The aim of this study was to assess the level of awareness and acceptance of bank customers regarding anti-money laundering (AML) practices of banks. The study also aimed to…
Abstract
Purpose
The aim of this study was to assess the level of awareness and acceptance of bank customers regarding anti-money laundering (AML) practices of banks. The study also aimed to understand their constraints in following the bank’s AML practice.
Design/methodology/approach
The target population was account holders of the banks above the age of 18 years, residing in the Puducherry and Chennai regions in India. Convenience sampling was adopted in selecting the sample from these states. The sample consisted of 416 customers of the public, private and foreign banks in India. The responses were collected by administering the pre-tested structured questionnaire. The data was collected during the period June–December 2014. Descriptive and non-parametric tests were applied, and the significance was considered at p = 0.5.
Findings
Respondents showed low level of awareness with regard to usage of banks as a channel for money laundering (ML) and terrorism financing (TF) activities (62.3 per cent), reporting function of the banks (70.4 per cent), AML and combating financing of terrorism (CFT) legislation (86.3 per cent) and about the existence of Financial Intelligence Unit (FIU)-India and its function (96.9 per cent). The customers were quite aware of ML (62.5 per cent) and customer identification requirements (95.2 per cent). The participants exhibited neutral attitude towards acceptance of AML measures (3.11 ± 1.31). The descriptive analysis showed 97.4 per cent were ready to provide their identification documents to the bank; however, 64.5 per cent of the participants were reluctant to update their Know Your Customer particulars when it has not experienced any change, and about 68.3 per cent expressed that banks should not disclose the details of their transactions to any third party including financial intelligence units.
Research limitations/implications
The sample constituted only few participants from the foreign sector banks because of the difficulty in identifying the foreign bank customers.
Social Implications
There is a necessity to undertake public awareness campaigns on the importance of AML/CFT system either by the banks or FIU-India or both to increase the level of acceptance towards AML measures. This will help the banks to strengthen the bank–customer relationship.
Originality/value
An extensive review of literature could not find any research study on the assessment of awareness and acceptance of banking customers towards AML practices in India. Thus, this paper attempts to understand the level of awareness and acceptance in the bank customers towards AML practices.
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Zuliera Zariz Azman Aziz and Seri Ayu Masuri Md Daud
This study aims to examine the associations between customers’ awareness of money laundering and terrorism financing, trust in banking secrecy measures and discomforts in…
Abstract
Purpose
This study aims to examine the associations between customers’ awareness of money laundering and terrorism financing, trust in banking secrecy measures and discomforts in fulfilling the bank’s anti-money laundering (AML) procedure and their acceptance of existing practices of banks regarding AML and counter-terrorism financing.
Design/methodology/approach
This study adapts a set of survey instruments developed and validated by prior studies to collect the required data. A convenient sample of 160 Malaysian bank customers aged 18 and above were surveyed to collect the data.
Findings
This study finds a significant relationship between the respondents’ awareness of money laundering and terrorism financing, trust in banking secrecy measures and their acceptance of the bank’s AML and counter-terrorism financing practices. However, no significant relationship is documented between the level of discomforts experienced by customers in satisfying the banks’ AML requirements and their acceptance of the banks’ AML practices. These results hold even after controlling for alternative explanations of the customers’ acceptance of banking practices examined in the extant literature: age, gender, location, literacy level and occupation.
Research limitations/implications
This study extends the literature on customers’ acceptance of banking practices more broadly by providing empirical evidence on the role of customers’ awareness on issues underlying the banking practices and their trust in the bank’s secrecy measures.
Practical implications
This study also provides some practical contributions by shedding some light on the factors that could help banks increase the acceptance of AML practices among their customers. Thus, the findings of this paper help banks focus their effort on these factors and hence increase acceptance rate more effectively.
Originality/value
Drawing on the elements of the theory of reasoned actions and technology acceptance model and the extant research on trust-privacy and comfortability in a banking setting, this study proposes an integrated approach that is theoretically and empirically grounded.
