Effective Anti-money Laundering Research Articles

Recalibrating the Banking Sector with Blockchain Technology for Effective Anti-Money Laundering Compliances by Banks

Recalibrating the Banking Sector with Blockchain Technology for Effective Anti-Money Laundering Compliances by Banks

The effect of the banking supervision on anti-money laundering

This article's goal is to investigate the connection between banking supervision (BakSup) and anti-money laundering (AnMeyLg). The study's hypothesized model was examined using a survey questionnaire research methodology. The Central Bank of Sudan and the compliance departments of Sudanese banks provided the information. Just 247 valid surveys were received out of a total distribution of 450 questionnaires. The partial least squares method for structural equation modeling was applied. The statistical findings supported the impact of banking supervision on anti-money laundering. In-depth discussions of the study's specifics and consequences were included at various points. There are several real-world applications of the findings of this study. Management can use the findings to guide their decisions on whether or not to establish anti-money laundering procedures in their banking firms. Banking supervision may provide managers with effective anti-money laundering strategies for maximizing bank performance and maintaining market share. This is one of the few empirical studies of its kind that looks at how banking supervision affects efforts to combat money laundering.

Uncovering the depths of trade-based money laundering: evidence from a seaport in Bangladesh

PurposeMoney laundering (ML) is a major criminal offence stemming from unethical practices by personnel on the ground at Chattogram Port, an important import and export facility in Bangladesh. Because money can be more easily laundered through imports, it is necessary to investigate the dubious process in this sector. This study aims to identify the items most regularly used for easy ML and the factors contributing to their vulnerability.Design/methodology/approachThis research uses a qualitative approach and analyses information from primary sources. Data is obtained from customs officials, port authority personnel, importers and customs brokers through semi-structured questionnaires. Although there are many techniques for ML, this study only found three most overwhelming: under-invoicing, over-invoicing and misdeclaration. A few case studies have been used based on newspaper reports and the internet to triangulate the qualitative data.FindingsFour import items – food products, garments, capital machinery and chemicals – have a higher risk of ML. This study also revealed that money launderers prefer under-invoicing food and garment items. Misdeclaration is more commonly associated with capital machinery and chemical items. Over-invoicing, on the other hand, is only prevalent in government purchases. The port authorities need to pay particular attention to these issues.Research limitations/implicationsAs ML is an ongoing activity that changes over time, the findings of this research are circumscribed by the data collected at a single point in time. Additionally, this research did not consider alternative laundering methods.Practical implicationsThe research results can provide a basis for creating effective anti-money laundering (AML) strategies to assist with sustainable economic growth.Social implicationsDeveloping effective AML measures can help combat corruption and establish good governance in the country and support human well-being.Originality/valueThis paper presents original research findings based on technical analysis. The Chattogram Port Authority and the National Board of Revenue have accepted and used the main findings in a collaborative action plan to tackle ML. The Bangladesh Bank, the country’s central bank, has also incorporated the necessary guidelines and regulations into the Money Laundering Prevention Act, 2012.

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

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

A Traceable Online Insurance Claims System Based on Blockchain and Smart Contract Technology

In the current medical insurance claims process, there are problems of low efficiency and complex services. When a patient applies for medical insurance claims, he/she must go to the hospital to apply for a diagnosis certificate and receipt and then send the relevant application documents to the insurance company. The patient will not receive compensation until the company completes the verification with the patient’s hospital. However, we can improve the current dilemma through blockchain technology. Blockchain technology can effectively open up the information channels of the insurance industry and medical institutions, promote industry integration, and enhance the ability of insurance companies to obtain information. In this research, we used blockchain and smart contract technology to make the following contributions to the development of Internet insurance. First, blockchain and smart contract technology can effectively solve the problem of online underwriting. Second, it is conducive to improving supervision. Third, it is conducive to solving risk control problems. Fourth, it is conducive to effective anti-money laundering. The proposed scheme fulfills the following security requirements: mutual authentication of identities, non-repudiation between each of two roles, and other major blockchain-based security requirements. In the event of a dispute, we also proposed an arbitration mechanism to divide responsibilities.

Perceptions of Barriers to Conducting Effective AML Investigations

AbstractFor many years, banks have been spending billions of pounds to combat money laundering and terrorist-financing activity but are falling short of both local and global expectations, despite extensive regulatory guidance. The aim of this research was to examine what barriers there might be in conducting effective anti-money laundering (AML) investigations. There is little guidance to help banks consider the difficulties that might be faced when raising awkward questions with customers. The few studies that were identified accentuated poor internal practices and inadequate skills; however, there is little examination of the specific problems encountered. A mixed methods form of research was adopted using surveys and interviews, targeted at bank staff involved in AML investigations. The results indicated numerous difficulties when conducting enquiries, many of which centred around a fear of offending the customer. If bank staff are fearful of asking questions, it is clearly impossible to conduct satisfactory investigations.

