Current Anti-money Laundering Research Articles

A critical analysis of Somalia’s current antimoney laundering and counter financing of terrorism regime: a comparative study with Malaysia

PurposeConcerns on money laundering (ML) and terrorist financing increased, as ML accounted 2%–5% of the global GDP, with Switzerland, the USA, Canada, India and Russia having high laundering rates. Banks were fined over US$320bn in 2008, but money laundering still accounted for 3.6% of global GDP in 2009, thereby indicating the need for effective regimes. Therefore, this study aims to critically analyze the antimoney laundering (AML)/CFT regime of Somalia, identify loopholes in the regime, raise awareness and propose recommendations for regime improvement.Design/methodology/approachThe qualitative research approach is used to compare Somalia’s AML/CFT regime with the corresponding regime of Malaysia through the black letter method combined with document analysis. Malaysia is selected as a benchmark for two reasons: firstly, it is an Islamic country like Somalia, and secondly, Malaysia has complied with integrity-related standards.FindingsThis study revealed that an impactful AML/CTF regime is reached by closing loopholes in the law, reevaluating and improving regulatory agencies and measures, facilitating formal financial services and collaborating with regional and international standard setters. According to the results, Somalia AML/CFT regime is counterproductive in criminalizing offenses; regulating digital currencies and mobile money, disclosures and nonfinancial business and provisions; and governing training requirements for regulatory agencies and financial institutions.Originality/valueTo the best of the author’s knowledge, this paper is the first of its kind in the study of Somalia’s regime building. Also, this study incorporates rich scholarly discourse on effective regime building.

Changes in credit score, transaction volume, customer characteristics, and the probability of detecting suspicious transactions

PurposeThis study aims to use a unique customer-information data set from a Norwegian bank to identify how small changes in firm-specific factors correlate with the risk of a client subsequently being involved in suspicious transactions. It provides insight into the importance of updating client risk based on changes in transaction volume and credit risk to enable effective resource use in transaction monitoring.Design/methodology/approachChanges in a firm’s bank use and accounting data were tested against subsequent flagged and reported customers to identify which changes led to a significant increase in the probability of engaging in a transaction identified as suspicious. Prioritizing resources to firms that remain suspicious after further controls can improve the risk-based approach and prioritize detection efforts. The main factors were customer probability of default (credit score), size and changes in customer characteristics. The cross-sectional data set contained administrative data on 8,538 corporate customers (219 with suspicious transactions that were subsequently flagged, 64 of which were reported). A binomial logit model was used.FindingsChanges in transaction volume and bank use are significant in predicting subsequent suspicious transactions. Customer credit score changes were significantly positively correlated with the likelihood of flagging and reporting. Change is a stronger indicator of suspicious transactions than the level. Thus, frequent updating of client risk and using a scale rather than risk categories can improve client risk monitoring. The results also showed that the current anti-money laundering (AML) system is size-dependent; the greater the change in customer size, the greater the probability of the firm subsequently engaging in a suspicious transaction.Research limitations/implicationsClient risk classification, monitoring changes in a client’s use of the bank and business risk should receive more attention.Practical implicationsThe authors demonstrate that client risk classifications should be dynamic and sensitive to even small changes, including monitoring the client’s credit risk changes.Social implicationsDirecting AML efforts to clients with characteristics indicating risk and monitoring changes in factors contributing to risk can increase efficiency in detecting money laundering.Originality/valueTo the best of the authors’ knowledge, this is the first study to focus on changes in a firm's use of a bank and link this to the probability of detecting a suspicious transaction.

The adequacy of the legal framework for combating money laundering and terrorist financing in Nigeria