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B. Viritha, V. Mariappan and Irfan Ul Haq
The purpose of this paper is to assess the effectiveness of anti-money laundering (AML) reporting system in India in terms of Suspicious Transaction Reports (STRs) and its impact…
Abstract
Purpose
The purpose of this paper is to assess the effectiveness of anti-money laundering (AML) reporting system in India in terms of Suspicious Transaction Reports (STRs) and its impact on countering money laundering through the conviction and confiscation. The main emphasis of financial action task force (FATF) guidelines on AML and countering of financing of terrorism (CFT) is the obligation of financial institutions and designated non-financial businesses and professions to instantaneously report the suspicious transactions to Financial Intelligence Unit (FIU), an agency with a mandate to deal with AML.
Design/methodology/approach
It is a descriptive study to explore the outcome of the AML process. The study has used the secondary information published in the annual reports of FIU-India and FATF. The study period is 2006-2007 to 2011-2012.
Findings
Though there is a significant increase in the STRs filed, the impact of AML is not realized in terms of neither AML-related convictions nor confiscations, since the enactment of the Prevention of Money Laundering Act (PMLA). However, the AML/CFT regime in India has just started earnestly, and it still has to go a long way before stabilizing and achieve tangible results.
Research limitations/implications
In the Indian context, only few of the effectiveness indicators of the FATF methodology 2013 could be selected due to the limited availability of data, as much of the information maintained by various stakeholders, including reporting entities, FIU-India and other investigative and enforcement agencies, is kept confidential. Thus, it is difficult to establish the effectiveness of enforcement function of AML. Evaluation of effectiveness of AML is judged on the basis of convictions and confiscations.
Originality/value
There is a dearth of studies assessing the reporting system under PMLA and thus this paper attempts to throw some insights on the outcome of AML chain, especially the impact of reporting suspicious transactions.
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B Viritha, Velu Mariappan and Varun Venkatachalapathy
The study was conducted to assess the level of compliance with regulatory guidelines on anti-money laundering (AML) in the scheduled commercial banks in India, and to understand…
Abstract
Purpose
The study was conducted to assess the level of compliance with regulatory guidelines on anti-money laundering (AML) in the scheduled commercial banks in India, and to understand the bottlenecks in AML implementation.
Design/methodology/approach
The respondents were employees working in the banks located in the States of Puducherry and Tamilnadu. Snowball sampling method was adopted in selecting the sample. The sample consisted of 392 employees from the public sector, private sector, and foreign banks in India. The data was collected by administering the structured questionnaire during the period June, 2014 to January, 2015. Descriptive and non-parametric tests were applied, and the significance was considered at þ ≤ 0.5.
Findings
Results indicated that the banks were largely complying (3.67 ± 1.39) with the AML measures under study. The compliance with guidelines on KYC updation was found to be higher (79.9 per cent), followed by reporting requirements (72.7 per cent), and customer identification procedures (57.4 per cent). The practice of customising or amending the AML policy of the bank according to the bank ' s business risks and evolving regulatory obligations was found unsatisfactory (67.1 per cent). The respondents in majority agreed to the identified issues such as deficit of resources, lack of customer support, training, feedback and information exchange as constraints in the practice of AML.
Originality/value
There is a dearth of studies examining the AML/CFT implementation in the financial institutions of India. Accordingly, the present study attempts to assess the practices of AML/CFT in commercial banks and understand their challenges faced in implementing it.
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William Gaviyau and Athenia Bongani Sibindi
The purpose of this study is to examine the South African banks’ customer due diligence (CDD) practices in the fintech era to mitigate money laundering (ML) risks and ensure…
Abstract
Purpose
The purpose of this study is to examine the South African banks’ customer due diligence (CDD) practices in the fintech era to mitigate money laundering (ML) risks and ensure financial stability. Financial technologies have brought substantial transformations to the financial services sector. However, such technologies have exposed the sector to emerging risks that threaten the integrity and stability of the financial system globally. Before any bank–customer relationship is established, proper customer background checks must be conducted. These background checks enable financial institutions to validate information provided and ensure customers are properly risk profiled. Failure to risk profile customers could result in financial institutions being used as conduits for ML. Undoubtedly, CDD procedures are pivotal to overall anti-money laundering efforts and curbing financing terrorism in a regulatory framework.
Design/methodology/approach
A qualitative research approach was adopted to address the research questions of the study. Given the confidentiality associated with the financial services sector, data triangulation was used in blending mainly secondary and primary data sources. Secondary data sources used in the study were published reports available in the public domain that were corroborated with subject matter experts’ interviews.
