Routine activity theory and the dynamics of money laundering: reassessing emerging threats in banking operations

PurposeThis paper aims to explore the obstacles that the ethical guidelines of legal professionals pose in the implementation of an effective anti-money laundering regime, established in the law on anti-money laundering in Indonesia. Some compliance schemes have been developed to integrate the participation of gatekeepers in anti-money laundering efforts, but the solution to mitigate the challenges must be implemented through the participation of the legal profession.Design/methodology/approachThe study uses a qualitative research methodology, including a triangulation of interviews with relevant experts, literature review and analysis of regulations. A deductive approach is employed to analyse the data.FindingsThe legal profession’s ethical regulations and laws were considered to be the cause for the Indonesian Government’s inability to implement the anti-money laundering regime. The findings show two practical solutions that could be implemented: A government policy for the amendment of the anti-money laundering law and organizational policy to increase support for the anti-money laundering regime; and active participation of legal professionals in an effective anti-money laundering regime in Indonesia.Originality/valueThis study provides insight into the participation of the legal profession in anti-money laundering efforts.

In the recent past, more countries are becoming vulnerable to the risks of money laundering and its contagious effects. According to the International Monetary Fund (IMF), the scale of money laundering globally could be between 2% and 5% of World Gross Domestic Product at the very lowest. This translates into a range of anything between US Dollars 590 billion to USD 1.5 trillion of laundered money per year.According to a very recent release by the Nigerian Economic and Financial Crime Commission (EFCC), an estimated $129 billion dollars (equivalent to N21 trillion Naira) was illicitly transferred out of Nigeria in the last ten years (2003-2013). The sources of the funds are often corruption, tax avoidance, tax evasion, illegal mining activities, drugs and human trafficking. The Nigerian Financial Intelligence Unit domiciled with the EFCC estimates that between 2009 and 2013, about $25.4 billion dollars were moved out of the country through cross border physical movement of cash and financial instruments. While these figures may not be necessarily indicative of the proceeds of crime, it shows vulnerabilities associated with cash movement within and outside the West African sub-region..The African region and indeed most of the developing countries are vulnerable to money laundering and terrorist financing particularly because of their cash-based and open economies. In Africa, this is further aggravated by the porous and weak controls at the borders. Combating money laundering and terrorist financing in these economies is further complicated by weak or ineffective regulation of financial institutions, lack of comprehensive legal framework, weak law enforcement agencies and poor coordination and collaboration between law enforcement agencies and financial regulatory bodies.Recent studies, including the ones carried out by the Inter-Governmental Action Group Against Money Laundering in West Africa (GIABA) and the Financial Action Task Force (FATF), suggest that advances in technology and the progressive tightening of Anti-Money Laundering (AML) regulations are leading money launderers to make more complex arrangements outside the formal financial services industry, such as the use of various professional services, and in particular the real estate business, legal practitioners, tax consultants, chartered accountants and designated Non-Financial Institutions or sectors, such as the International football, casinos and gaming, hotels, supermarkets, dealers in luxury goods, cars and jewelry.The above opportunities and skills acquired by money launderers and their collaborators led to the renewed strategy and initiatives adopted by the Nigerian Government between 2011 and October 2013 in combating money laundering and terrorism financing in Nigeria. This resulted in the promulgation of the Money Laundering (Prohibition) Act, No. 11, 2011, which inter alia, repealed the 2004 Act, made comprehensive provisions to prohibit the financing of terrorism, provide for appropriate penalties and expand the scope of supervisory and regulatory authorities so as to address the challenges faced in the implementation of the anti-money laundering regime in Nigeria. A year later, amending the 2011 Act, the Money Laundering Act, No.1, 2012 introduced new initiatives that greatly improved and added value to the provisions of sections 2, 3, 6, 9, 11, 15, 16, 20, 23 and 25 of the amended 2011 Act. Furthermore, the other recent trend is the provision for liability regime for financing of terrorism under the Terrorism (Prevention) Act, 2011 as amended by the 2013 Terrorism (Prevention)(Amendment) Act and strengthened by the 2013 Regulations on the Freezing of International Terrorists Funds and other related Measures.It is against this background that this paper seeks to realize the following objectives:1. To examine why and how is combating money laundering and financing of terrorism a top priority for the international community;2. To appraise the development and initiatives reflected in the legal and institutional frameworks in combating money laundering and financing of terrorism in Nigeria;3. To highlight the critical roles of financial regulators in regulating money laundering and terrorism financing in the banking, insurance and capital market sectors of the Nigerian economy;4. To conclude with some recommendations.