PurposeBanditry and terrorism constitute serious security risks in Nigeria. This follows the fact that Nigeria is rated as one of the leading states in the world that is plagued by terrorism. Terrorists and bandits usually embark on predicate crimes such as kidnapping, smuggling, narcotics trade, and similar trades to finance their terrorist enterprises in Nigeria. The funds realized by criminals from nefarious sources such as sales of narcotics and ransom from kidnapping are usually laundered to make their criminal enterprises self-sustaining. Thus, all “dirty” money is laundered so as not to attract the attention of law enforcement agents. The funds realized through receipt of ransom from kidnapping, smuggling or funds from sponsors are laundered through channels such as bureau de change, which are difficult to monitor by the Nigerian authorities due, in part, to flaws and loopholes in the current anti-money laundering and anti-terrorist laws. This paper aims to adopt a doctrinal and qualitative desktop research methodology. In this regard, the current anti-money laundering and anti-terrorist laws are discussed to explore possible measures that could be adopted to remedy the flaws and loopholes in such laws and combat money laundering and financing of terrorism in Nigeria.Design/methodology/approachThe article analyses the regulation and combating of money laundering and terrorist financing activities in Nigeria. In this regard, a doctrinal and qualitative research method is used to explore the flaws in the Nigerian anti-money laundering laws so as to recommend possible remedies in respect thereof.FindingsIt is hoped that policymakers and other relevant persons will use the recommendations provided in this article to enhance the curbing of money laundering and terrorist financing activities in Nigeria.Research limitations/implicationsThe article is not based on empirical research.Practical implicationsThis study is important and vital to all policymakers, lawyers, law students and regulatory bodies in Nigeria and other countries globally.Social implicationsThe study seeks to curb money laundering and terrorist financing activities in Nigeria.Originality/valueThe study is based on original research which is focused on the regulation and combating of money laundering and terrorist financing activities in Nigeria.

The Examination of Anti-Money Laundering Laws in Nigeria as International Law Overview

The money laundering along with other economic and financial crimes continues to increase unabated. It remains one of the major problems of the country which has retarded immensely its growth and economic development. This research aims to examine the provisions of the current Anti-Money Laundering Act in Nigeria, as the country is under obligation to comply with the international standard, having signed and ratified “Vienna Convention and Palermo Convention”. This research used a doctrinal method which examined and analysed the provision of the Money Laundering (Prohibition) Act 2011. A deducible impression that this created is that it is either those laws are not effective or there is no political will to execute. Combating money laundering therefore requires more than having an array of legal framework. The implementation of those laws is germane for a desire result.

A study of Malaysian anti-money laundering law and the impact on public and private sector

PurposeThe objectives of this study are to analyse the present Malaysian law regarding money laundering, to identify advantages and disadvantages of the current anti-money laundering law, to analyse its impact on the public sector and the private sector and to make recommendations on any improvements that should be made.Design/methodology/approachThis study will use a qualitative method where the literature review method applies to collect primary and secondary data regarding anti-money laundering laws. Data has been collected from the various provisions of laws and text reading, such as books, articles, journals, law cases and thesis regarding anti-money laundering laws and those analysed with the content analysis method and the critical analysis method.FindingsThis study found that Malaysia has one law regarding anti-money laundering and they have control over individual and corporate entities in Malaysia.Originality/valueThis study found that Malaysia has one law regarding anti-money laundering and they have control over individual and corporate entities in Malaysia.

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.

Financial Intelligence Units: Reflections on the applicable data protection legal framework

Financial Intelligence Units (FIUs) are key players in the current Anti-Money Laundering and Countering the Financing of Terrorism (AML/CFT) legal system. FIUs are specialised bodies positioned between private financial institutions and states’ law enforcement authorities, what renders them a crucial middle link in the chain of information exchange between the private and public sectors. Considering that a large share of this information is personal data, its processing must meet the minimum data protection standards. Yet, the EU data protection legal framework is composed of two main instruments, i.e. the General Data Protection Regulation (GDPR) and the Law Enforcement Directive (LED), which provide different thresholds for the protection of personal data. The aim of this paper is to clarify the applicable data protection legal regime for the processing of personal data by FIUs for AML/CFT purposes. To that end, the paper provides an overview of the nature and goals of AML/CFT policy and discusses the problem of the diversity of existing FIU models. Further, it proposes a number of arguments in favour of and against the possibility of applying either the GDPR or LED to the processing of personal data by the FIUs and reflects on how convincingly these arguments can be used depending on the specificities of a given FIU model.