Findings
Based on the findings of this study, it is concluded that in South Africa, technological solutions have been incorporated into CDD functions, which is now risk-based (enhanced due diligence). Also, legally, South Africa has incorporated the biometrics, integration with Department of Home Affairs and Companies and Intellectual Property Commission databases, customer consent to third-party sources with the Financial Intelligence Centre Act and the Protection of Personal Information Act.
Originality/value
The shift towards digital banking in South Africa results in increased data and dynamic risk profiling. This study advocates a policy shift requiring a risk-based approach to mitigating emerging ML risks (in particular digital laundering), especially in the wake of South Africa’s recent greylisting by the Financial Action Task Force.
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Qamar Uz Zaman, Kinza Aish, Waheed Akhter and Syed Anees Haidder Zaidi
The purpose of this paper is to address the effect of corruption and money laundering (ML) on banking profitability and stability.
Abstract
Purpose
The purpose of this paper is to address the effect of corruption and money laundering (ML) on banking profitability and stability.
Design/methodology/approach
This study uses the panel data of 72 banks of Pakistan and Malaysia from 2012–2018. This paper uses fixed effect (FE) and random effect (RE) regression techniques for empirical testing and generalized methods of moment (GMM) technique for robustness tests.
Findings
This study founds consistent evidence that corruption has a positive and ML has a negative relationship with the banking profitability of Pakistan and Malaysia while the empirical evidence suggests that corruption and ML have a diverse impact on the banking stability of Pakistan and Malaysia. Further, this paper also founds that corruption and ML moderates the relationship between risk and banking profitability and stability.
Practical implications
The results reveal that the banks of the highly corrupt environment are more affected by corruption and ML than the least corrupt environment. Thus, it is recommended that the Government of Pakistan should formulate strong anti-corruption and anti-money laundering policies.
Originality/value
As per the knowledge of the authors, this research contributes to understanding the role of corruption and money laundering on the stability and profitability of Pakistan and, in general, it is the first attempt investigating the moderating role of corruption and ML between risk and banking profitability and stability.
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Osama Omar Jaara and Abdelrahim M. Kadomi
This paper aims to investigate Jordan’s framework specifics of the anti-money laundering (AML) policy and factors related to the Central Bank instructions on money laundering.
Abstract
Purpose
This paper aims to investigate Jordan’s framework specifics of the anti-money laundering (AML) policy and factors related to the Central Bank instructions on money laundering.
Design/methodology/approach
A questionnaire has been distributed to a random data sample of 100 branch bank managers and supervisors who have a sufficient experience in this issue, and a t-test statistical technique has been used.
Findings
The results revealed that commercial banks of Jordan are committed to the instruction of the central bank, and they are highly qualified in all investigated measures.
Practical implications
This study supports the Central Bank of Jordan’s efforts in combating money laundering, which encourage all commercial banks of one country to follow the same adopted regulations to identify and report transactions of suspicious behaviour: investigate capability of the tellers and customer account representatives to report such activities, use AML software, filter customer’s data classify available information according to levels of suspicion or based on the uncertain customers without being subject to the institutional secrecy jurisdiction and to work under cooperative management.
Originality/value
It has been recommended to utilize more advanced technology, intensify training and ensure for more knowing clients’ knowledge. The importance of this paper is to insure the following: first, the banking system is obliged to recognize and report suspicious money laundering transactions, regarding up to date the FATFA equivalence status of other countries; second, increase the awareness and ensure the central bank efforts’ success; third, assure the adequacy of different issues such as the internal control system tools; devices or tools availability; and sufficient employees’ qualifications in facing launderers attempts; fourth, to be sure that suspected transactions are checked against any commercial bank records; finally, to be sure that commercial banks are giving enough considerations to all the AML proactive actions such as the regulations of checking while opening an account, accepting money on deposit, giving loans, issuing a debit card, traveller’s check and collecting enough information about new clients.
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Charu Saxena and Pardeep Kumar
The purpose of this study is to provide a bibliometric analysis of the Journal of Money Laundering and Control (JMLC) from 2010 to 2021 and map its way forward.
Abstract
Purpose
The purpose of this study is to provide a bibliometric analysis of the Journal of Money Laundering and Control (JMLC) from 2010 to 2021 and map its way forward.
