Anti-money Laundering Regulation Research Articles

‘It could have been us’. Peer responses to money-laundering violations in the Dutch banking industry

Much literature has focused on societal responses to corporate scandals, either by authorities or the public. However, there is little research on responses to corporate deviance by peers (corporations in the same industry). As corporations face a Zeitgeist characterised by increased attention to, and disapproval of, corporate deviance, they are compelled to respond to the external ‘labelling’ of their behaviour, as well as that of their peers. In this context of increasing public scrutiny, this article explores how (employees at) corporations respond to deviant peer behaviour. To examine this question, the case study of non-compliance with anti-money laundering (AML) regulations in the Dutch banking industry is utilised. Six stages of peer interactions were identified, namely, panic and fear, comparing practices, distancing, investing, and cooperation and defiance. In these six stages, condemnation between peers is incidental and mainly functions as a tool to guard their reputation (defence mechanism). Peer responses are determined by characteristics of the act (severance of the violation), actor (comparability and identification as peers), the audience (type of enforcement and public attention), and the situation (knowledge on the violation). As AML cases spread become more frequent across the industry, defence mechanisms also expand, thereby resulting in cooperation between banks and defiance of regulators.

The legal-criminal aspects of Iran’s anti-money laundering law in light of the FATF recommendations

PurposeThe purpose of this study is to examine Iran’s anti-money laundering (AML) system from a legal and criminal perspective and to understand the obstacles for international cooperation and the extent to which it aligns with financial action task force (FATF) standards. In this regard, three aspects are examined, namely, enforcement and guarantees of preventive measures, penalty for ML offences and the burden of proof.Design/methodology/approachThis subject is examined through the legal–criminal perspective, which concentrates on the effectiveness of legal measures in tackling criminal issues by focusing on criminal law. The legal–criminal viewpoint considers criminal behaviour as a breach of societal norms and strives to combat it through legal channels.FindingsIran’s AML laws and regulations are partially compliant with the financial action task force (FATF) recommendations. However, the main obstacle is not the lack of sufficient laws, rather the lack of proper implementation of these laws. In addition, there are foundational shortages, such as the absence of a national risk document to guide an action based on current risks.Originality/valueNo comprehensive study has analysed Iran’s AML laws, referring to the three main aspects of enforcement and guarantees of preventive measures, penalties for ML offenses and the burden of proof. In general, there are few research papers on Iran’s AML laws owing to Iran’s high ranking in ML/TF. However, analysing Iran’s regulations can be helpful in taking a step towards effective international AML practices.

Compliant or not compliant? The challenges of anti-money laundering regulations in crypto assets: the case of Switzerland

PurposeCriminals have quickly discovered the advantage of crypto assets, with its pseudo-anonymity, untraceability and the ability to freely exchange crypto assets across borders, which makes it an ideal tool for money laundering activities. Switzerland has a technology-neutral framework, and crypto assets are regulated by the existing anti-money laundering (AML) legislation. The purpose of this paper is to gain insights into the industry adoption of measurements to prevent money laundering through crypto assets and if they are compliant with national and international AML regulations.Design/methodology/approachSemi-structured expert interviews were conducted with participants having expertise in compliance, AML and crypto assets with focus on Switzerland. The interviews were analyzed using the thematic analysis.FindingsThe experts have a general consensus that Switzerland is a pioneer when it comes to regulating crypto assets. It is perceived that legislations are released without industry consultation and that AML processes for fiat transactions also work for crypto assets, which is not the case. The results show that the industry wants a consortium to fight money laundering in crypto assets in Switzerland. The current measures to identify money laundering are not optimal, yet, it is the best solution and according to national and international regulations the businesses are perceived to be compliant.Originality/valueThis paper offers new insights on the challenges of AML regulations in crypto assets, given the limited information available. It also provides good practice examples for addressing these challenges, benefiting policymakers, regulators and practitioners in the crypto asset ecosystem.

