Counter Money Laundering Research Articles

Monetary Smurfing Analytics Model using ML

The act of taking money obtained from illegal operations, such as drug trafficking, and disguising it as profits from a legitimate business venture is known as money laundering. The money obtained through illegal action is regarded as dirty, and to make it appear clean, it is "laundered." Money laundering is a major concern to the country these days, as well as financial institutions. The sophistication of this illegal activity is growing; it appears to have beyond the tired old trope of drug trafficking to include financing terrorism and, of course, personal benefit. Research on anti-money laundering is crucial since money laundering is a global issue that seriously jeopardizes international security and financial stability. Furthermore, it's estimated that the banking system seizes only 0.2% of the money that has been laundered. The crime itself is growing more sophisticated and intricate, and banks are becoming more vulnerable as a result of its ongoing volume amplification. Considering the role that banking institutions play in the money-laundering industry, practitioners and researchers are becoming more interested in creative ways to solve problems and enhance anti-money-laundering efforts. Researchers are starting to look into the viability of artificial intelligence methods in this setting. A systematic knowledge deficit concerning a thorough study that meticulously examines and combines artificial intelligence methods for countering money laundering in the banking industry was discovered, though. To combat investment fraud, the majority of global financial institutions have been putting anti-money laundering measures into place. Data mining tools have emerged recently and are thought to be effective methods for identifying instances of money laundering.

The role of international auditing standards in the system of countering money laundering

Relevance. Countering money laundering is a critical global issue that requires coordinated international efforts. The United Nations and other organisations have developed programs to combat this problem, and International Auditing Standards play a significant role in these efforts. One of the goals of these standards is to prevent the legitimisation of criminal incomes. Purpose. The purpose of the study is to show the role of international auditing standards in the system of countering the laundering of illegally obtained funds. Methodology. The study employs the method of analysis and the historical method to examine various sources and draw conclusions on the role of international auditing standards in combating money laundering. Results. The study identifies and describes the basic principles of international auditing standards and their effectiveness in preventing the legitimisation of criminal income. It highlights how these standards are implemented across different countries and their impact on reducing money laundering activities. The analysis shows that adherence to these standards improves transparency and accountability in financial transactions, making it harder for illegal funds to be integrated into the legitimate economy. Conclusions. The findings underscore the importance of international auditing standards in the global fight against money laundering. These standards serve as a critical tool for enhancing the integrity of financial systems worldwide. The study's insights can aid policymakers and educators in understanding and teaching the significance of auditing standards in combating financial crimes. Additionally, the research provides practical recommendations for improving the implementation and enforcement of these standards to better address the evolving challenges of money laundering. Keywords: money laundering; international relations; crime prevention; auditing

Countering Money Laundering and Terrorist Financing: A Case for Bitcoin Regulation

Countering Money Laundering and Terrorist Financing: A Case for Bitcoin Regulation

The Role of the UN Security Council in the Context of Combating Money Laundering and the Financing of Terrorism

The subject of the study is the role of the UN Security Council in the international system of countering money laundering and terrorist financing. The author pays special attention to the historical component, identifying the reasons for the transformation of the UN approach to money laundering and terrorist financing and tracing the link between the globalization of terrorist acts and the development of counteraction by the UN Security Council. The main functions of the Counter-Terrorism Committee (CTC of the UN Security Council) and the Executive Directorate (CTED of the UN Security Council) are outlined. The article reveals the role of a number of UN Security Council documents as a systemically significant source of law in the context of the international system for countering money laundering and terrorist financing, as well as individual problems faced by states implementing the norms of resolutions into their national legislation. The methodological basis of the study was a combination of general scientific (logical method and analysis) and private scientific methods (comparative legal, historical legal, historical and sociological). The article systematically details the development of the UN Security Council's approach to the problem of money laundering and terrorist financing. Through careful consideration of individual provisions of the resolutions, the role of this UN Security Council and its bodies in developing measures and countering ML/FT is being specified. Based on the results of the study, the author concludes that the UN Security Council has played a systemically significant role in the formation of an international system for countering money laundering and terrorist financing, consolidating a number of advanced international standards developed by international organizations, para-organizations and other institutions. In addition, the author clarifies that it is thanks to the UN Security Council that it is possible to further "solidify" the FATF Recommendations and their full implementation into the international legal system.

