Corruption, Money Laundering, Secrecy and Societal Responsibility of Banks

Abstract

Against the backdrop of corruption and money laundering this paper explores the extent to which the anti money laundering framework has the potential to prevent corruption. The paper starts with an examination of the anti-corruption conventions (in particular, the United Nations Convention against Corruption (UNCAC)) and how they accommodate the anti-money laundering discourse within their overall framework. This is followed by an examination of due diligence procedures including those in relation to PEPs (Politically Exposed Persons) that banks are expected to follow to counter money laundering. Using the UK Financial Services Authority’s 2011 Report on the managing of money laundering risks by banks. Citing the HSBC money laundering case, this paper argues that anti-money laundering (AML) legislative measures (be they hard or soft) are of limited use only since they are dependent on rigorous application by the banks. To improve the contribution of AML measures to combat corruption, this paper argues that banks, who in some instances encourage this activity through their commitment to bank secrecy, should not be solely profit-seeking entities but should see themselves as having societal responsibility, both at the local and global level. Viewed from this perspective banks would not face the temptation of engaging with high-risk customers and PEPs thus strengthening the fight against corruption. Adoption of such an approach on the banks’ part would also curb other social ills such as human trafficking and drug trafficking that are the sources of illicit funds and terrorist activities that use illicitly or illegitimately obtained funds for the furtherance of their causes and ideologies.