The role of the Palestine monetary authority in combating money laundering

Purpose This paper aims to highlight the role of the Palestine Monetary Authority (PMA) in combating money laundering. The discussion will focus on the sectors under the PAM authority by examining the issued instructions. Design/methodology/approach The current study is a pure legal study. The methodology used in this paper is the qualitative approach by focussing on the doctrinal mechanism. Thus, it focussed on procedures, processes, laws, and regulations. Findings This paper found serious organisational inefficiencies within the governance framework of anti-money laundering (AML) for both the currency exchange and specialised lending institutions sectors. Moreover, the PMA’s role in combating money laundering is insufficient where its efforts are limited by random inspection visits and the installation of surveillance cameras in the money changers shops. Practical implications The findings may influence both the currency exchange and specialized lending institutions sectors to adopt a more vigilant approach to prevent the occurrence of money laundering in Palestine and to undertake more responsibility in ensuring compliance with the current AML legal framework. The study also highlighted that their current practice might place them in danger of non-compliance. Originality/value The paper demonstrated in, an exceptional way, the role of the PMA in combating money laundering by focussing on both legal and regulatory requirements for the three sectors under the PMA supervision authority. This paper made a valuable contribution to the study of combating money laundering in Palestine, where it is one of the first studies dealing with this issue involving this country.

Is there a commendable regime for combatting money laundering in international business transactions?

Purpose Money laundering and grand business corruption continue to plague the global economy, accounting for 2%-5% of the global gross domestic product. Illicit funds, produced through grand corruption, are laundered using complex layering schemes that cloak them in legitimacy by concealing their origins. Lamentably, weak anti-money laundering (AML) frameworks promote economic instability, unjust commercial advantages and organized crimes. This study aims to highlight the need for comprehensive anti-corruption and AML frameworks by critiquing the exploitable gaps in the global AML regime created by heterogeneous state-level AML regimes to date. Design/methodology/approach This study welcomes the United Nations Convention against Corruption (UNCAC) and the financial action task force (FATF) recommendations but underscores the limitations of their effectiveness by investigating state-level enforcement mechanisms to determine these instruments’ true impact or lack thereof. The mutual evaluation reports (MERs) and state-level AML regimes in the UK, the USA and Canada are analyzed to illustrate the distinct implementation of international soft law in domestic legislation. Findings This study finds that UNCAC and the FATF recommendations are pivotal steps towards the establishment of a global AML regime for international business, albeit, one that remains imperfect because of the inconsistency of state-level AML frameworks. Consequently, international cooperation is needed to navigate and improve the discrepancies in varied AML legislation. Originality/value The author provides an in-depth and balanced analysis of current state-level AML developments and relies upon the recent 2016-2018 MERs to indicate the successes and flaws of various AML legislation. Therefore, this critique may guide stakeholders to construct robust AML frameworks and contributes to academic research in AML.

Artificial intelligence for anti-money laundering: a review and extension

This paper surveys the existing academic literature on artificial intelligence (AI) technologies for anti-money laundering (AML). We review the state-of-the-art AI methods for AML and extend the discussion by proposing a framework that utilizes advanced natural language processing and deep-learning techniques to facilitate next-generation AML technologies. Our framework utilizes unstructured external information to assist domain experts, aiming to decrease the workload for the human investigator. We bridge the gap between the current AML methods and state-of-the art AI, highlighting new trends and directions in AI that can be used to develop the AML pipeline into a robust, scalable solution with a reduced false positive rate and high adaptability.

'Gatekeepers' Are Vital Participants in Anti-Money-Laundering Laws and Enforcement Regimes As Permission-less Blockchain-Based Transactions Pose Challenges to Current Means to 'Follow the Money'