The impact of anti-money laundering regulations on inclusive finance: Evidence from Sub-Saharan Africa

The impact of anti-money laundering regulations on inclusive finance: Evidence from Sub-Saharan Africa

Banks’ Level Factors Affecting the Effective Implementation of Anti-Money Laundering Practices in Nepalese Banks: An Employee and Customer Perspectives

Purpose: Money laundering can affect global macroeconomic projections, currency markets, and financial stability by fueling shadow economies. Thus, the efficiency of the Anti-Money Laundering (AML) procedure must be investigated. Understanding such elements may help prevent money laundering. This necessitates studies to raise awareness and emphasize its importance. This study sought to assess customer understanding and examine the factors that affect the efficient application of AML regulations in Nepalese banks.Design/Methodology/Approach: This study includes responses from 201 bank consumers and 156 bank employees. The study focused on customers' AML awareness and how bank employees implement AML regulations in their respective banks.Findings: According to the study, consumers apprehend money laundering, terrorist financing, and their implications. According to bank employees, customers are unaware of money laundering and its consequences. Banking and financial institutions should prioritize education and awareness to improve the implementation of anti-money laundering regulations. Control over company sophistication, business ethics, customer awareness, and the AML system all have a favorable influence on Nepali banks' AML policies. The analysis reveals that business sophistication control is quite important.Originality: The study focused on consumer and employee AML knowledge, revealing ground-level perspectives. The study found the variables related to the bank's management and compliance department's views on AML policy implementation. This research assists government agencies and policymakers in developing national anti-money laundering measures and aids academics in AML procedure implementation.

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.

CRYPTOLAUNDERING: ANTI-MONEY LAUNDERING REGULATION OF VIRTUAL CURRENCY EXCHANGES

Ten years on since their invention, virtual currencies are here to stay. However, virtual currencies come with money laundering risks. This paper discusses anti-money laundering regulation for virtual currency intermediaries, by showcasing and comparing regulatory models at the national and international levels.It is found that the anti-money laundering regulation for virtual currencies — more than being merely “nice to have” — carries considerable potential in the fight economic crime. Where financial intermediaries engaged in virtual currencies are required to gather the full spectrum of information needed to identify their customers and the source of funds, virtual currencies become much less attractive to money launderers than traditional fiat money systems. Furthermore, anti-money laundering regulation means that supervisory and investigatory authorities can identify and act against money launderers and other delinquents.

A COMPARATIVE ANALYSIS TO EVALUATE THE EFFECTIVENESS OF THE LEGAL FRAMEWORK FOR ANTI-MONEY LAUNDERING IN MAURITIUS

The fight against money laundering has been a central issue for governments worldwide, with initiatives aimed at preventing the flow of dirty money. The value of money laundering is estimated to range from 2% to 5% of the global gross domestic product, thus, creating a compelling and urgent need to combat money laundering operations at both national and international levels.To effectively combat this issue, this paper seeks to analyse the various aspects of the Anti-Money Laundering (AML) Laws in Mauritius. It aims to identify the loopholes in the system and recommends ways to improve AML regulations in the country. The study uses the doctrinal methodology to analyse the laws and regulations of Mauritius on money laundering and terrorism financing.Additionally, the article uses a comparative approach to analyse the efficiency of the Mauritian AML Laws by comparing and contrasting the laws and regulations of Mauritius with those of the United Kingdom (UK). This will help the study identify areas where the country can improve its regulatory and legal framework to prevent money laundering and terrorism financing.

Technological Advancements and Legal Challenges to Combat Money Laundering: Evidence from Pakistan

