Research on Constraints in Anti-Money Laundering (AML) Business Process in China Based on Theory of Constraints

Abstract

Anti-money laundering is a pressing issue in today's economy. With the newly launched Chinese anti-money laundering regulation, this issue has drawn more and more attention from governments, financial institutions, and scholars. However, there exist many problems in the suspicious activity reports (SARs), large-value reporting, delivering and analyzing processes. In order to further enhance financial supervision efficiency, this paper aims to find out the constraints for AML business in China. After semi-structured interviews with financial institutions and government agencies, we describe the business process in China in the process of dealing with SARs and large-value reports based on theory of constraints (TOC). We then extend our research by a comprehensive field study, and find that the main constraints for financial institutions are the incapable SARs extracting system, the immature AML internal control mechanism, the changing AML administrative rules and regulations, the problematic AML motivation, the skill incapability, and the low training efficiency. As for regulation agencies, the key point that affects the efficiency is data problem and SARs analysis tools. Those findings can guide our agencies to adjust current AML work and solve bottlenecks in AML so as to enhance AML efficiency.