Two phenomena dominate reports about blockchain-based transactions—that they will disrupt and displace legacy banking, securities, and trade intermediaries, and that they present new or greater opportunities for hiding proceeds of crimes or corruption. This essay does not deal with the former topic. Rather, the organizers of the symposium at George Mason University’s Antonin Scalia School of Law asks me to consider the latter question. It proved to be a tough assignment. This essay looks at the separate questions of (1) the degree to which permission-less blockchain transactions will disrupt current anti-money laundering (AML) regimes and enforcement efforts, and (2) what efforts governments that have agreed to pursue goals of deterrence and detection of money laundering may need to initiate as blockchain-based transactions become more common. My thought process has moved through stages and, finally, has focused on three silos of potential concerns about blockchain technologies. In the first silo are blockchain technologies as technologies. I assign to this first silo the lowest level of concerns because of their potential for inclusion, security and integrity. I do not favor regulating technologies; such regulation will be outdated too fast. The second silo contains cryptocurrencies and other crypto-assets or products and services related to them that are offered in compliance with applicable domestic laws where the user of the product or services is domiciled. I assign a low-to-low-middle level of concern to these crypto assets but recognize and discuss below that this “grade” could change. In the third silo, I have bad actors whose products and services are designed for illicit purposes, and opportunists that offer products and services they do not have and that have no intention of delivering products or services or allowing redemption of value delivered to them. This third silo gets a big red flag from me – and this silo will require continued attention from domestic and global law enforcement agencies. Part of the reason that I see a low or low-to-low-middle level of concern for the first two silos is that, for the immediate future at least, that traditional financial services “gatekeepers” in payments, securities, and commodities will continue to play vital roles in deterring and detecting money laundering and terrorism finance efforts here and abroad. The presence of regulated “gatekeepers” may not forestall the need for new legal requirements or enforcement systems forever, but their presence in the marketplaces of today reduce the need for immediate action and allow legislatures and regulators more time to observe crypto innovations and determine their next steps. As a subset of the third silo, for the time being at least, are the new brands of government-backed cryptocurrencies, such as the Petro from Venezuela and those that Russia, China, and other governments, and the special challenges they may pose to AML legal regimes and, separately, to the United States Dollar as the global reserve currency that it has represented since World War II. These government-backed cryptocurrencies also challenge longstanding concepts of sovereigns’ control over “legal tender” inside their own borders and their potential sponsors are designing them to avoid economic sanctions imposed by other governments. The balance of this essay proceeds as follows: Part II provides background on permission-less blockchains and, separately, recent interest by governments in issuing cryptocurrencies themselves. Part III provides background on the three stages of value laundering – (1) initial “placement” of illicit proceeds, (2) “layering” through multiple forms of property or banks or banking systems to obscure its source or ownership, and (3) “integration” or emergence of assets that look legitimate to the outsider. Part IV reviews different challenges to traditional means of detecting value laundering that non-government-issued cryptocurrencies, permission-less blockchains, and government-sponsored cryptocurrencies pose. This Part looks at the vital roles that “gatekeepers” play in AML enforcement in the United States. Part IV also explains how (1) regulators and law enforcement authorities are already using new tools to trace and identify blockchain-based transactions that are in furtherance of illicit activities, and (2) government-issued cryptocurrencies and more private and opaque cryptocurrencies may make detection of money laundering more difficult. Part V explains my view that permission-less blockchains are not our major problem in the global campaigns against money laundering (regardless of the purposes for which money laundering is attempted) but finding someone to regulate in future may be. Part VI briefly evaluates efforts by global authorities, such as the G-20’s Financial Action Task Force (“FATF”) regarding the regulation of cryptocurrencies and the European Parliament’s 5th Anti-Money Laundering Directive (“AMLD5”), some of which goes into effect on January 10, 2020, to re-frame the AML and market-protection regulatory recommendations to cover issues relating to cryptocurrencies and other crypto-assets. Part VII states some conclusions and identifies questions for additional research.

Follow the Money, If You Can - Possible Solutions for Enhanced FIU Cooperation Under Improved Data Protection Rules