The primary objective of this research article is to examine technological advancements and legal challenges to combat crime of money laundering in context of Pakistan. The risk of money laundering, as well as the considerable threat posed by terrorist funding, poses a serious danger to the socioeconomic equilibrium of Pakistan. In today's world, money laundering is a huge financial problem as well as a crime. Billions of dollars are smuggled illegally across international boundaries each year. Laundering ill-gotten gains has developed into a significant issue in the world's financial system, and the authorities are working hard to eliminate it. Technology doesn't always advance positive outcomes. With the advancement of technology, financial crime tactics are becoming more sophisticated. The most common method of money laundering is through financial systems. Therefore, banks are obligated to make use of technology to combat the practise of money laundering. However, technology can help financial institutions such as banks to fight against financial crimes. Any institution that chooses to ignore AML guidelines runs the risk of incurring punishment, such as monetary penalties. Therefore, this paper fills this gap by critically examining the legal challenges faced by financial institutions in Pakistan in their use of technology to combat money laundering. For this research, the qualitative doctrinal research methodology is used that is based on documentary analysis. This research critically analyses the legal challenges faced by financial institutions such as banks in their compliance with anti-money laundering regulations. This paper critically examines the parliamentary statutes, regulations, policies in various domestic jurisdictions and international statutes, treaties, conventions and other existing data relating to technological advancements to combat money laundering.

Combating Organised Crime: Exploring the Intersection of Cryptocurrencies and Money Laundering in Serbia

Background: This paper's central theme revolves around combating contemporary forms of organised crime by exploiting cryptocurrencies. It delves into the evolution of cryptocurrency structures, trends in the cryptocurrency market, and the intricate processes of transactions and money laundering involving digital currencies. The paper presents an overview of the most significant cryptocurrencies traded on electronic exchanges and explores their market characteristics.Objectives: This paper aims to conduct an in-depth analysis of the intersection between cryptocurrencies and high-tech crime, mainly focusing on money laundering, within the context of specific cases in the Republic of Serbia.Methods: The analysis commences by elucidating the nature of cryptocurrencies, with a particular emphasis on how the underlying technologies and applications contribute to heightened vulnerabilities. The subsequent segment of the analysis will then pivot towards delineating the extent of the money laundering predicament associated with cryptocurrencies. In the third section, the research will delve into the burgeoning Anti-Money Laundering (AML) regulations that govern cryptocurrencies, emphasising the ongoing development and implementation of such regulations in the Republic of Serbia.Results: The absence of borders in digital currencies and exchanges renders the current laws and regulations insufficient in dealing with illicit activities like cross-border money laundering. Consequently, it is imperative to establish consistent global rules to achieve uniformity in implementation promptly. Conclusion: Prioritising the pursuit of harmonisation becomes crucial as the FATF endeavours to formulate a universal benchmark. This international standard will facilitate the consistent enforcement of Anti-Money Laundering/Counter-Terrorist Financing (AML/CTF) laws and regulations on cryptocurrencies and blockchain technology.

Anti-money laundering regulations’ effectiveness in ensuring banking sector stability: Evidence of Western Balkan

The paper aims to provide an in-depth understanding of the effectiveness of anti-money laundering (AML) regulations in measuring banking sector stability in Western Balkan countries, as well as to explore the possibility of enhancing banking sector policy and performance. The study employs a quantitative methodology created on secondary data from 2012 to 2021. The data analysis methodology incorporates static and dynamic approaches to examine the banking sector stability using OLS and 2SLS. The results of the study show that the tight AMLi,t implementation of both approaches has a positive and statistically significant impact on the banking sector stability (BSS). The value of the paper is unique in that it applies the most recent data in this field for Western Balkans countries, and it brings benefits for a better understanding of the effectiveness of AML regulations. The research will encourage fruitful discussion among policymakers, practitioners, researchers, and financial institution executives.

Informal Saving Groups and Its Effect on Monetary Activities Of Nepal

The informal sector activities account for a significant proportion of production, consumption, and employment in the country. However, informal firms tend to be small and are unable to provide basic goods and services to the entire population. Additionally, informal workers are more likely to be poor and earn lower wages compared to their formal sector counterparts. The government of Nepal is actively working to address these issues, including the enforcement of anti-money laundering (AML) regulations in the banking, finance, and cooperative sectors. However, the enforcement of AML regulations should be approached cautiously to prevent the potential transfer of informal money to other sectors and to avoid security problems. The study aims to explore the relationship between various economic indicators and informal monetary activities in Nepal, with a focus on finding ways to regulate and formalize these activities. Large samples of 385 were surveyed through structured questionnaire. The informal economy in Nepal has important macroeconomic consequences, and the government is working to address the challenges it poses. However, the enforcement of AML regulations should be approached cautiously to prevent the potential transfer of informal money to other sectors and to avoid security problems. The study aims to explore the relationship between various economic indicators and informal monetary activities in Nepal, with a focus on finding ways to regulate and formalize these activities. Keywords: Informal monetary activities, Hidden economy, AML regulations, Small saving groups, Remittance