With the advent of the Internet and the emergence of cybercrimes (e.g., cyber stalking, cyber harassment), criminologists have begun to explore the empirical utility of lifestyle exposure and routine activity theories (RATs) to account for personal victimization as a consequence of cyber abuse. Available cyber abuse studies have produced inconsistent empirical support for both models, which has reignited the debate about whether terrestrial theories, such as RAT, will ever be able to adequately explain cybercrimes due to the spatial and temporal disconnect between the theories and the cyber environment. This article reviews existing cyber abuse scholarship, explores potential reasons for the weak empirical support for routine activity and lifestyle exposure theories in cyberspace, and proposes several directions for future research. We suggest that to further our understanding of cyber abuse processes, scholars need to carefully define and operationalize the key theoretical concepts in the light of latest developments in RAT (i.e., addition of new controllers—handlers and place managers, and super controllers), and conduct in-depth qualitative studies, as well as quantitative studies, that employ robust methodological designs and multi-level statistical analyses.

PurposeThis paper provides examples of how illicit financial flows (IFFs) are occurring through the formal banking and financial services sector. The purpose of this paper is to explore which elements of anti-money laundering (AML) compliance need to be addressed to strengthen the banking response and reduce the impact of IFFs within the banking sector.Design/methodology/approachThe paper uses a number of sources of secondary data including the Swiss leaks data for HSBC and also the Permanent Sub Committee Report on HBUS in the USA, the OECD report on money laundering compliance and Financial Action Task Force (FATF) guidelines on beneficial ownership. It links this information to the relevant IFF reports produced through Global Financial Integrity to highlight the connection between banking AML compliance and IFF transfers through the banking sector.FindingsThe main findings from the analysis are that banks have a greater legal responsibility towards detecting and reporting suspicious transactions than they would have previously considered. This includes identifying the source and purpose of fund transfers and establishing the beneficial ownership of recipients.Research limitations/implicationsThe research topic is new; therefore, analysis papers and other academic writing on this topic are limited.Practical implicationsThe research paper has identified a number of implications to the banking sector on addressing AML deficiencies, especially the need to improve standards of beneficial ownership verification and customer due diligence (CDD) checks for politically exposed persons.Social implicationsThis paper has implications for the international development and the global banking sector. It will also influence approaches to AML regulation, risk assessment and audit within the broader financial services sector.Originality/valueThe originality of this paper is the link between the HSBC cases and IFFs and the implications this will have for future AML compliance processes across the banking sector.

PurposeThis paper uses the recent (August 2015) FIFA arrests to provide an example of how illicit financial flows are occurring through the formal banking and financial services sector. The purpose of this paper is to explore which elements of anti-money laundering (AML) compliance need to be addressed to strengthen the banking response and reduce the impact of IFFs within the banking sector.Design/methodology/approachThe paper is based on the indictment document currently prepared for the FIFA arrests and the District Court case of Chuck Blazer the FIFA Whistleblower. It uses the banking examples identified in the indictment as typologies of money laundering and wire fraud. Corresponding industry reports on AML compliance are included to determine where the major weaknesses and gaps are across the financial service.FindingsThe main findings from the analysis are that banks still have weak areas within AML compliance. Even recognised red flag areas such as off shore havens, large wire transfers and front companies are still being used. The largest gaps still appear to be due diligence and beneficial ownership information.Research limitations/implicationsThe research topic is very new and emerging topic; therefore, analysis papers and other academic writing on this topic are limited.Practical implicationsThe research paper has identified a number of implications for the banking sector, addressing AML deficiencies, especially the need to consider the source of funds and the need for further enhanced due diligence systems for politically exposed and influential people and the importance of beneficial ownership information.Social implicationsThis paper has implications for the international development and the global banking sector. It will also influence approaches to AML regulation, risk assessment and audit within the broader financial services sector.Originality/valueThe originality of this paper is the link between the emerging issues associated with allegations of bribery and corruption within FIFA and the illicit financial flow implications across the banking sector.

