose
The purpose of this paper is to systematically study the research and development history of suspicious transaction reporting (STR) system in China, and introduce the core elements in constructing an intelligent surveillance system which could provide a solution to the situation of low effectiveness and efficiency in Chinese Financial Institutions (FIs) STR procedure nowadays. The solution outputs those falling out of the normal customer behavior profiles instead of only extracting data by the rules issued by authorities.
Design/methodology/approach
This paper reviews the latest literature, regulations and guidelines of STR gathered domestically and overseas, and hands out questionnaire surveys to hundreds of software vendors, regulators and FIs, details the current situation of poor deployment of intelligent in China and tells the difficulties of subjective STR decision procedures.
Findings
Few Chinese FIs have deployed real intelligent STR systems, most are using rule-based filtering systems conformed to the objective STR supervisory regulations. To change the embarrassing situation, the regulators have tried to introduce self-regulatory mode which allows the FIs to define STR decision procedures themselves. Limited by the FIs’ ability of information sharing and investigation scope, FIs could hardly unveil the whole schema of a money laundering organization. The pursuant objective FIs can reach is to construct a system that could tell what the normal customer behaviors look like and extract all those falling out of the system’s expectations as suspicious activities.
Research limitations/implications
Only the core elements of the total intelligent STR system are discussed, that is, what, why and how about the customer behavior pattern recognition system. Besides this, a total solution should also use a watch list, reporting decision, cases management, risk control, etc.
Originality/value
This paper for the first time argues that the orientation of regulatory rules in China has actually hindered the spreading of really effective intelligent system for these years. The author creatively puts forward a solution to the difficult problem for FIs to spot criminal schema directly, instead the FIs should only be required to determine whether the transactions carrying out currently are falling within the expected behavior pattern scopes, which is under the FIs’ capabilities due to the internationally accepted obligations of “Know Your Customer”.
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Reporting suspicious transactions under anti‐money laundering (AML) laws creates a major dilemma for banks. On the one hand, failure to report suspicious transactions is an…
Abstract
Purpose
Reporting suspicious transactions under anti‐money laundering (AML) laws creates a major dilemma for banks. On the one hand, failure to report suspicious transactions is an offence under the laws. On the other hand, if they report the transaction, they may breach their duty of confidentiality to their customer or could be liable for tipping off the suspected customer. More importantly, it can also undermine customers' trust. The purpose of this paper is to look into these issues and analyse them against the background of the Malaysian AML laws.
Design/methodology/approach
This paper mainly relies on statutes as its primary sources of information. As such, the relevant Malaysian AML that affect the reporting obligations will be identified and analyzed. It will be necessary to examine not just the provisions of the Malaysian Anti‐Money Laundering and Anti‐Terrorism Financing Act, but also its regulations and guidelines which affect banks in detail, as this is the most important legislation for the purpose of this paper.
Findings
It is apparent that the reporting suspicious transactions regime has had a significant impact on the operations of banks in Malaysia. While the regime is based on sound principles, the effectiveness of the regime is still unknown. As such, only time will tell whether the banks will be able to cope sufficiently with the increased AML obligations. Obviously, it is critical at this stage, to establish effective coordination between legislators, regulators and the banking industry, in order to minimize problems faced by the banks and thereby to ensure effective implementation of the regime.
Originality/value
This paper provides an examination of the impact of the reporting suspicious transactions regime on Malaysian banks. It is hoped that the study would provide some insight into this particular area for academics, banks, their legal advisers, practitioners and policy makers, not only in Malaysia but also elsewhere. In view of the international nature of money laundering and banking, there will be significant interest in how the AML laws affect banks operating in Malaysia.
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B. Viritha, V. Mariappan and Irfan Ul Haq
The purpose of this paper is to assess the effectiveness of anti-money laundering (AML) reporting system in India in terms of Suspicious Transaction Reports (STRs) and its impact…
Abstract
Purpose
The purpose of this paper is to assess the effectiveness of anti-money laundering (AML) reporting system in India in terms of Suspicious Transaction Reports (STRs) and its impact on countering money laundering through the conviction and confiscation. The main emphasis of financial action task force (FATF) guidelines on AML and countering of financing of terrorism (CFT) is the obligation of financial institutions and designated non-financial businesses and professions to instantaneously report the suspicious transactions to Financial Intelligence Unit (FIU), an agency with a mandate to deal with AML.
Design/methodology/approach
It is a descriptive study to explore the outcome of the AML process. The study has used the secondary information published in the annual reports of FIU-India and FATF. The study period is 2006-2007 to 2011-2012.
Findings
Though there is a significant increase in the STRs filed, the impact of AML is not realized in terms of neither AML-related convictions nor confiscations, since the enactment of the Prevention of Money Laundering Act (PMLA). However, the AML/CFT regime in India has just started earnestly, and it still has to go a long way before stabilizing and achieve tangible results.
Research limitations/implications
In the Indian context, only few of the effectiveness indicators of the FATF methodology 2013 could be selected due to the limited availability of data, as much of the information maintained by various stakeholders, including reporting entities, FIU-India and other investigative and enforcement agencies, is kept confidential. Thus, it is difficult to establish the effectiveness of enforcement function of AML. Evaluation of effectiveness of AML is judged on the basis of convictions and confiscations.
Originality/value
There is a dearth of studies assessing the reporting system under PMLA and thus this paper attempts to throw some insights on the outcome of AML chain, especially the impact of reporting suspicious transactions.
