Anti-money Laundering Compliance Research Articles

Digital Financial Services Effort in Enforcing Anti-Money Laundering through Open Banking Optimization

Technology has revolutionized finance, but seamless services increase fraud risks. As digital finance grows, anti-money laundering (AML) systems struggle with high transaction volumes. The main objective of this study is to verify whether open banking catalyzes the efficiency of transaction monitoring in AML. Another objective is to analyze the current agenda of regulators in Indonesia, which is related to the Indonesia Payment Systems Blueprint 2025 and customer data security. The Delphi technique pinpointed contemporary AML compliance technologies, encompassing money laundering, Regulatory Technology, and regulatory bodies. The article delves into a comparative analysis between Regulatory Technology and financial crime, which emphasizes several actions to eradicate money laundering, such as strengthening the AML system, customer screening, and allowing cross-data sharing between institutions. In addition, this paper explores RegTech's limitations and forthcoming hurdles regarding AML compliance. The finding shows that open banking catalyzes the efficiency of transaction monitoring in AML and supports the regulator's agenda to combat money laundering with some requirements.

Blockchain solutions with consensus algorithms and immediate finality: Toward Panopticon-style monitoring to enhance anti-money laundering

Banks can reduce resources spent on anti-money laundering (AML) compliance with blockchain-based transaction infrastructure. We consider AML compliance as a superset of know-your-customer (KYC) and transaction monitoring capabilities. We carried out this research with Danske Bank and Concordium, using internal documents and interviews that served as empirical data. We show how storing digital representations of verified IDs with a blockchain can automate tasks and reduce redundant verification in KYC onboarding. Blockchain transparency also improves identifying counterparties, determining funds sources, and creating alerts in transaction monitoring. These reduce time and labor costs for AML compliance, which may lead to smaller banks. When more banks commit to layer-1 blockchain technology, the benefits of blockchain-based AML will increase. We carried out this theory-based qualitative research and encourage ECRA readers to recognize that the emerging technology innovations we study in this article have not yet been widely adopted and implemented by financial services firms. We also include a theoretical model with study hypotheses to make the main constructs that we investigate easily understood by non-technical ECRA readers. The findings we have developed are consistent with early-stage exploration in our research context and are intended to encourage more well-developed empirical results as the passage of time permits such work to be undertaken.

Anti-Money Laundering Compliance and Financial Performance of Commercial Banks in South Sudan: A Survey of Literature on Internal Policies

Anti-Money Laundering Compliance and Financial Performance of Commercial Banks in South Sudan: A Survey of Literature on Internal Policies

A Survey of Literature on Suspicious Transaction Monitoring: Anti-Money Laundering Compliance and Financial Performance of Commercial Banks in South Sudan

A Survey of Literature on Suspicious Transaction Monitoring: Anti-Money Laundering Compliance and Financial Performance of Commercial Banks in South Sudan

Anti-Money Laundering Compliance and Financial Performance of Selected Commercial Banks in South Sudan: A Survey of Literature on Customer Due Diligence

Anti-Money Laundering Compliance and Financial Performance of Selected Commercial Banks in South Sudan: A Survey of Literature on Customer Due Diligence

Dark side of decentralised finance: a call for enhanced AML regulation based on use cases of illicit activities

PurposeThis paper aims to focus on the need for an enhanced anti-money laundering (AML) regulation for decentralised finance (DeFi) to protect the integrity of global financial systems against illicit activities. Research highlights the requirement for a robust regulatory strategy for the fast-paced DeFi evolvement.Design/methodology/approachThis study used doctrinal legal research by analysing legislation, which involved creating use cases to illustrate different aspects of potential illicit activities via the DeFi ecosystem. Various DeFi applications were assessed for the potential regulatory responses and outcomes.FindingsThis paper offers valuable insight into the regulatory challenges presented by DeFi. This study addresses the blind spots leveraged by criminals afforded by the DeFi’s decentralised nature. This paper offers a comprehensive examination of DeFi regulatory challenges based on use-case scenarios and provides recommendations for regulators on how to address them effectively.Originality/valueThis paper proposes measures for regulatory authorities to minimise money laundering risks through new channels such as decentralised exchanges, non-custodial wallets and cross-chain bridges. This study concludes with the future directions for DeFi regulation and AML compliance.