LEVERAGING ANTI-MONEY LAUNDERING POLICIES AND PROCEDURES TO COMBAT ILLICIT TRAFFICKING IN NARCOTIC DRUGS

PURPOSE – This paper aims to examine the different methods that drug dealers employ to launder their illicit funds, and the strategies that countries can adopt to combat the laundering of the Proceeds of Illicit Trafficking in Narcotic Drugs. DESIGN/METHODOLOGY/APPROACH – This paper uses selected drug trafficking case studies i.e. R v. Adam Maybury and Caroline Wakefield; R v. Daniel Harris; and R v. Nicholas Strange and Neil Strange to help build awareness with the regulatory, enforcement and customs authorities as well as reporting entities about the risks and vulnerabilities of money laundering, and how to mitigate them. This is the only Article to adopt this kind of approach. FINDINGS – This paper determined that with a host of measures, including enhanced cooperation among law enforcement, financial institutions and judiciary; the adoption of legislation that criminalizes the laundering of the proceeds of all serious crimes; establishing a financial intelligence unit; repealing bank secrecy laws; and establishing effective anti-money laundering programs in banks i.e. customer due diligence, enhanced customer due diligence, recordkeeping, account monitoring, suspicious activity reporting and training for officers and employees, countries can reduce the risks associated with the laundering of the Proceeds of Illicit Trafficking to the barest minimum. ORIGINALITY/VALUE – This paper examined the different methods that drug dealers usually adopt to launder their illicit funds through selected drug trafficking case studies i.e. R v. Adam Maybury and Caroline Wakefield; R v. Daniel Harris; and R v. Nicholas Strange and Neil Strange and expounded on the ten strategies listed by William R. Schroeder to combat money laundering using the United Kingdom as a case study. This is the only Article to adopt this kind of approach.

State and institutional capacity in combating money laundering and terrorism financing in armed conflict

PurposeThe purpose of this paper is to explore the relationship and implications of institutional autonomy and capacity through the Central Bank of Syria in its ability to implement an effective anti-money laundering (AML) and counter-terrorism financing (CTF) framework during a period of intense armed conflict.Design/methodology/approachDue to the lack of reliable data currently available on Syria, this paper focuses on Syria’s AML/CTF legislation through passed laws and regulations; annual reports on the Central Bank of Syria and the AML and terrorism financing authority; the academic literature on money laundering, terrorist financing and institutional capacity. This paper will address the theoretical framework of Coleman and Skogstad’s characteristics that define the degree of autonomy and capacity of an institution. Though their characteristics are applied toward the Canadian state, for the purpose of this paper, they have been adopted in the absence of their use verbatim in the case of the Central Bank of Syria.FindingsThe Central Bank of Syria has experienced diminishing independence due to conflict-induced stress in Syria’s financial sector. This loss of autonomy is attributed to the prioritization of government-led emergency policies to secure and stabilize Syria's economy. Despite this loss, the Central Bank of Syria has maintained considerable and effective improvements in Syria’s AML/CTF framework, aligning it closer to that of international standards promoted by the Financial Action Task Force (FATF). Institutional gaps, however, still exist. These gaps imply that the Central Bank of Syria still lags in a number of areas that affect its capability in implementing a more effective AML/CTF framework.Research limitations/implicationsThe conflict in Syria is still a very new topic that lacks a considerable amount of reliable data. As such, many research limitations were encountered despite the volume of information reviewed for this paper in both Arabic and English. Nevertheless, this paper provides a clearer understanding of how state capacity is reflected in its institutions through certain policies and approaches taken by a central monetary authority with implications and results in a country rattled by years of intense conflict.Practical implicationsDespite the research limitations and implications, this paper provides a clearer understanding of how state capacity is reflected in its institutions through certain policies and approaches taken by a central monetary authority with implications and results in a country rattled by years of intense conflict. This can be useful for institutional policymakers, as well as academics exploring the relationship between the state and its institutions in times of hardship.Originality/valueThough there is AML/CTF literature on Middle Eastern countries such as Egypt, Jordan and Saudi Arabia, very little is written on Syria. There is also very little written on the broader subject of state and institutional capacity through the lens of an effective AML and CTF framework during a period of intense armed conflict. By looking at an ongoing conflict, this paper explores a subject with as much detail as needed to provide an illustration of the relationship and implications of institutional autonomy and capacity in relation to the state through an effective AML/CTF framework in a country with a struggling financial system.