Применение мер противодействия отмыванию денег в ходе расследования преступлений, связанных с незаконным оборотом наркотиков в Казахстане

This article discusses the current problems of improving anti-money laundering measures in the investigation of crimes directly related to the illicit trafficking of narcotic drugs and psychotropic substances in Kazakhstan. The author highlights the organizational and legal aspects of the identification and further investigation of criminal offenses related to drug trafficking, as well as the criminalistic characterization of their sale and subsequent money laundering. The practical experience of law enforcement agencies and international organizations whose activities are aimed at suppressing money laundering and drug trafficking is being studied. Based on the analysis, the author concludes that it is necessary to develop systematic measures to combat money laundering in the legalization of criminal proceeds. A study is being conducted on the activities of the informal organization Egmont group in recent years, information on money laundering from drug trafficking. The purpose of the study is to identify effective measures to combat money laundering by examining statistical data and empirical evidence of crimes related to illicit trafficking in narcotic drugs and psychotropic substances. In studying this problem, various scientific research methods were used, which made it possible to objectively and comprehensively disclose certain provisions of the topic of the article. As a result of the conducted research, the author draws conclusions and suggests measures to counter money laundering in the shadow economy.

Methodology for assessing compliance with fatf recommendations and the effectiveness of financial monitoring systems

Rules combating money laundering and terrorism financing play a crucial role in establishing trust in the reliability and stability of the financial system, simultaneously acting as a protective mechanism against the infiltration of illicit elements. This dual function enhances the stability and reliability of the financial system, which is a crucially important element for fostering economic development and financial markets.
 The purpose of the article is a thorough analysis of the existing legal and institutional framework, as well as regulatory practices in the field of financial monitoring to determine their compliance with FATF regulations and identify opportunities for optimization and improvement.
 The research of evaluation of the effectiveness of financial monitoring systems was carried out on the examples of countries selected from different geographical regions and with different levels of development, including several countries in Africa, North and South America, Europe and Asia. Additionally, based on published consolidated assessment ratings of countries that underwent the latest round of FATF methodology assessments, we will identify those countries that received the highest ratings across 11 criteria: the United States and the United Kingdom (in 4 criteria), Israel and France (in 3 criteria).
 To incorporate the experience of foreign countries into Ukraine, the assessment of the effectiveness of the financial monitoring system is conducted by comparing it with both superior and inferior foreign practices, as well as with countries facing similar military-political situations. A profile of the effectiveness of systems countering money laundering and financing terrorism is constructed for various countries, including the United Kingdom, the United States, China, Georgia, Moldova, Pakistan, Poland, and Ukraine, following the FATF methodology.
 It has been determined that, for many foreign systems combating money laundering and terrorism financing, risks associated with the use of cash remain relevant. Additionally, inadequacies in combating terrorism financing have been identified, except for the United States and the United Kingdom. Reserves for increasing the effectiveness of national systems and systems combating the legalization of proceeds obtained through criminal means or terrorism financing have been identified.

Adapting confiscation and anti-money laundering laws to the digital economy: exploring the Australian interplay between proceeds and technology