Financial information can play a key role in tackling Money Laundering (ML), Terrorist Financing (TF) and combatting serious crime more generally. Preventing and fighting ML and the financing of terrorism were top priorities of the European Agenda on Security, which might explain the fast developments regarding the regulation of Anti-Money Laundering (AML) and Counter Terrorism Financing (CTF). During the past years, the European Commission (Commission) proposed several legal texts to reform the current AML framework and to facilitate timely law enforcement (LE) access to financial data for the prevention, detection, investigation and prosecution of serious crime. The line between administrative sanctions and criminal law measures seems to become increasingly blurred, as the latest proposals are no longer based on an internal market provision, but on police and judicial cooperation legal bases. Financial Intelligence Units (FIUs) play a crucial role in analysing and exchanging information concerning suspicious transactions, serving as intermediaries between the private sector and Law Enforcement Authorities (LEAs). Because of the international nature of financial crime, cooperation between FIUs is of paramount importance. Yet, due to different organizational settings in the EU Member States, FIUs are not always able to exchange data effectively, which leads to information gaps. One of the reasons why the data exchange between FIUs is impeded are data protection rules that apply differently depending on the organizational structure of the FIUs in the 28 Member States. Whereas some FIUs must adhere to the stricter data protection rules under the General Data Protection Regulation (GDPR), others may exchange data more flexibly within the scope of the data protection Directive for police and criminal justice authorities (LED). Therefore, the counter-argument to granting broader LE-access rights to financial data by LEAs could be to enable a more effective exchange of data between FIUs. This article argues that FIUs should be able to process personal data within the scope of the LED, in order to have more flexibility to receive, analyse and exchange data: On the one hand, the LED provides sufficiently high data protection standards and adequate safeguards for data subjects while allowing FIUs to carry out their tasks effectively under harmonized rules. On the other hand, this would be an argument to strengthening the role of FIUs as neutral intermediaries instead of granting additional access to personal data by LEAs.

Assessing the introduction of anti-money laundering regulations on bank stock valuation

PurposeThis paper aims to analyze the impact of the introduction of anti-money laundering (AML) regulations on bank stock valuations in the USA. Regulations can have a negative impact on financial returns as a result of increased operational costs, potentially driving down stock valuations and loss of profitability. However, regulations can also have a positive impact on valuations because of greater oversight and increased investor confidence. Findings are useful for assessing the market impact of future regulations.Design/methodology/approachEvent studies and cross-sectional regression analysis are used to determine the impact on bank stock valuations together with specific characteristics of bank size and geographic headquarter location of the bank for identified AML regulations. Hypothesis related to the impact of the introduction of AML regulations are empirically tested based on the statistical significance of cumulative abnormal returns of markets.FindingsAML regulations introduced in 1998 had a positive impact on bank stock valuations, while the USA PATRIOT Act legislation of 2001 had a negative impact. These findings suggest that recent AML regulation is a cost compliance burden for banks, where the costs of operations outweigh the benefits of improved processes. Larger banks see a more negative impact on their bank stock valuations compared to smaller banks, suggesting the market perceives greater cost and less profit for larger banks. Results also show that the location of bank’s headquarters does not significantly impact bank stock valuations.Originality/valueThis paper specifically focuses on the impact of AML regulations on the US banking sector, providing investors, academics and regulators additional insight on the market dynamics of regulations. Identifying whether the introduction of regulations has a significant impact on a bank’s performance will provide both banks and regulators clarity as to the net benefits associated with the current and future AML legislation.

The value of public-private partnerships for financial intelligence

This paper discusses the lack of effectiveness of the current anti-money laundering and counter-terrorist financing reporting regime, which leads to defensive and over-reporting. However, the end-goal of the reporting regime is to get more convictions, and to seize more ill-gotten assets. Partnerships between financial institutions and law enforcement authorities allow relevant information sharing in a trusted environment to improve the detection of suspicious transactions. The existing national initiatives in this field, such as the Joint Anti-Money Laundering Intelligence Task-force in the United Kingdom, have proven to be very successful. Yet, this is not sufficient to achieve greater effectiveness as illicit transactions are mostly cross-border. Presently, reporting entities can only provide fragmented pieces of information to their respective domestic Financial intelligence Unit (FIU). To achieve the goal to have a better cross-border vision, Europol developed in 2017 a functionality to allow EU FIUs to quickly forward cross-border Suspicious Transaction Reports relevant to other EU FIUs. Europol decided to push further the cross-border cooperation by setting up the first transnational public-private partnership for financial information sharing. The Europol Financial Intelligence Public-Private Partnership (EFIPPP) was launched in December 2017, bringing together experts from 15 major banks and competent authorities from eight EU member states and non-EU countries, involving FIUs, law enforcement authorities and supervisors, to improve transnational cooperation. Participants of the EFIPPP have started to exchange strategic information and sanitized case studies. Ultimately, the objective of the EFIPPP is to facilitate the exchange of operational or tactical intelligence associated with on-going investigations.