Quo Vadis legal profession participation in anti-money laundering

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

Rethinking the internal mechanism of the EGMONT group in financial crime control

PurposeThis paper aims to evaluate the use of Intelligence gathering, especially the exercise of customer due diligence (CDD), enhanced due diligence (EDD), know your customer (KYC) and recordkeeping as effective anti-money laundering (AML) and counter-terrorism financing (CTF) measures. It re-appraises the risk of breach of privacy associated with recordkeeping of clients’ information in countries where there are no data protection laws and the role of the EGMONT group against the backdrop of the recent suspension of Nigeria from the group; it argues that, in view of other existing liberal punitive measures, suspending a developing nation like Nigeria by the EGMONT group (arising from a rigid demand for an autonomous financial intelligence unit (FIU)) is draconian and counterproductive. Finally, it argues that the fundamental needs and challenges of developing member states of the EGMONT group, particularly members that are battling with weak and non-transparent investigation process and terrorism require, inter alia, technical and manpower assistance to disrupt financial crime and financing of terrorism.Design/methodology/approachA doctrinal approach is utilised to analyse AML and CTF from the social and historical perspectives. A comparative analysis of international control of money laundering and terrorist financing, appraising the challenges of developing member states in complying with the Financial Action Task Force regulations and the principles of the Egmont group.FindingsThere are liberal punitive measures than suspension which the EGMONT group could apply when dealing with developing members of the group, especially on the issue of rigid demand for an autonomy of a national FIU. The fundamental needs and challenges of developing member states of the Egmont group, particularly members that are battling with weak and non-transparent investigation process and terrorism require, inter alia, technical and manpower assistance to disrupt financial crime and financing of terrorism.Originality/valueThe paper queries the appropriateness of the decision to suspend Nigeria by the Egmont group for failure to comply with its policy autonomy of its FIU when there are other liberal disciplinary measures that could have been applied. And, it suggests the need to lay more emphasis on technical assistance for member states to achieve the objectives of the group.

Combating Money Laundering in Malaysia: Current Practice, Challenges and Suggestions

Money laundering is a global threat to financial institutions especially the banking industry since it may weaken and expose the institutions to serious risks such as operational, legal and reputational risks. Against this background, the objectives of the study are to analyse the current practice on the prevention of money laundering in selected banks in Malaysia, to investigate the barriers to the implementation of effective Anti-Money Laundering (AML) regulations and to identify the ways to improve the implementation of AML in Malaysia. The study was conducted using qualitative method via interviews with 6 respondents from 6 Islamic & Conventional banks in Malaysia. The preliminary findings showed that the banking institutions’ current practice is fully complying with AML regulations under the AMLA 2001. The findings also demonstrated that the barriers to effective implementation of AML regulations are in line with those of previous study, which are lack of expert staff as the top factor together with an additional factor, which is lack of customers’ education and awareness on money laundering. Hence, to improve the implementation of AML in Malaysia, this study suggested to firstly strengthen the collaboration with government and relevant authorities to ensure strong enforcement action is taken against the criminals. Secondly, collaboration of BNM with banks and local media to increase public awareness and education on financial crime. Thirdly, to invest on employee training, upgrading system management as well as sufficient resources in compliance unit and finally to intensify the “Three Lines of Defence” in Bank Risk Management.

Anti-money laundering governance in the Philippines: legal foundations, institutional dynamics and policy challenges

Effective anti-money laundering governance is essential in all countries with banks and other financial institutions which could be, or already are, the targets of money laundering aimed at making the proceeds of illegal activities appear to be clean and legitimate. The Philippines is no exception, with the government having taken some important initiatives but needing to do more to meet significant international expectations and standards. Accordingly, this article assesses the country’s anti-money laundering governance in terms of its legal foundations, institutional dynamics and policy challenges, which all point to a need for ongoing review and reform.