PurposeThe rise of cryptocurrencies and other digital assets has triggered concerns about regulation and security. Governments and regulatory bodies are challenged to create frameworks that protect consumers, combat money laundering and address risks linked to digital assets. Conventional approaches to confiscation and anti-money laundering are deemed insufficient in this evolving landscape. The absence of a central authority and the use of encryption hinder the identification of asset owners and the tracking of illicit activities. Moreover, the international and cross-border nature of digital assets complicates matters, demanding global coordination. The purpose of this study is to highlight that the effective combat of money laundering, legislative action, innovative investigative techniques and public–private partnerships are crucial.Design/methodology/approachThe focal point of this paper is Australia’s approach to law enforcement in the realm of digital assets. It underscores the pivotal role of robust confiscation mechanisms in disrupting criminal networks operating through digital means. The paper firmly asserts that staying ahead of the curve and maintaining an agile stance is paramount. Criminals are quick to embrace emerging technologies, necessitating proactive measures from policymakers and law enforcement agencies.FindingsIt is argued that an agile and comprehensive approach is vital in countering money laundering, as criminals adapt to new technologies. Policymakers and law enforcement agencies must remain proactively ahead of these developments to efficiently identify, trace and seize digital assets involved in illicit activities, thereby safeguarding the integrity of the global financial system.Originality/valueThis paper provides a distinctive perspective by examining Australia’s legal anti-money laundering and counterterrorism financing framework, along with its law enforcement strategies within the realm of the digital asset landscape. While there is a plethora of literature on both asset confiscation and digital assets, there is a noticeable absence of exploration into their interplay, especially within the Australian context.

THE EFFICIENCY INFLUENCE OF AGENCIES ON CONTROLLING MONEY LAUNDERING IN BANGLADESH

Money laundering has emerged as a global concern in recent times, impacting both affluent and developing nations. Among emerging economies, Bangladesh faces pronounced challenges in addressing financial illicit activities due to its lenient regulatory framework and unstable financial sector. The Bangladesh Central Bank issues guidelines to streamline the implementation of the Prevention of Money Laundering Act. To ensure the stability and security of their institutions, financial entities are required to devise anti-money laundering policies in accordance with the stipulations of the Bangladesh Bank. This study centres on assessing the effectiveness of sanctioned organizations in countering money laundering. The research delves into the latest transformations in financial wrongdoing from the Bangladeshi context. It thoroughly explores strategies to prevent money laundering and other financial offences through enhanced efficiency. Presently, money laundering constitutes a complex and evolving criminal activity, with perpetrators constantly devising novel tactics to undermine the financial system. The study will advance the discussion of the influence of combatting the efficiency of authorized agencies to fight against money laundering in Bangladesh.

IMPROVEMENT OF LEGAL MECHANISMS FOR COUNTERING MONEY LAUNDERING THROUGH THE USE OF ELECTRONIC PAYMENT INSTRUMENTS

The purpose of this research is to study the current state of legal regulation to counter money laundering through the use of electronic payment instruments and on its basis to develop proposals for improving the relevant legal mechanisms. Materials and methods. To achieve the purpose of the study, the initial data were used: 1) regulatory legal acts adopted by state authorities of the Russian Federation; 2) materials of the latest judicial practice; 3) working materials of divisions of credit organizations engaged in anti-money laundering activities. The analysis and generalization of these materials made it possible to identify the actual problems in legal regulation of the institution in question in modern conditions and to develop proposals to overcome them. Study results. Current problems of improving the legal mechanisms for countering legalization (laundering) of funds and other property obtained as a result of criminal encroachments in the context of the use of electronic payment instruments are considered. The study found that creation of a legal mechanism regulating the digital assets market, as well as interpretation of regulations by judicial authorities, have a positive effect in the fight against legitimization of criminally acquired income. At the same time, the effectiveness of implementing such legislation in the field under consideration is associated with the need for careful studying the technological aspects of its application. The gradual introduction of the digital ruble will also make it necessary to improve legislation in the field of countering money laundering. The thesis is expressed that such improvement should be based directly on the characteristics of the digital ruble. Conclusions. When making amendments to the criminal legislation in order to exclude possible negative legal consequences of future law enforcement, it seems appropriate, if necessary, to use mechanisms of preliminary constitutional judicial control. The main directions of international cooperation in the field under consideration are: on the basis of regional rules creation of uniform international standards for countering money laundering, including uniform approaches to the criminal legal qualification of relevant acts, as well as formation of a legal and technical basis to implement operational information exchange between law enforcement agencies of various states on the facts of illegal using electronic means of payment.