Purpose – This paper aims to provide a macro analysis of the USA’s anti-money laundering (AML) legislation. In examining the context and consequences of these regulations, a general determination can be made on the effectiveness of the current US AML legislation. The major AML regulations in the USA are covered under the Bank Secrecy Act, USA Patriot Act and the Office of Foreign Assets Control. It is difficult to determine what constitutes as implementation and maintenance of effective AML Compliance Programs because US federal AML requirements remain largely dynamic. This paper will provide some context to why certain major AML regulations were established as well as the reasoning behind their implementation. This paper will then attempt to determine the effectiveness of current AML regulations, particularly on the banking sector, by looking at several cases of alleged failure to maintain effective AML Compliance Programs. An examination will be conducted on HSBC’s $1.9 billion settlement in 2012 to the US government, as HSBC failed to establish a reasonable AML program according to the US Department of Justice press releases. Design/methodology/approach – A brief description of major US AML regulations pertaining to the 2012 HSBC case is first made. Also, a look into the frequency of suspicious activity report (SAR) filings as well as initiated money laundering investigations is made. The paper critically analyzes the Financial Action Task Force (FATF)’s evaluation of US AML regulations. Findings – It is evident that the FATF held an accurate evaluation of US AML regulations being both very comprehensive and severely enforced. The main criticism is with the implementation of these regulations driving adverse economic and social effects. Financial institutions fear being charged with not having a proper AML program; this causes banks to be more inclined to inflate SARs as well as engage in financial exclusion. It is difficult to prevent these adverse effects, as they directly result from having strict and comprehensive AML legislation, which is necessary to prevent and detect money being laundered. Practical implications – A determination as to whether US AML regulations need strengthening or is too strict in that it causes adverse effects. Originality/value – A macro analysis of America’s AML legislation is severely needed. Many papers on the issue lack a thorough description of the large-scale socio-economic effects of the AML programs of American financial institutions.

Indonesia was ranked 61 out of 164 countries (6.32 out of 10) based on the Basel AML Index in 2024. The Basel AML Index score reflects a country's vulnerability to money laundering and terrorist financing. Although not among the countries with the highest risk globally, this score indicates that Indonesia still has work to do to improve the effectiveness of its AML/CFT/CPF framework. Moreover, the newly emerging money laundering schemes, one of which involves untraceable assets like cryptocurrency, make it more difficult to carry out legal proceedings. The novelty in this study is the discovery of assets disguised in money laundering, which is expected to ease the Financial Transaction Reporting and Analysis Center (Pusat Pelaporan dan Analisis Transaksi Keuangan-PPATK) to track hard-to-trace assets. This study was conducted using a juridical-normative method. The result showed various methods in money laundering activities, namely transferring and/or investing funds obtained from illicit activities, corruption, bribery, fraud, irregularities through the banking sector, capital markets, and other means such as deposits, stocks, bonds, and various financial instruments. The various modus operandi carried out by corrupt individuals in money laundering in various sectors require more attention from PPATK.

PurposeIllegal 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/approachThis 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.FindingsThis 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/implicationsThis 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/valueThere 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.

PurposeThis study aims to investigate the impact of FinTech on money laundering within the context of Nigeria. The motivation stems from observations suggesting that FinTech platforms might be used for illicit money transfers, particularly from developed to developing economies. While existing literature predominantly highlights the positive aspects of FinTech, there's a dearth of studies addressing its potential association with money laundering. Current understanding of this relationship relies heavily on anecdotal evidence derived from reported or convicted cases. Thus, the primary goal of this study is to analyze the influence of FinTech on money laundering while also considering the moderating effects of financial regulation and financial literacy as perceived by users. The research delves into regulatory perspectives concerning money laundering and FinTech.Design/methodology/approachTo fulfill the study's objectives, a quantitative research design is used. A survey of 248 FinTech users in Nigeria is conducted using structured questionnaires. Data collected from the questionnaires is analyzed using partial least square structural equation modeling (PLS-SEM).FindingsThe quantitative analysis revealed a significant relationship between FinTech and money laundering and that financial regulation moderates the relationship between FinTech and money laundering in Nigeria, but such was not established with respect to financial literacy. The results of the quantitative approach that uses secondary data are consistent with the qualitative approach. FinTech the results indicate the presence of technology induced money laundering in Nigeria. Regulating technology-based anti-money laundering poses serious challenges for developing countries due to the absence of specific laws that mitigate the threats.Research limitations/implicationsThe paper focuses on Nigeria as a case study, which may limit the generalizability of the findings to other countries with different FinTech ecosystems, regulatory frameworks and financial literacy levels.Practical implicationsThe finding is useful in developing guidelines and regulations by policymakers and strategies by practitioners in relation to FinTech, money laundering, financial regulation and financial literacy. On the basis of the above, the authors recommend regulation at the national and industry level to mitigate the adverse effect of technology on money laundering. Thus, multilateral partnerships can help in tackling tech-induced money laundering through strengthened cooperation.Social implicationsMoney laundering risks: The study highlights that FinTech, while beneficial, also poses significant risks for money laundering activities, especially in developing countries like Nigeria. Regulatory Importance: It emphasizes the critical role of financial regulations in mitigating the risks associated with FinTech and money laundering. Financial Literacy: The paper suggests that financial literacy does not significantly moderate the relationship between FinTech and money laundering, indicating the need for stronger regulatory measures rather than relying solely on financial literacy. Policy Formulation: The findings are crucial for policymakers to formulate strategies that balance the benefits of FinTech with the need to prevent money laundering and ensure financial system integrity.Originality/valueThis research presents a novel approach to methodology, specifically focusing on the qualitative research design, addressing population, sampling techniques and data collection methods. It emphasizes techniques aimed at ensuring measurement quality and achieving research objectives. Data collection used survey questionnaires, while analysis involved both statistical package for social science (SPSS) and PLS-SEM. SPSS facilitated descriptive and preliminary analyses, while PLS-SEM confirmed measurement quality and tested hypotheses. Ethical considerations were paramount throughout the research process, underscoring the commitment to maintaining originality in research endeavors.