Anti-Money Laundering Regulations and the Effective use of Mobile Money in South Africa – Part 1

Mobile financial services, specifically mobile money, has the potential to expand access to financial services to millions of unbanked people in South Africa. As such, it looks very promising in terms of financial inclusion. However, concerns exist that mobile money can be detrimental to financial integrity since there are several proven risk factors linked to mobile financial services. These risk factors make mobile money very susceptible to money laundering. The potential for abuse and the need for appropriate controls is therefore something which cannot be ignored. While the South African legislator has made provision for comprehensive anti-money laundering preventative measures by means of the Financial Intelligence Centre Act 38 of 2001, there exists no South African legislation explicitly concerned with mobile money. It is therefore difficult to determine what the regulatory stance is in terms of mobile money in South Africa. The Financial Action Task Force (FATF) is, however, currently focusing attention on the effect which mobile money may have on financial integrity. The latest FATF Recommendations make provision for several anti-money laundering controls which are specifically applicable to mobile money, including controls regarding money or value transfer services and new technologies. While it is always difficult to balance financial integrity and financial inclusion, the risk-based approach makes it possible for governments to implement effective antimoney laundering measures, thereby preserving financial integrity, without the need to compromise on financial inclusion objectives. The fact that South Africa has not fully adopted a risk-based approach is a problem which needs to be addressed if mobile money is to deliver on its promises for financial inclusion, without being detrimental to financial integrity.

Anti-Money Laundering Regulations and the Effective Use of Mobile Money in South Africa – Part 2

Mobile financial services, specifically mobile money, has the potential to expand access to financial services to millions of unbanked people in South Africa. As such, it looks very promising in terms of financial inclusion. However, concerns exist that mobile money can be detrimental to financial integrity since there are several proven risk factors linked to mobile financial services. These risk factors make mobile money very susceptible to money laundering. The potential for abuse and the need for appropriate controls is therefore something which cannot be ignored. While the South African legislator has made provision for comprehensive anti-money laundering preventative measures by means of the Financial Intelligence Centre Act 38 of 2001, there exists no South African legislation explicitly concerned with mobile money. It is therefore difficult to determine what the regulatory stance is in terms of mobile money in South Africa. The Financial Action Task Force (FATF) is, however, currently focusing attention on the effect which mobile money may have on financial integrity. The latest FATF Recommendations make provision for several anti-money laundering controls which are specifically applicable to mobile money, including controls regarding money or value transfer services and new technologies. While it is always difficult to balance financial integrity and financial inclusion, the risk-based approach makes it possible for governments to implement effective antimoney laundering measures, thereby preserving financial integrity, without the need to compromise on financial inclusion objectives. The fact that South Africa has not fully adopted a risk-based approach is a problem which needs to be addressed if mobile money is to deliver on its promises for financial inclusion, without being detrimental to financial integrity.
 

ENHANCING EFFICIENT PAYMENTS AND REMITTANCES SYSTEMS THROUGH EFFECTIVE AML/CFT COMPLIANCE

Financial remittances facilitate human capital formation by improving access to education andhealth; an increase in investments and reduction in poverty especially for recipient households. Also, remittancesserve as a critical source of foreign exchange for the national accounts and they promote macroeconomic stability. It has been estimated that remittances are now more than double the size of net official flows, and are second toForeign Direct Investment (FDI) as source of external finance for developing countries. To derive maximum benefitsand forestall the misuse of remittance channels for the purposes of concealing the proceeds of crime, it is crucial toadopt and enforce effective anti-money laundering and counter financing of terrorism measures of acceptableinternational standards. This paper examines the importance of payments and foreign remittances systems; anddrawing lessons from the mutual evaluation of countries in West Africa, concludes that effective and efficientcompliance can only be achieved with a strong commitment of the industry to enforce self regulation. Other measuresto enhance the efficiency of the payments and remittances systems are also recommended.

Money Laundering (from a Management Perspective)

In this paper, the authors have engaged in the discussion of money laundering from a management perspective. The concept of money laundering has been dealt with in a two-fold manner. First, the authors discuss the responsibility of a business entity in ensuring effective anti-money laundering, by undertaking customer due diligence, having requisite internal controls, inter alia. Second, the authors discuss the scheme of money-laundering with regards to India and how its membership at FATF has positively affected the Indian financial scenario.

Promoting financial inclusion for effective anti-money laundering and counter financing of terrorism (AML/CFT)

“Financial inclusion” is the delivery of financial services at affordable costs, especially to the disadvantaged and low income populations. Financial inclusion has gained some importance in the last few decades as a result of findings on the impact of “financial exclusion” on development and especially its correlation to poverty.This paper arguesthat access to financial services contributes to human and economic development; and that financial inclusion and effective AML/CFT are complementary to ensure the safety, integrity and soundness of the financial system and the protection of depositors. It calls for the recognition of country specific characteristics of the derived segments of the society, the risks and national priorities in the application of AML/CFT measures, as well as how financial inclusion has been applied with flexible AML/CFT principles. It concludes that inclusive finance does not necessarily mean that everyone who is eligible uses each of the services, but they should be able to choose to use such services if they wish.