Design/methodology/approach
A range of bibliometric techniques have been used to analyse the performance of JMLC from Volume 14 (Issue 1) to Volume 24 (Issue 4). The Scopus database has been used to analyse the documents of JMLC. A total of 294 documents are reviewed. The bibliographic data has been analysed using the software VOS viewer and R-studio (Biblioshine) to assess the trend of publications, word growth, keyword co-occurrence, citation analysis, most prolific authors and authors’ impact.
Findings
JMLC’s academic contributions, influence and impact have grown progressively. The thematic structure of the journal has evolved into six bibliographic clusters, noted as prevention of corruption due to money laundering; compliance and regulation of money laundering; customer due diligence; role of Financial Action Task Force (FATF) in the financial system of developing countries; control of terrorism and terrorist financing; and role of money laundering in the proceeds of crime.
Research limitations/implications
The constraint of this endeavour largely arises from its selection of bibliographic data being confined to Scopus.
Practical implications
The results of the study would help the current and future authors to understand the emerging themes in the field of money laundering and control. They are also going to help the editors of the journals of this domain to understand the emerging themes and how the published documents are going to contribute the society, throwing light on the controlling and compliance part of money laundering. Future research directions are provided in tackling the problem of money laundering, corruption, terrorism, crime, etc. with the help of financial intelligence, strong FATF all around the world, machine learning, Bitcoin exchange management and global knowledge management.
Originality/value
To the best of the authors’ knowledge, this is the first objective assessment of the journal. Thus, the results of the study are useful to past and prospective authors, editorial board members, editors, readers and reviewers to gain a one-stop understanding of anti-money laundering actions through the contributions of JMLC.
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Nadir Hussain, Salman Masood Sheikh and Ijaz Hussain Shah
Corruption and money laundering (ML) are severe concerns for both developing and developed countries. According to international organizations, such as Transparency International…
Abstract
Purpose
Corruption and money laundering (ML) are severe concerns for both developing and developed countries. According to international organizations, such as Transparency International, the Basel Institute on Governance and the International Country Risk Guide, corruption and ML exist in every country. This research aims to investigate the impact of corruption and ML on the loan portfolio quality of banks.
Design/methodology/approach
From 2013 to 2019, this study used the panel data of 132 countries, including 87 highly corrupt and 45 least corrupt countries: the fixed effect and random effect econometric regression techniques for data analysis. Additionally, this study used the generalized methods of moment technique to check the result’s robustness.
Findings
This study shows that corruption and ML have diverse relationships with non-performing loans in highly corrupt and low corrupt countries. It is potentially because of the differences in the regulatory structure of a highly corrupt and least corrupt environment.
Originality/value
To the best of the authors’ knowledge, this study is the first attempt that provides a unique perspective on corruption, ML and its effect on the loan’s portfolio quality of banks. Furthermore, this study suggests that governments in highly corrupt environments develop robust anti-corruption and anti-ML regulations.
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This paper aims to explore the role of the financial intelligence unit in Tanzania in fighting against money laundering and its predicate offences, examine its potential in…
Abstract
Purpose
This paper aims to explore the role of the financial intelligence unit in Tanzania in fighting against money laundering and its predicate offences, examine its potential in controlling the problem and describe factors that undermine its efficacy.
Design/methodology/approach
The doctrinal research approach is used to analyse Tanzania’s anti-money laundering law and appraise its effectiveness in facilitating operations of the financial intelligence unit in fighting against money laundering and its predicate offences. The law-in-context approach is applied to interrogate the anti-money laundering law and describe non-law factors that impinge on the efficiency of Tanzania’s financial intelligence unit.
Findings
The law vests the financial intelligence unit with powers to perform a number of functions that are significant in fighting against money laundering and its predicate offences in Tanzania. The unit has been instrumental in curbing money laundering. The efficacy of this anti-money laundering agency, which is at its infancy stage, is emasculated by law-related, institutional and non-law factors. These factors undercut the potency of the agency.
Practical implications
There is a need for Tanzania to undertake policy, legislative and institutional reforms to augment the efficacy of the financial intelligence unit. The reforms should be implemented concurrently with other measures, which will enhance the country’s anti-money money laundering regime.
Originality/value
This paper applies the legal and non-law perspectives to evaluate the effectiveness of the financial intelligence unit as an essential component of Tanzania’s anti-money laundering regime. It proposes law-related and non-law approaches to augment the efficiency of the unit and the country’s anti-money laundering regime in general.