Cryptocurrency Money Laundering: A New Challenge for the European Anti- Money Laundering Framework

Money laundering has developed at the same pace, if not quicker, as the laws that were meant to restrain it. The advent of cryptocurrency escalated the century-long arms race between money launderers and regulators as cryptocurrencies shifted the frontline from the thoroughly governed, centralized financial sector to the (semi)anonymous, decentralized and unevenly regulated cryptocurrency domain. Recent reports indicate that cryptocurrency money laundering represents a problem of considerable proportions. Owing to the fast-paced development of the crypto ecosystem and the growing interconnectedness between cryptocurrency and the traditional financial sector, forward looking and future-proof solutions are a conditio sine qua non for safeguarding the integrity of financial markets. Moreover, as cryptocurrency holds the promise of an accessible and expeditious transaction system, it is imperative to disperse the criminal label attached to it and work towards improving credibility through calculated regulation. Although some progress has been achieved at the EU level, European cryptocurrency anti-money laundering (AML) regulation is still in its nascent stage. European legislators have touched upon the topic of cryptocurrency in AMLD V, leaving considerable space for improvement. The objective of this study is to assess the European Union’s approach to regulating cryptocurrencies from an AML perspective and propose ways forward.

Tax amnesty schemes, anti-money laundering regulations and customer due diligence by financial institutes: an evaluation of the implementation issues in Pakistan

Purpose Tax amnesty (TA) schemes are typical in developing countries. Governments’ claims and suppositions are continually heightened; however, this may differ in actuality. This study aims to present an overview of the effectiveness of TA schemes and the problems they raise in implementing anti-money laundering regulations. Design/methodology/approach This study used a qualitative research design. Content analysis was used to analyse research articles, reports, legal documents and news articles. Findings Every amnesty offered in Pakistan from 1956 to 2018 failed to meet government expectations. Instead, the continuity resulted in an irrepressible black economy. The black economy’s uncontrollability undermines tax collection and hinders a robust anti-money laundering regime. Significantly, tax holidays with discrepant legislation strengthen evaders, plunderers and launderers. These policies severely impede the implementation of anti-money laundering policies in the financial institutions of Pakistan. Additionally, Pakistan's geopolitical location, circumstance and war against terror cannot afford any policy that provides monetary relaxation to offenders. Practical implications There is no concrete evidence to support long-term economic progress through the implementation of amnesty schemes as a revenue collection policy. This study evaluates previous studies and findings to understand the effect of tax amnesties on the financial industry of Pakistan. The findings have practical implications for tax collection authorities, policymakers and international financial bodies. Originality/value Previous studies have discussed the advantages and disadvantages of Pakistan’s regular tax amnesties. However, this study discusses the implementation of TA schemes concerning anti-money laundering regulations and customer due diligence by financial institutes and provides suggestions to minimise its negative implications.

Importance of anti-money laundering regulations among prosumers for a cybersecure decentralized finance

This study displays the importance of anti-money laundering (AML) regulations among prosumers in decentralized finance (DeFi) in establishing cybersecurity. With a game theory model based on an integrated framework of crime theories, we find that beneficial claims of financial inclusivity and pseudonymity of permissionless DeFi come with a cost of vulnerability to cyberattacks due to its incompliance with AML regulations among prosumers. In contrast, cyberattackers can be deterred from attacking AML-compliant permissioned DeFi. These results have important implications for trust as a construct within the context of blockchain-based sharing economy and institutional roles played by decentralized governance and smart contract auditors in creating a “trustless” state-space without forfeiting cybersecurity of a blockchain-based sharing economy. We also provide cybersecurity policy suggestions for permissionless DeFi without sacrificing its decentralized nature.