Mechanisms for interaction of law enforcement agencies in the field of countering money laundering

PurposeThe purpose of this paper is to develop a new methodology for the interaction of law enforcement agencies with each other, financial institutions and other legal entities in the field of counteracting and combating the legalization of criminal income as a prerequisite for increasing the effectiveness of their activity in the area of countering and combating money laundering, which will improve the conditions for the development of the financial system and increase the level of living of the population of Ukraine.Design/methodology/approachAn interdisciplinary approach was used during the writing of the paper. In particular, legal techniques, analysis and generalization, sociological research, questionnaires, etc., were used.FindingsThis paper demonstrates the need for a comprehensive approach to effectively building cooperation between law enforcement agencies in another money laundering. A proposal is made to improve the interaction between law enforcement agencies, financial institutions and other legal entities by creating a single database of information on money laundering and suspicious transactions and involving financial intelligence units in the process of investigating cases of money laundering.Practical implicationsLaw enforcement agencies can use the proposed approach to ensure the effectiveness of their activities in counteracting and combating money laundering.Originality/valueThe authors have developed a new approach to improving the interaction of law enforcement agencies in the field of counteracting and combating money laundering, which involves the creation of a single database of information on money laundering and suspicious transactions, as well as the involvement of financial intelligence units in the process of detecting and investigating cases of money laundering.

INTERNATIONAL LEGAL ASPECTS OF SEARCH AND REPATRIATION OF ILLEGAL ASSETS

The article analyzes the international legal aspects of the search and return of illegally exported or stolen assets. When analyzing this topic, attention is paid, first of all, to the processes and methods of asset recovery, thereby studying the international experience of states and organizations in countering money laundering, attaching importance to the role of the international regulatory framework on this issue, for example, the UN Convention Against Corruption. Also, the issues of trends in the search and repatriation of illegally exported assets and legal regulation in the Republic of Uzbekistan were considered. In addition, the article provides international statistics on the volume of bribes received annually by officials in developing countries and countries with economies in transition. The main purpose of the article is to reveal the legal essence of the international legal aspects of the search and repatriation of illegally exported assets. Based on the research done, a legal conclusion was made on the scientific topic of the article.

National and International Financial Market Regulation and Supervision Systems: Challenges and Solutions

The purpose of this original study is to critically analyse the emergence and development of the national models of financial regulation, international standards and codes, and regional and national financial regulation and supervision (for the cases of the UK, USA, Sweden, the EU, and Finland). The research raises both academic and regulatory concerns. The relevance and purpose of this research arise from a need for an academic analysis of the economic nature and classification of financial market regulation systems. They represent a theoretical justification for changes in the policies and supervisory practices of national and international regulatory authorities in response to innovations in financial technologies and instruments, digital products, and risks. Secondly, it will stimulate more systematic work on regulatory databases, registration, and reporting procedures in various economies in different financial markets. The author identifies five main systems of national financial regulatory markets: the multi-tiered, multi-agency US system, the twin peaks model (UK), and the mega-regulatory model (Sweden). There is a thorough review of the international standards and institutions that work for the stability of financial systems. The analysis of the regional and national systems of financial regulation and supervision is based on the examples of the EU and Finnish institutions. National macro- and micro-economic regulation and supervision have been examined, with a focus on the US Federal Reserve and the US Treasury. An important result of the study is the systematisation of the directions of the development of national and international regulatory institutions (since the 1980s). First, the minimum capital and credit risk requirements for banks (the 1980s) were complemented in the 21st century by buffer reserves, liquidity, and leverage standards. Second, regulation focuses on ensuring the sustainability of the national economy. The regulatory focus is on ensuring the sustainability of national and global financial systems. Third, there is an increase in the number of supervised institutions. Fourth, there is a division of the functions between central banks (macro-economic regulation) and one or two mega-regulators (micro-economic regulation and supervision). Fifth, there is a division of labour between the international financial institutions (BIS, IMF, and WB) and national regulators. Sixth, the focus is on protecting consumers and investors and countering money laundering and the financing of terrorism. Seventh, there is an understanding based on a common approach by central banks to new financial technologies and cybersecurity.