Money laundering and related financial crimes, such as fraud and terrorism financing, pose a significant threat to the integrity and stability of South African financial markets. This article explores the application and use of artificial intelligence (AI) to detect and prevent money laundering in South African banking institutions. The implementation of big data technologies, data processing analytics and AI could enhance the detection and prevention of money laundering activities in South Africa's banking sector. AI should be carefully utilised to improve the detection of suspicious activities and the accuracy of financial intelligence, and to combat evolving money laundering techniques. The article also examines the benefits and challenges of implementing AI as an anti-money laundering (AML) measure in the South African banking sector. These include the need for quality data, integration with existing regulatory systems, regulatory compliance and ethical considerations. The article highlights the potential use of AI in transaction monitoring, customer due diligence, outcomes-based risk assessment and the improved detection of suspicious transactions. This could be done by utilising AI to enhance the effectiveness and efficiency of AML measures. The importance of effective coordination between banking institutions, regulatory authorities and law enforcement bodies is also highlighted as a key component of leveraging AI to combat money laundering and related financial crimes in South Africa's banking sector.

The rapid deployment of Artificial Intelligence (AI) in Anti-Money Laundering (AML) practices within the financial industry presents significant ethical and governance challenges that must be navigated effectively. As financial institutions increasingly adopt AI technologies to enhance their AML efforts, concerns regarding data privacy, algorithmic bias, and transparency emerge. This review explores the ethical implications of AI in AML and offers governance strategies to mitigate risks while ensuring compliance with regulatory frameworks. One of the primary ethical challenges in deploying AI for AML is the potential for algorithmic bias. AI systems trained on historical data may inadvertently perpetuate existing biases, leading to discriminatory practices in transaction monitoring and customer profiling. This raises serious concerns about fairness and equity in the financial sector. Addressing algorithmic bias requires the implementation of rigorous testing and validation processes to ensure AI systems function impartially across diverse populations. Data privacy is another critical issue. The extensive data collection required for effective AML monitoring raises questions about the protection of sensitive customer information. Financial institutions must establish robust data governance frameworks that prioritize privacy and comply with regulations such as the General Data Protection Regulation (GDPR). Ensuring transparency in how data is used and providing clear communication to customers about data practices is essential for building trust. Effective governance frameworks are crucial in navigating these ethical challenges. Financial institutions should adopt a multi-disciplinary approach that includes ethical guidelines, compliance measures, and risk management strategies. Establishing oversight committees can help ensure that AI deployment aligns with ethical standards and regulatory requirements. Furthermore, ongoing training for employees on the ethical use of AI in AML can foster a culture of responsibility and accountability. This review highlights the need for a balanced approach to AI deployment in AML, emphasizing the importance of ethical considerations and governance structures. As the financial industry continues to evolve, addressing these challenges will be essential for maintaining trust, ensuring compliance, and leveraging AI’s potential to enhance AML practices effectively.