An Improve the Onboarding Process in Trade Finance Applications Using Blockchain Technology

Today, challenges in Know Your Customer (KYC) and Anti-Money Laundering (AML) processes include inefficiencies, data silos, and the risk of fraudulent activities. Integrating blockchain technology offers a transformative solution to these issues. Blockchain's decentralized and tamper-resistant nature ensures a single, verifiable source of truth for customer information, reducing data discrepancies across institutions. Smart contracts can automate AML compliance checks, ensuring real-time monitoring and rapid response to suspicious activities. The immutability of blockchain records enhances auditability, facilitating regulatory compliance. Furthermore, the secure and transparent nature of blockchain instills trust among stakeholders, fostering collaboration in combating financial crimes. By leveraging blockchain in KYC and AML processes, the financial industry can achieve enhanced efficiency, reduced fraud, and strengthened regulatory adherence.

The video game industry’s money laundering problem: when do game publishers become money transmitters?

Objective: to study the problem of money laundering in video game industry and to develop measures to minimize this illegal behavior.Methods: dialectical approach to cognition of social phenomena, allowing to analyze them in historical development and functioning in the context of the totality of objective and subjective factors, which predetermined the following research methods: formal-logical and sociological.Results: as enthusiasm for immersive multiplayer video games continues to grow, players are placing a high degree of value on virtual items like in-game currency, weapons, vehicles, and “skins”. The value of these items, paired with features that allow players to buy and sell them, has opened the door to criminals who can exploit these features to launder money. The United States maintains a robust legal framework to prevent and punish money laundering. One key piece of that framework is imposing certain reporting and recordkeeping duties on “financial institutions”, including money transmitters. If a company is subject to these duties, it must abide by complex and expensive anti-money laundering compliance requirements.Scientific novelty: the article, for the first time, considers the issue whether a game publisher is a criminal money transmitter. The paper takes up that question detailing the specific game features and publisher policies that, under current rules and guidance, lead to or rebuff the conclusion that a game publisher is a money transmitter.Practical significance: the main provisions and conclusions of the article can be used in scientific, pedagogical and law enforcement activities when considering the issues related to the qualification of actions of video games publishers in case of their participation in money laundering.The article was first published in English language by Fordham Law Review Online. For more information please contact the editorial office.For original publication: Roomberg, M. (2023). The video game industry’s money laundering problem: when do game publishers become money transmitters?, Fordham Law Review Online, 91, 161–177.Publication URL: https://fordhamlawreview.org/law-review-online/the-video-game-industrys-money-laundering-problem-when-dogame-publishers-become-money-transmitters/

Navigating the Complex Landscape of Anti-Money Laundering Compliance: A Technical Perspective

Navigating the Complex Landscape of Anti-Money Laundering Compliance: A Technical Perspective

Machine learning in predicting anti-money laundering compliance with protection motivation theory among professional accountants

Money laundering represents a significant global threat, necessitating the vigilance of professional accountants in detecting and reporting suspicious customer activities within their jurisdiction to the relevant authorities. Despite the legal obligation to comply with anti-money laundering regulations, professional accountants' adherence to these measures remains insufficient. Previous research on machine learning techniques for combating money laundering has predominantly concentrated on predicting suspicious transactions, rather than evaluating compliance behavior. This study aims to develop a machine learning prediction model to assess the inclination of professional accountants towards adhering to anti-money laundering regulations, serving as an early signal system to gauge their willingness to abide by the law in their professional responsibilities. The research elaborates on the design and implementation of machine learning models based on three algorithms: Decision Tree, Gradient Boosted Tree, and Support Vector Machine. The paper offers two types of comparisons from distinct perspectives: firstly, the performance of each algorithm in predicting real cases of anti-money laundering compliance, and secondly, the contribution of attributes measured by weights of correlation in different algorithms. Alongside demographic factors, the study evaluates the effectiveness of each algorithm in anti-money laundering compliance by utilizing five attributes derived from the Protection Motivation Theory (PMT). The findings demonstrate the significance of all attributes, including demography and PMT, in all machine learning models, with both Gradient Boosted Tree and Support Vector Machine achieving a proportion of variance of 0.8 or higher. This indicates the potential of these algorithms in effectively measuring and predicting professional accountants' intentions to comply with anti-money laundering regulations.