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This paper aims to inform the readers about the existing financial intelligence tools that are being used by financial intelligence units. It tries to demonstrate, with the help…
Abstract
Purpose
This paper aims to inform the readers about the existing financial intelligence tools that are being used by financial intelligence units. It tries to demonstrate, with the help of a literature review, what the limitations of these tools are and how these limitations hinder the potential of the financial intelligence tools for early detection of terrorist financing activities.
Design/methodology/approach
The literature review method was adopted to discuss the financial intelligence tools, their limitations and the implications of the limitations for early detection of terrorist financing activities.
Findings
It was found that although the financial intelligence tools were introduced with a view to detect terrorist financing activities early, there are some inherent limitations of the tools relating to technical design features and operational procedures that hinder early detection of terrorist financing activities.
Research limitations/implications
The existing financial intelligence tools need to be repaired by removing the inherent limitations of the tools.
Practical implications
The financial intelligence units should take into cognizance the importance of early detection of terrorist financing activities for preventing terrorist attacks and need to redesign the existing tools in such a way that make these tools effective for early detection of terrorist financing activities.
Social implications
Peace will be established in society by preventing terrorist attacks through early detection of terrorist financing activities.
Originality/value
The originality of the paper lies in identifying the limitations of the existing financial intelligence tools for the early detection of terrorist financing activities.
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The purpose of this study is to make clear the structure of suspicious transaction reporting system in Japan from perspective of knowledge management. Because of the…
Abstract
Purpose
The purpose of this study is to make clear the structure of suspicious transaction reporting system in Japan from perspective of knowledge management. Because of the institutionalization of law, suspicious transaction reports in Japan have increased, but most of these reports are from financial institutions. Moreover, it cannot be said that the effect is used completely. It is important to increase the accuracy of the data mining method and incorporate the concept of knowledge management. Furthermore, it is desirable to use suspicious transactions from a global “knowledge management” perspective.
Design/methodology/approach
Based on the case of the Japanese transaction reporting system, Global knowledge management of suspicious transaction reporting system would be considered.
Findings
It is effective for money laundering countermeasures to deepen knowledge management of data → information → knowledge → wisdom. This brings the refinement of typology at the transaction unit to the upper level. This repetition has become more advanced and generalized knowledge. Knowledge transferred from national stage to international stage is organized as further information → knowledge → wisdom by collecting data based on that knowledge. By repeating this systematization in the process of knowledge management, global prevention measures against money laundering would be disseminated. As the result of these efforts, effective counter measures against money laundering could be sharper than before.
Originality/value
This is the first study about the analysis of suspicious transaction reporting system in Japan linked to the global knowledge management.
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Aspalella A. Rahman and Harlida Abdul Wahab
This paper aims to analyse the anti-money laundering (AML) obligations imposed on bankers as the main reporting entities under the AML regime in Malaysia. Apart from discussing…
Abstract
Purpose
This paper aims to analyse the anti-money laundering (AML) obligations imposed on bankers as the main reporting entities under the AML regime in Malaysia. Apart from discussing the relevant provisions, several court cases were also examined to identify the problems which arise in the implementation of the law and the risk of dismissal that bankers may face.
Design/methodology/approach
This paper mainly relies on statutes and court cases as its primary sources of information. It is supported by secondary data to justify the analysis. This paper also uses an analytical descriptive approach to analyse relevant provisions from statutes and to examine current court cases regarding the implementation of the AML obligations on bankers.
Findings
It is submitted that the AML legislation imposes a significant burden of reporting requirements on the bankers, failure of which may justify the dismissal or termination of their services. In other words, the law has not only altered the way bankers deal with their customers but also poses substantial legal risks to their security of tenure. Indeed, getting the right balance between the need to combat money laundering and the interests of bankers is a difficult exercise.
Originality/value
This paper provides an analysis of the liability of bankers under Malaysian AML laws. It is hoped that the content of this paper can provide some insight into this particular area for bankers, enforcement authorities, practitioners, academics, policymakers and legal advisers, not only in Malaysia but also elsewhere. The findings of this paper also highlight the risks that bankers may face for non-compliance with the reporting obligations under the AML laws.
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The purpose of this paper is to examine the effectiveness of the Financial Intelligence Unit (FIU) of Bangladesh and India in efforts of combating money laundering by these…
Abstract
Purpose
The purpose of this paper is to examine the effectiveness of the Financial Intelligence Unit (FIU) of Bangladesh and India in efforts of combating money laundering by these countries through a comparative assessment of several aspects of both FIUs.
Design/methodology/approach
The two FIUs are compared by using a “multiple case design” method of assessment. The framework for assessment was developed following the earlier models developed by scholars and recommendations of international institutions working on money laundering. Publicly available information from the respective websites of FIUs and annual reports has been used to complete the study.
Findings
The study has found that FIUs of both countries have improved significantly in fulfilling their mandates. There are several commonalities and differences between the two agencies. Despite showing improvement in several respects, both countries need to address certain basic deficiencies of the existing framework to make the agencies more effective.
Originality/value
It is supposed that this study will assist both countries to transform their existing FIUs to robust agencies in anti-money laundering efforts by taking care of the weaknesses identified here. It is hoped that the present study will encourage similar studies regarding the problematic areas of FIUs of Bangladesh and India as identified and in respect of FIUs of other countries.
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