Comparative characteristics of Anti-money laundering and combating the financing of terrorism (AML/CFT) mechanisms Republic of Kazakhstan and Russian Federation

The research topic is related to the comparative analysis of the mechanisms of functioning of AML/CFT systems of the Russian Federation and the Republic of Kazakhstan. The object of the study is the mechanisms of functioning of the "Countering money laundering and terrorist financing" AML/CFT systems of the Russian Federation and the Republic of Kazakhstan in terms of identifying and reducing the risks of money laundering and terrorist financing of ML/FT. The subject of the study is a set of economic relations related to the functioning of the national AML/CFT systems of the Russian Federation and the Republic of Kazakhstan to identify and reduce the risks of money laundering and terrorist financing of ML/FT. The purpose of the study is to conduct a comparative analysis of the mechanisms of functioning of the "Countering money laundering and terrorist financing" AML/CFT systems of the Russian Federation and the Republic of Kazakhstan.   The purpose of the study is to analyze and compare the mechanisms of functioning of the "Countering Money laundering and terrorist financing" AML/CFT of the Russian Federation and the Republic of Kazakhstan. Results of the work - for the first time a comparative analysis was carried out and problem areas of AML/CFT systems of the Russian Federation and the Republic of Kazakhstan were identified. The value of the conducted research is to contribute to the further development and improvement of the national financial monitoring system of the Republic of Kazakhstan by identifying inconsistencies in the AML/CFT systems of the two countries and determining the points of their convergence and harmonization. Practical significance - the results of the comparative analysis will contribute to taking into account the current problems and prospects for the development of national AML/CFT systems of the Russian Federation and the Republic of Kazakhstan, will assist in eliminating the shortcomings inherent in these systems in terms of identifying and reducing the risks of ML/FT. Keywords: financial intelligence, financial monitoring, money laundering, AML/CFT system Keywords: financial intelligence, financial monitoring, money laundering, AML/CFT system

Countering money laundering (legalization) in the context of digital transformation (financial legal aspect)

The legal regulation of the sphere of money laundering prevention and the financing of terrorism is at the junction of several branches of law. This article attempts to analyze the norms of the relevant legislation through the prism of financial law. The purpose of this article is to determine the role and place of the concept of money in the legislation, as well as to determine the relationship between the process of digital transformation of money circulation and the current methods used by the legislator to prevent the use of finance for criminal purposes. The result of this article is the determination of prioritising of the legislation goals itself aimed at preventing money laundering and the financing of terrorism. As a conclusion it is proposed that the above-mentioned legislation is of the most applied nature and has specific practical goals, while the issue of development of legal regulation of monetary circulation is not among the priority goals.

MEMORIZATION AND FORGETTING IN THE N-SCHEME OF THE MARKOV ALGORITHM

The methods of memorization and forgettingin the N-scheme of the Markov algorithm synthesized to replace its wellknown Y-scheme are investigated. It is noted that in the theory of Markov algorithms, the occurrences of words into each other are considered as a “mechanical connection” of words outside the context of the purpose of such connections, therefore there is no goal setting for memorizing and forgetting words. It isestablished that several criteria (reasons) for memorizing and forgetting words can be distinguished. It is shownthat it is advisable to generalize these within the framework of the N-scheme of the Markov algorithm. A method of memorizing and forgetting words using a special cycle and the possibility of recovery is proposed. A method of memorizing and forgetting words using thresholds for the meaning and type of morphism is synthesized. The method of memorizing and forgetting several words by time is given. The method of memorizing and forgetting words by the value of induction is presented. A refinement of the alphabet of control commands K is carried out, it is shown that these also form the alphabet of an artificial language, which can be considered as the Markov alphabet AK–+2. A method of memorizing and forgetting several words is proposed. A method of memorizing and forgetting several words according to a fragment pattern has been synthesized. The method of restoring the forgotten and deleting the remembered is given. It is established that the N-scheme of the Markov algorithm has a wide range of methods for memorizing and forgetting data. This data can be used to detect the risks of laundering the proceeds of crime and the financing of terrorism. An artificial language of many socio-economic systems has been synthesized in the Markov alphabet AK–+2. Compositions of ways of remembering and forgetting form the necessary tools for searching, selecting and monitoring socio-economic systems in order to counter money laundering and terrorist financing. It is advisable to synthesize a big data protocol, which includes formalized descriptions of ways of remembering and forgetting.