Purpose – This paper aims to provide an analysis of the HSBC Swiss bank accounts scandal, from the perspective of anti-money laundering (AML) compliance, and considers the future AML implications for the banking sector and HSBC. It reviews the use of a whistleblower to highlight AML irregularities rather than official reporting through the current AML compliance system. Design/methodology/approach – The paper uses secondary data to offer a viewpoint on the HSBC issues from a money laundering and financial crime perspective. The paper extracts key statements from staff at HSBC and regulators and examines how AML risk assessment was undertaken at this time and what changes need to occur in the future. It considers the implications of the current theoretical context for AML from an agency theory perspective. Findings – The main findings are that AML compliance needs to be embedded into a proactive corporate social responsibility approach rather than relying solely on regulation to improve detection and reporting of money laundering activity. Research limitations/implications – The research topic is new, and therefore, analysis papers and other academic writing on this topic are limited. Future research could consider the outcomes of the Swiss bank’s attempts to prosecute the whistleblower and whether this would have implications for future internal reporting and whistleblowing approaches to support AML compliance. Practical implications – The implications from the research are the recommendations to the banking sector on addressing AML deficiencies especially within the context of an evolving level of criminal sophistication towards money laundering. Social implications – The paper supports the argument for integrating social corporate responsibility and AML compliance to produce a whole bank response to financial crime. This is in contrast to the current systems, which seem to be prevalent within the financial services, of profit and business being seen as separate rather than integral to regulation and control. Originality/value – The originality of this paper is the current example of the HSBC Swiss case and the focus specifically on AML compliance rather than tax evasion, which has been the media angle on the issue.

The Silk Road, as the pioneering online marketplace utilizing cryptocurrencies as a payment system, revolutionized illicit activities in the digital realm. This research delves into the implications of implementing cryptocurrencies within the Silk Road, focusing on the surge of cybercrime and money laundering. Through qualitative research methodologies, including case studies such as United States of America v. Ross Ulbricht, along with films, movies, and documentaries, the study sheds light on the nefarious consequences of cryptocurrency adoption in this dark web marketplace. Cryptocurrency was applied on Silk Road to provide an anonymous payment system without the influence of legal authorities. The findings underscore the primary motivation behind incorporating cryptocurrencies into the Silk Road - the provision of an anonymous payment system shielded from the reach of law enforcement. By leveraging cryptocurrencies, the Silk Road facilitated illegal transactions, including the sale of illicit drugs, counterfeit identification documents, and various other illegal goods and services. Additionally, the platform acted as a hub for money laundering activities, enabling the conversion of cash into anonymous virtual assets, thereby obfuscating the authorities' ability to trace the illicit funds. This research contributes to a comprehensive understanding of the intricate interplay between cryptocurrencies, cybercrime, and money laundering on the Silk Road. The insights gleaned from this study underscore the urgent need for regulatory measures to mitigate the risks associated with anonymous cryptocurrency transactions and enhance law enforcement capabilities to combat illicit activities in the digital landscape.

Customer due diligence is a means of ensuring that financial institutions know their customers well through know-your-customer (KYC) tools and related measures. Notably, customer due diligence measures include the identification and verification of customer identity, keeping records of transactions concluded between a customer and the financial institution, ongoing monitoring of customer account activities, reporting unusual and suspicious transactions, and risk assessment programmes. Accordingly, financial institutions should ensure that their customers are risk assessed before concluding any transactions with them. The regulation of money laundering is crucial to the economic growth of many countries, including South Africa. However, there are still numerous challenges affecting the banks and other role players’ reliance on customer due diligence measures to combat money laundering in South Africa. Therefore, a qualitative research methodology is employed in this article to unpack such challenges. The challenges include the failure to meet the identification and verification requirements by some South African citizens, onerous documentation requirements giving rise to other persons being denied access to the formal financial sector, and the lack of express provisions to regulate the informal financial sector in South Africa. Given this background, the article discusses the challenges associated with the regulation and implementation of customer due diligence measures to enhance the combating of money laundering in South African banks and related financial institutions. It is hoped that the recommendations provided in this article will be utilised by the relevant authorities to enhance customer due diligence and effectively combat money laundering activities in South African banks and related financial institutions.

PurposeThe purpose of this paper is to assess the role of commercial banks in combating money laundering in the People's Republic of China (PRC). An effective anti‐money laundering (AML) regime within the banking sector can make a significant contribution to the fight against money laundering both nationally and internationally.Design/methodology/approachAn assessment based on the AML law of China, rules and regulations issued by the People's Bank of China (PBOC) was conducted on commercial banks in Xichang City. A questionnaire and guided oral interviews were employed to collect data for the study.FindingsThe study found that all the five banks that responded to the questionnaire have, for the period 2006‐2010, not been assessed by the PBOC, despite being independently audited by external auditors. All banks have AML policies and procedures in place, have designated a compliance officer for AML activities and trained their employees.Research limitations/implicationsOnly five banks responded to the questionnaire as most of them were not willing to release information on their AML activities, for various reasons. This raises the question of generalizing the findings of the current study.Originality/valueThe paper shows the extent to which AML rules and regulations have been embraced and implemented by commercial banks at a micro level. It is envisaged that the findings of this study will encourage similar studies in other cities of the PRC and help policy makers, especially at the PBOC, to re‐align their strategies in line with what is obtaining on the ground.