Big Data Analytics for Anti-Money Laundering Compliance in the Banking Industry

The rapid growth of the digital economy and the complexity of financial transactions have led to a significant increase in money laundering activities, posing a problem that threating the global financial system. This study examines the use of big data techniques to strengthen anti-money laundering (AML) measures, specifically in the areas of suspicious activity reporting, customer due diligence, and trade-based money laundering. According to the analysis of these applications, it has been demonstrated that big data techniques can substantially strengthen the detection and prevention of money laundering activities by providing more accurate and timely insights, streamlining compliance processes, and facilitating cross-border collaboration among financial institutions and regulators. However, challenges related to data quality, privacy, security, and the need for continuous improvement to keep up with evolving money laundering schemes remain. Overall, this research highlights the importance of leveraging big data techniques in AML and their potential for combating money laundering, providing valuable insights and solutions for maintaining the integrity of the global financial system.

Evidencing source of wealth–challenges, questions, solutions and recommendations

PurposeThe purpose of this paper is twofold. Firstly, it highlights areas of disconnect between how the financial services sector in the UK approaches the requirement to evidence source of wealth when conducting customer due diligence; the requirements of the UK’s laws and regulations in relation to evidence source of wealth; and the expectations of the Financial Conduct Authority (FCA) in this regard. It then proposes an alternative approach to evidencing source of wealth.Design/methodology/approachSemi-structured interviews have been carried out among compliance professionals in UK financial services.FindingsThis paper provides rare insight into the anti-money laundering arrangements of UK banks, an area that has not yet been widely researched in the academic literature. It highlights a lack of legal certainty in the UK’s laws and regulation around anti-money laundering and argues that the expectations of the FCA exceed both the letter and the spirit of the laws. It suggests that mixed messages disseminated by the FCA have incentivised banks to shift their focus from financial crime risk (i.e. preventing money laundering and terrorist financing, etc.) towards regulatory risk (i.e. the risk of falling foul of regulatory expectations) and proposes a change to the law and regulatory guidance to enhance the level of legal certainty needed for the law to be effective.Practical implicationsThe paper makes suggestions for a more practical and risk-based approach to anti-money laundering compliance and for a much-needed change in the law.Originality/valueIt provides unique insight into the due diligence challenges of financial services firms and argues for the FCA to propagate a more risk-based approach to enhanced due diligence.

Compliance determinants of anti-money laundering regime among professional accountants in Malaysia

PurposeMoney laundering offences occur worldwide, with recent discussions involving issues related to the low levels of compliance among professional accountants towards the anti-money laundering (AML) regime. Under the regime, professional accountants are required to implement compliance programs (Know Your Customer, Clients Due Diligent, Record Keeping) and to submit any suspicious transaction report encounters to the authorities. Due to the lack of research in this sector, this study aims to examine the compliance determinants towards AML regimes among professional accountants in Malaysia.Design/methodology/approachPremised on protection motivation theory, a questionnaire was developed and distributed among 1,100 professional accountants. Of which 275 questionnaires were returned and subjected to regression analysis.FindingsBased on the findings, “perceived risk of non-compliance” and “awareness of Anti-Money Laundering Act 2001 and Financial Action Task Force standard” were significantly related to the level of compliance towards the AML regimes. Meanwhile, “compliance cost” did not influence the compliance behaviour of professional accountants. Moreover, the findings demonstrated that awareness programs among the reporting institutions should be enhanced, specifically the professional accountants.Practical implicationsThis study recommends the professional bodies particularly professional accountants in Malaysia to establish a blueprint as a guideline for money laundering reporting.Originality/valueThis is one of the pioneer studies looking into AML compliance determinants among the professional accountants in Malaysia. This study will provide insights on the current practices and recommend ways to improve the current AML reporting practices among the professional accountants.