The effect of anti-money laundering regulations on earnings management: evidence of Iran

Purpose The purpose of this study is to examine the impact of anti-money laundering (AML) regulations on accrual earnings management (AEM) and real earnings management (REM) in Iran’s emerging capital market. Design/methodology/approach The panel data regression is used to testing hypotheses. The sample includes 2,020 data and 202 companies listed on the Tehran Stock Exchange (TSE) over a period of ten years from 2012 to 2021. Also, the companies covered in this study include financial and nonfinancial companies. Furthermore, the data related to the research variables were extracted from the annual financial statements and the TSE database. Findings The results show that compliance with AML regulations leads to a reduction in AEM and REM. In other words, companies with higher money laundering (ML) tend to manage their earnings, which is in line with agency theory. Practical implications This study has implication for policymakers and regulators, auditors and managers. Considering the negative impact of AML regulations on earnings management (EM), Iranian auditing firms need to emphasize on the full implementation of AML regulations in TSE. Also, the results of this research may aid policymakers and regulators to detect financial crimes through accounting signals. Originality/value To the best of the authors’ knowledge, this is the first study in an Iran capital market to examine the impact of AML regulations on EM in financial and nonfinancial companies. Previous research has not controlled for the effects of financial companies. Prior studies have not examined the effects of financial companies. In addition, this study differentiates itself from previous studies by introducing a new method for measuring the independent ML variable based on auditor opinions. The obtained data can aid international bodies to better understand compliance with ML regulations in Iran and can reduce their concerns in negotiations.

Virtual money laundering: policy implications of the proliferation in the illicit use of cryptocurrency

PurposeThis study aims to explain how cryptocurrency is leveraged for illicit purposes across the global financial system. Specifically, it establishes how cryptocurrency has been changing the nature of transnational and domestic money laundering (ML). It then assesses the effectiveness of conventional anti-money laundering (AML) policy and legislation against the proliferation of crypto laundering, using Canada as a critical case study.Design/methodology/approachData was collected from court cases and secondary sources to build cross-case trends of cryptocurrency use in ML. Illicit International Political Economy forms the theoretical foundation for this study, whose contribution is situated in the current literature on crypto-ML.FindingsThis study finds that Bitcoin is common among crypto-money launderers, though most also use some form of alt-coin, and that the use of third-party currency exchanges is a prevalent method to create illicit funds and conceal proceeds of crime. The findings validate two hypotheses that illicit use of crypto is prevalent in the first two stages of ML, and that crypto is most often used in conjunction with other fiat currencies. Although law enforcement is improving on monitoring and understanding popular cryptocurrencies such as Bitcoin, alt-coins pose a significant challenge for criminal intelligence. New regulations for third-party currency exchanges are having a positive impact on curtailing crypto-laundering but are shown to be insufficient per se to contain the use of crypto in criminal activity.Originality/valueThis study contributes to a more robust understanding of the use of virtual currency in transnational and domestic ML. It contributes to an emerging body of literature on the role of technological change in enabling the global flow of illicit funds. It also informs public policy on virtual currency in general, and on AML regulation in Canada in particular.