Ризик-орієнтований підхід до управління фінансовими потоками банків: світова практика та досвід України

The article highlights the world practice and experience of Ukraine in managing financial flows of the bank taking into account the risk-based approach. It is proved that the experience of Ukraine, which is applied in practice in the management of financial flows of the bank, taking into account the risk-based approach, meets the requirements of the international standards of the group for the development of financial measures to counter money laundering and terrorist financing (FATF), Basel principles of effective banking supervision, directives and regulations of the European Parliament and the Council of the European Union in the field of prevention and counteraction to legalization of criminal proceeds/terrorist financing. A comparative analysis of FATF recommendations on risk management and risk management models in Ukraine (single-tier and two-tier) is carried out and the efficiency of their use is proved. An analysis of current measures of the National Bank of Ukraine in the field of prevention and counteraction to legalization of criminal proceeds/terrorist financing is carried out, taking into account the characteristics of the measures taken in the first quarter of 2023. It is proved that the risk-based approach, which is specified in the current legislation of Ukraine, covers all necessary directions – from entities that have an increased level of risk to entities with a reduced level of risk – in order to minimize these risks in the process of economic activity, but this is not always reflected in the practice of domestic economic entities. Based on the results of the assessment, it was concluded that further developments should focus on even more intensive interaction of Ukrainian legislation and best international practices in the field of prevention and counteraction to legalization (laundering) of proceeds from crime, terrorist financing, also financing of proliferation of weapons of mass destruction.

PROTOMORPHISMS IN THE THEORY OF MARKOV ALGORITHMS AND BIG DATA OF SOCIO-ECONOMIC SYSTEMS

Protomorphisms known in category theory are investigated together with the theory of Markov algorithms. Protomorphisms are considered as an element extending the theoretical provisions of the theory of Markov algorithms. Protomorphisms are investigated in the big data of socio-economic systems in the tasks of countering money laundering and terrorist financing. Methods of assignment for protomorphisms of the absence of a preorder are considered. A synthesized method for recording protomorphism in a data cycle when entering input sample sets into a big data classification algorithm is considered. A method of writing a protomorphism using the alphabet M = λιτφп/αβδγχκμ for the N-scheme of the Markov algorithm is presented, by entering a new nonterminal symbol into it. Examples of protomorphisms in big data are considered. Protomorphisms are divided into those about the truth, which can be asked, and those for which it is impractical to make a judgment about truth or falsity. The Hempel paradox with protomorphisms is considered. For Hempel’s paradox with “classes”, the method of bringing the number of inductive observations to the total number of observations is specified. An example of filling an artificial intelligence database with protomorphism is considered. A practical example of the use of protomorphism in the task of countering money laundering and terrorist financing of the socio-economic system is given. It is shown that it is permissible to expand the alphabet M with new letters for some morphisms, separating them. It is concluded that in the task of countering money laundering and terrorist financing, it is advisable to use protomorphisms, since they can increase the level of completeness, reliability, and efficiency of the subsystem for countering money laundering and terrorist financing when making decisions.