Money laundering risk judgement by compliance officers at financial institutions in Malaysia: the effects of customer risk determinants and regulatory enforcement

PurposeThis paper aims to provide an empirical analysis of the effects of regulatory enforcement and customer risk determinants on money laundering risk judgment. The study further explores the moderating impact of regulatory enforcement on compliance officers in the banking and money service business (MSB) sectors. The analysis is conducted to find the important factors that contribute to the issues of risk judgement among compliance officers to establish effective anti-money laundering (AML) and countering financing of terrorism compliance at the financial institutions, as highlighted in the National Risk Assessment Report 2017 by the Central Bank of Malaysia.Design/methodology/approachAn experimental study with four different scenarios of case studies distributed to 124 compliance officers at the banking and MSB sectors was conducted via online platforms. The paper uses a quantitative approach via structural equation modelling.FindingsThe result shows a significant effect of customer risk determinants and regulatory enforcement on money laundering risk judgement, taking into account competency as the control measure. A further test on the interaction effects of both determinants shows a significant result on the money laundering risk judgement. The empirical evidence indicated that regulatory enforcement influenced compliance officers’ money laundering risk judgement and suspicious transaction report submission. In other words, the banking and MSB sectors’ AML compliance significantly depends on the regulators’ enforcement activity.Research limitations/implicationsThis study is limited to two independent variables: regulatory enforcement and customer risk determinants. Future studies may consider other factors affecting compliance officers’ money laundering risk judgement, such as technical competency, knowledge management, digitalization and technology and ethical issues.Practical implicationsThis study provides several theoretical and practical implications. Emphasizing the excellent quality of judgement and, eventually, good quality of reporting the suspicious transactions will not be achieved merely from enforcing fines and punishment, but comprehensive measures must be taken. Increasing the competency and training, educating the compliance officers, supporting the industry and practitioners with incentives and digitalization, enhancing the campaign and awareness among the public and standardizing the policy shall be the good initiatives for the regulatory enforcement to establish.Originality/valueThis paper provides a valuable contribution to the body of knowledge and fulfills the significant gaps in the literature on money laundering, not to mention, the integration between behavioural studies and anti-money laundering compliance, which has scarcely been statistically evident from the research studies.

Determinant of Compliance Perceptions among Bank Officers towards Anti-Money Laundering

The purpose of this study is to investigate the perceptions of determinants of anti-money laundering compliance among banking officers in mitigating money laundering. There are three independent variables that are employed in this study to understand and analyze the level of perceived compliance among the banking compliance officers, which are the regulatory comprehensiveness, training, and awareness. The data were collected through the distribution of questionnaires to 56 banks in Malaysia. The findings of this study show that there is a positive relationship between regulatory comprehensiveness, training, and awareness on the perceived level of compliance. This study recommends that efforts should be made by the banking institution to strengthen the anti-money laundering regulation and policy to improve the efficiency of financial institutions in Malaysia. In addition, the compliance officer's competency should be enhanced to ensure better compliance quality.

An expectation-performance gap between money laundering reporting officers and their directors – evidence from Germany

PurposeMoney Laundering Reporting Officers (MLROs) carry out day-to-day anti-money laundering (AML) tasks while directors ultimately remain responsible for AML compliance. Therefore, directors’ expectations of what their MLROs do should ideally coincide with what their actual tasks to minimise liability risk. This paper aims to test for gaps between MLROs and their directors in terms of knowledge, expectations and performance of AML tasks. Likewise, it is researched whether MLROs and directors communicate well with regard to MLROs’ tasks.Design/methodology/approachThis paper first develops a model for analysing the dyadic relationship between MLROs and their directors, based on the audit expectation-performance gap. Second, a paired electronic survey of MLROs and directors of German companies was conducted in autumn 2020, testing for participants’ knowledge, expectations and performance of possible AML tasks (n = 136 pairs).FindingsWhile there is no knowledge or performance gap among MLROs and directors, expectations among them are partially unreasonable and their communication needs to be improved. Additionally, this study suggests that MLROs of German non-financial businesses are less knowledgeable, perform AML duties more poorly, and communicate less effectively with their directors.Practical implicationsTraining of MLROs and communication with their directors need to be improved. Especially in the non-financial sector, action is urgently required.Originality/valueThis paper reports the results of the first paired survey of MLROs and their directors, offering unique insights into their relationship and the status of private AML efforts.