Unintended Consequences of Anti-Money Laundering and Combating the Financing of Terrorism (AML/CFT)

Money laundering is illegal world-wide and constitutes a significant economic inefficiency. One must wonder why current anti-money laundering and combating the financing (AML/CFT) efforts are primarily driven by the threat of terrorism and drug-trafficking when the overwhelming majority of illicit money flows is due to other causes, primarily fraud. The significant costs imposed on financial institutions, together with ever increasing levels of regulation mandated by AML/CFT efforts and the minuscule in comparison illicit money flows intercepted by these efforts has thereby resulted in both moral hazard and conflicts of interest for financial institutions. Furthermore, AML/CFT efforts take on a new meaning when one realizes that illicit money, flows not only through traditional banks but also shadow banks and other non-bank financial intermediaries. The costs of compliance are enormous in comparison to the benefits with the “war on terrorism” superseding the more relaxed “war on drugs”, although even the latter was onerous in comparison to the even more relaxed efforts against the more widespread “white-collar” crime of fraud. In this paper, we trace the evolution of the present AML/CFT regime while at the same time assessing the costs and benefits of this government initiative on the efficiency of the financial system both in modern advanced economies and as well as the less developed economies of the world.

Nonmarket Action and the International Counter-Money Laundering Act (H.R. 3886)

The case describes the international problem of money laundering and summarizes U.S. bank regulations aimed at reducing money laundering activities. The introduction of H.R. 3886 in 2000 was one in a series of attempts to formalize U.S. banks' monitoring of their customers. The bill was prompted by a government report that named and criticized U.S. banks for laundering billions of dollars linked to drug trafficking, fraud, and organized crime. Interest groups in favor of H.R. 3886 were predominantly law enforcement agencies that viewed current anti-money laundering laws as ineffective. Groups opposed to the bill included the American Civil Liberties Union, which believed that the collection of more information about bank customers' activities was an invasion of privacy, and the American Bankers Association, which claimed that the legislation would impose unnecessary costs on banks. The case can be used to introduce the distributive politics framework for analyzing non-market issues and formulating nonmarket strategies in the context of government institutions. The epilogue reveals that H.R. 3886 died before it ever reached the House floor, but that an expanded version of the legislation ultimately passed---with the support of stakeholders who originally fought it---as part of the USA PATRIOT Act after the terrorist attacks of September 11, 2001. This stance reversal provides an opportunity to explore how events, public opinion, and the media can create windows of policy opportunityUtilize a framework for analyzing options for non-market action – Formulate a strategy for nonmarket action – Recognize how public opinion influences the opportunity for non-market action through events and/or new information, political actors, media coverage, and policy windows

Managing money laundering risks in commercial letters of credit

Purpose The purpose of this paper is to critically examine the role of banks in detecting and mitigating money laundering risks in trade finance activities, especially in commercial letters of credit, and to answer the central question: do banks comply with regulations that are inadequate (if so, is more stringent regulation compatible with the commercial world of trade finance?), or are banks are in danger of non-compliance? Design/methodology/approach The relevant principles promulgated by international organisations as well as the law enacted in UK to prevent money laundering risks in commercial letters of credit was examined to assess banks’ compliance with their anti-money laundering (AML) obligations. The key provisions of the Money Laundering Regulations 2007, Proceeds of Crime Act 2002 and the Wolfsberg Trade Finance Principles were discussed, and the extent of banks’ compliance with these provisions was highlighted by carefully analysing the steps a bank might take at various stages of the operation of a commercial letter of credit and what the banks in fact do. The paper relies heavily on the findings of the recent study conducted by the Financial Conduct Authority (UK) to analyse the actual practice followed by UK banks in controlling money laundering risks in transactions involving commercial letters of credit. Findings The paper establishes that considering the formal nature of commercial letters of credit (which makes them independent from the underlying transaction), any stringent measures to regulate trade finance activities of a bank may destroy the effectiveness of commercial letters of credit as a tool for promoting international trade. The current law and regulations together with the Joint Money Laundering Steering Group Sectoral Guidance and the Wolfsberg Principles provide the requisite legal and regulatory framework to control money laundering risks in commercial letters of credit. The paper however establishes that the majority of banks in UK currently appear to be in danger of non-compliance with the UK AML regime and certainly need to meet their AML obligations in a more serious way. Practical implications The findings may influence banks to adopt a more vigilant approach in their trade finance activities and to undertake more responsibility in ensuring compliance with the current AML law and regulations, while highlighting that their current practice may put them in danger of non-compliance. Originality/value The paper demonstrates in an exceptional way the legal and regulatory requirements for banks to prevent money laundering risks in their trade finance activities and where, in practice, the banks are falling short of compliance with these requirements. By adopting a step-by-step approach in evaluating banks’ “current-and-must have” approach to controlling money laundering risks at various stages of a commercial letter, the paper makes a valuable contribution to the study of combating money laundering in commercial letter of credit transactions.