Anti-money laundering regulation of cryptocurrency: UAE and global approaches

PurposeThe purpose of this paper is to provide a high-level analysis of the intersection emerging cryptocurrency sector with anti-money laundering (AML) regulations and risk-based AML diligence systems maintained by financial institutions.Design/methodology/approachThe analysis begins with a description of cryptocurrencies, focusing specifically on how the supporting technologies and applications increase vulnerabilities. The information will lay the foundation for examining the vulnerabilities existing in the architecture of cryptocurrency technology, as well as potential targets for regulations. The second part of the analysis will then shift focus to defining the scope of the money laundering problem associated with cryptocurrencies. An in-depth understanding of the problem is necessary to inform tailored AML legislation and regulations. The third part of the analysis will explore emerging AML regulations that govern cryptocurrencies, focusing specifically on those being developed and implemented in the United Arab Emirates (UAE). The UAE regulations will then be compared to those of the USA and European Union (EU) for comparative analysis and best practices.FindingsThe UAE has a robust legal system aimed at bolstering AML efforts while supporting widespread integration of crypto assets into business and government operations. A review of the UAE’s legislative framework reveals critical issues. First, the current regulations do not cover decentralized finance (DeFi) and non-fungible tokens (NFTs). The absence of clear regulations for DeFi and NFT protocols has created a leeway for money laundering and related criminal activities. Second, there is a high level of fragmentation in the UAE’s legislative landscape. The UAE does not have uniform, national laws that apply to all the Emirates. Fragmentation is not unique to the UAE but a major global problem that affects the USA and EU. Therefore, it is necessary to adopt a tailored approach where standard rules and regulations are responsive to the diverse aspects of cryptocurrencies. The strategy is vital, as it will be impractical to create a single legislation or law that will cover all the crypto assets, including their diverse applications. Furthermore, the Financial Action Task Force (FATF) should develop a global standard that will support a unified/harmonized application of AML/counter-terrorist financing (CTF) laws and regulations related to cryptocurrencies and the blockchain technology.Originality/valueThe borderless nature of digital currency and exchanges means that the existing laws and regulations are inadequate to address cross-border money laundering activities. Thus, there is an urgent need of harmonizing global regulations to ensure uniformity in applications. The quest for harmonization should be a priority as the FATF works towards developing a global standard. The global standard will support a uniform application of AML/CTF laws and regulations related to cryptocurrencies and the blockchain technology.

Research on the Legal Regulation Path of Digital Currency Electronic Payment and Its Improvement from Anti-Money Laundering Perspective

With the rapid development of Internet information payment technology, digital currencies are widely used, and digital currencies with blockchain as the underlying technology can be used as a monetary policy tool to serve national economic policies. Under the principle of adhering to steady development, operational safety and risk control, China has launched digital currency electronic payment with equivalence and legalization with traditional legal currency, featuring controlled anonymity, loose coupling of accounts and support for dual offline payments, which combines the advantages of both physical RMB and electronic payment instruments. However, precisely for this reason, China’s existing Anti-Money Laundering (AML) legal system, which mainly regulates and protects traditional currencies, can hardly adapt to the changes of money laundering crimes in the Internet environment in terms of the subject scope, object standards, subjective mentality and behavioral patterns. Taking into account the existing legal norms and the needs of AML regulation of digital currency, money laundering crimes should be incorporated into the section of “obstruction of justice”, the scope of predicate crimes of money laundering crimes should be expanded, the AML obligations of specific non-financial institutions should be improved, and international cooperation should be strengthened, so as to promote the healthy development of China’s digital economy.

New Aml regulation: From ‘virtual currency’ to ‘crypto assets' — differentiation from tokenised financial instruments and potential concerns over the perceived end of pseudonymity in the crypto sector

In adopting new regulatory measures, the EU is increasing its efforts to prevent money laundering and terrorist financing. Aside from a uniform and EU-wide ban on cash transactions over €10,000 and the establishment of a common European anti-money laundering (AML) authority, the new rules specifically tackle the growing crypto economy. While existing AML regulations already cover various business activities related to crypto-assets such as Bitcoin & Co., there is still considerable leeway for interpretation and uncertainty. The currently applicable definition of ‘virtual currencies' and demarcation issues to financial instruments subject to stricter regulatory regimes are prominent examples of this. As an answer to these issues the new term ‘crypto-asset’, introduced by the upcoming crypto regulation MiCAR, is going to be consistently used in the new anti-money laundering regulation as well as MiCAR, promising more legal clarity for the future. Meanwhile, headlines about the alleged end of ‘(pseudo)anonymity of crypto-assets' due to the new AML rules are already appearing on the European media landscape. This paper provides an overview of the potential implications of these new regulations for businesses, investors and users, as well as seeking to alleviate some of the fears of the market.