The anti-money laundering act of 2020

Purpose The purpose of this article is to inform stakeholders about the Anti-Money Laundering Act of 2020 (AMLA), explain its impact on the U.S. anti-money laundering (AML) regime, and highlight critical updates for financial institutions. Design/methodology/approach The article provides an overview of the AMLA, and specifically addresses three key components: (1) the development of uniform beneficial ownership requirements and the creation of a beneficial ownership registry at the Financial Crimes Enforcement Network (FinCEN); (2) the expansion of FinCEN’s powers and the Bank Secrecy Act/AML program requirements; and (3) new subpoena powers with potential extraterritorial effect granted to the U.S. Secretary of the Treasury and the U.S. Attorney General for documents located at foreign banks that have a correspondent banking account in the U.S. The article also notes the purpose and goals of the AMLA. Findings The AMLA is the first major overhaul of the U.S. AML regime since the 2001 USA PATRIOT Act, and is designed to strengthen national security, protect the financial system, and simplify compliance obligations. The beneficial ownership reporting requirements represent an effort to combat illicit financial activity conducted by shell companies formed and registered in the U.S. Originality/value The article provides financial institutions with a brief overview of a lengthy new law that will impact their AML compliance obligations. Financial institutions should be on alert for forthcoming regulations.

Perception versus reality: Iranian banks and international anti-money laundering expectations

PurposeIran has been ranked by the Basel Committee on Banking Supervision and the Financial Action Task Force (FATF) as one of the foremost countries in the world for money laundering. However, Iranian banks claim that they comply with international standards for reporting suspicious activity, risk management and training. This paper aims to investigate this dichotomy between perception and reality.Design/methodology/approachA Wolfsberg-style questionnaire was sent to partners in Iranian accounting firms, which have audited domestic banks over the past five years to investigate the adequacy of risk management systems.FindingsMost Iranian banks have anti-money laundering (AML) systems, which compare favourably with those of international counterparties. Banks take a risk-based approach to potential criminal behaviour. The negative perception of Iranian banks is principally attributable to the government’s unwillingness to accede to “touchstone” international conventions. In spite of having in place AML laws, which are comparable in intent with those of the UK and the United States of America (USA), weak enforcement remains a significant impediment of which the political establishment is aware.Practical implicationsMeasures required to bring Iranian banks into compliance with international standards may be less extensive than perceptions suggest. However, failure of the government to accede to conventions stipulated by the FATF means that banks may remain ostracised by foreign counterparties for the foreseeable future.Originality/valueThis study provides a unique insight into the extent of AML compliance in Iranian banks as verified by external auditors.

RegTech solutions and AML compliance: what future for financial crime?

PurposeThis study aims to discuss the growing use of RegTech solutions by financial institutions to comply more efficiently with regulation in terms of anti-money laundering compliance and more specifically its influence on the evolution of financial crime in the next ten years.Design/methodology/approachBased on two online Delphi surveys sent to a panel of international experts composed of eight specially recruited professionals and specialists of anti-financial crime compliance and RegTech, five main predictions have been developed.FindingsIt was found that artificial intelligence would become the most impactful technology for financial institutions to fight financial crime, and that there will be a strong positive correlation between ever-more elaborated compliance programs and the level of sophistication of methods used for money laundering. Furthermore, the panel designated regulators’ recommendations as likely to be less influential than RegTech solutions, and the time required to integrate RegTech solutions for AML compliance as the main future challenge.Originality/valueThese predictions are meant to provide financial institutions and regulators with useful outlooks. While the reviewed literature focused on the role of regulations on the evolution of money laundering, this study puts stress on RegTech solutions and their impact on both compliance and financial crime.

Supporting Blockchain-Based Cryptocurrency Mobile Payment With Smart Devices

The smart device owning rate such as smart phone and smart watch is higher than ever before and mobile payment has become one of the major payment methods in many different areas. At the same time, blockchain-based cryptocurrency is becoming a nonnegligible type of currency and the total value of all types of cryptocurrency has reached USD 200 billion. Therefore, it is a natural demand to support cryptocurrency payment on mobile devices. Considering the poor infrastructure and low penetration of financial service in developing countries, this combination is especially attractive. The high storage cost and payment processing latency are the two main obstacles for mobile payment using cryptocurrency. We propose two different schemes for cryptocurrency mobile payment, one involves a centralized bank and the other one does not require any centralized party. We also provide a solution for the bank to meet KYC (know your customer)/AML (antimoney laundering) compliance requirements when it is involved in cryptocurrency mobile payment processing.