International anti-money laundering laws: the problems with enforcement

Purpose This paper aims to explore the underlying problem of tackling money laundering, namely, the difficulty of enforcing international laws and whether this is a problem which is too great to overcome in practice. Design/methodology/approach A doctrinal approach is used to discuss international anti-money laundering (AML) laws and question whether money laundering can be truly regarded as an international crime. A comparative approach with case studies of corruption in financial institutions illustrates the problems which law enforcement might encounter. The advantages and disadvantages of tackling money laundering will be highlighted to elucidate both the negative impacts of the crime and the reasons why some states may not be tackling money laundering as forcefully as they could. Findings Uniformity of AML laws among different countries may deter criminals from laundering money. The ratification of the Vienna Convention can help to facilitate uniformity of legal rules. States need robust domestic laws to tackle money laundering. Money laundering is an international crime, although not always a specific crime in international law. Moreover, it is generally advantageous to consider money laundering to be a specific crime under international law. Originality/value The article questions the effectiveness of current AML laws by examining the foundations of international law. Suggestions as to how uniformity can be achieved are given. A comparative approach is also used to demonstrate the extent of the crime, weaknesses in companies’ regulatory regimes and how each State responds to money laundering. The comparison also reveals State-specific issues which fuel money laundering. Moreover, the article explores the practical and legal advantages and disadvantages of money laundering being considered a specific crime in international law.

The Economic Foundations of Anti-Money Laundering Regulation

In this paper the foundations of anti-money laundering regulation are analyzed from an economic viewpoint. The analysis departs from the view that money laundering is a polluting element in financial systems produced by the regular activity of financial institutions. In a latu sensu view it can be viewed as a negative externality that has to be dealt with. The paper shows that the current anti-money laundering regulation is based on a Pigouvian approach although it is known that a Coasian analysis is theoretically superior to deal with law and economic issues. This may help to explain the difficulties that the anti-money laundering regulations are facing to be efficiently applied worldwide. However, the Coasian approach cannot be implemented due to some characteristics of the money laundering. First, it is a derived offence in which is difficult to establish who is the victim. This fact makes almost impossible the creation of a market in which the victims and would negotiate the property rights. Hence, the paper acknowledges that a Pigovian approach although plagged by some difficulties is shown to be the best practice to cope with prevention of money laundering.

“No safe haven”: denying entry to the corrupt as a new anti-corruption policy

Purpose – This paper aims to provide an overview of the “no safe haven” anti-corruption commitment recently announced by the G20. The essence of this approach lies in denying entry to individuals reasonably believed to be complicit in massive corruption. Design/methodology/approach – The paper is based on the analysis of international legal instruments and relevant domestic legislation (US statutes, in particular the Magnitsky Act 2012), as well as on scholarly discussions. Findings – Proceeding from the analysis of deficiencies in the current anti-money laundering regime, this paper makes an argument in favour of adoption of the “no safe haven” policy as a legal standard in anti-corruption cooperation, rather than a voluntary initiative. Practical implications – The adoption by states of the approach advocated in this paper will strengthen, or so it is submitted, the international anti-corruption regime. Importantly, it will help curb impunity of those who are shielded from investigation and prosecution in their home countries. Originality/value – This paper considers basic legal and policy arguments that support the “no safe haven” anti-corruption policy. Due to the novelty of this approach and the dearth of academic literature on this topic, this may be a valuable contribution to the current anti-corruption discussions.