INVESTIGATION OF THE HEMPEL PARADOX WITH CLASSES IN BIG DATA OF SOCIO-ECONOMIC SYSTEMS

The methods of self-learning and learning with an artificial intelligence teacher are being investigated. The research is carried out in the interests of solving the problems of countering money laundering and terrorist financing on incomplete, heterogeneous big data of socio-economic systems. The N-scheme of the Markov algorithm with a quantitative measure of induction is synthesized. A method is proposed for recording the number of relationships (interactions) of big data objects in the database of artificial intelligence. The theoretical provisions of Hempel’s paradox with classes are considered. The Hempel paradox is evaluated in heterogeneous big data. The Markov occurrence diagram for Hempel’s paradox with classes is synthesized. The Hempel paradox with classes is investigated under conditions of incompleteness and heterogeneity of the data sample. A method of inductive self-learning of artificial intelligence in the N-scheme of the Markov algorithm with a quantitative measure of induction is proposed. The method of using the associator m for training artificial intelligence in the N-scheme of the Markov algorithm is presented. A method of category, predetermined, inductive, teacher-directed self-study is proposed. It is concluded that self-learning methods have a limited potential for mathematical expressiveness. The reason for the low expressiveness is the inability to correctly operate with classes and categories, as well as the limitations of the possibility of logical predestination of truth, taking into account the heterogeneous, anthropogenic nature of objects and morphisms. The study of methods of teaching without a teacher revealed the scientific task of overcoming the Hempel paradox for classes of objects. It is indicated that the proposed method of categorically predetermined, inductive, teacher-directed self-learning actually shows that artificial intelligence a priori must be trained by a teacher, in other words, it cannot correctly self-study without it.

REFINEMENT OF THE MARKOV ALPHABET TO REPRESENT SYNONYMS AND HOMONYMS DENOTING OBJECTS OF BIG DATA OF SOCIO-ECONOMIC SYSTEMS. Part 2

The words synonyms and homonyms denoting objects of big data of socio-economic systems in the ordered and expanded Markov alphabet A–+ are studied. A general theoretical substantiation of constructive synonyms and homonyms in the Markov alphabet A–+ is carried out. An example of a diagram of the join the words in the Markov alphabet A–+ in the typologies of risks of money laundering with restrictions is synthesized. The restrictions are chosen as close as possible to the real conditions for searching and detecting the risk of money laundering. Among the restrictions, the main ones stand out. Signs of risk are extracted from the main restrictions, which always indicate the illegal nature of the transaction. The main signs of risk are presented in algebraic form. The algebraic form is the categorical one. A method of replacing individual words in the Markov alphabet A–+ with their constructive synonyms using cycles of a special format is considered. When replacing with constructive synonyms, homonyms are excluded. The exclusion of homonyms is achieved by substituting such synonyms that uniquely define the homonym. The main signs of income laundering risks are presented categorically in alphabet ζ. Examples of categories in alphabet F are shown both with and without synonyms. The method of using the categorical alphabet ζ to detect typologies of income laundering risks with an arbitrary combination of elements of this alphabet is illustrated. The Markov system is synthesized, which can act as a basic model of the subsystem for countering money laundering and terrorist financing. It is concluded that the use of substitutions with constructive synonyms of words in the Markov alphabet A–+, denoting objects of big data of socio-economic systems, provides an increase in the completeness of the definition of their relationships (interactions).

Can implementing classic management theories in the KYC process help achieve high regulatory compliance?

Banks and other financial institutions (FIs) today face completely different challenges than they did 20 years ago. Since the Fourth Money Laundering Directive (EU 2015/849) came into force in 2014, the aim was to counter money laundering and terrorist financing. FIs have had to change their priorities and spend large sums on regulatory compliance in this area. The legal requirements found in national legislations across the EU which are based on the implementation of the EU Money Laundering Directive and associated regulations, are one of the FIs biggest challenges today. The ‘know your customer’ (KYC) process is a costly and complicated process that includes administration and alternating contacts with the customer. The process places high demands on regulatory compliance as the KYC process is governed by national legislation, directives, and regulations. The requirement for a risk-based and holistic view on the money laundering and terrorist financing (ML/TF) risks also requires that the process adapts to the outside world. This is difficult for the middle and larger financial institutions to comply with without automation. Despite the complexity of the process, the literature review conducted by the author shows that the main research focus is on technology, cost efficiency and customer satisfaction. Only a few raise the issue from a compliance perspective, and even fewer highlight both technology and compliance in the same research. With research focused on developing strategies for enhanced customer satisfaction and cost and time efficiency, what strategies are there to succeed implementing a KYC process with all attributes above at the same time as it is fully compliant with regulations, ie risk-based and holistic? By applying and implementing classic management theories into the anti-money laundering regulatory control environment, the author believes that it is possible to have a KYC process that is cost and time effective, has a high level of customer satisfaction, and at the same time is highly compliant with AML/CTF regulations.