Purpose This paper aims to consider the role of internal audit function (IAF) in relation to anti-money laundering (AML) compliance and oversight within global banking. The increasing globalisation of banking functions and the mirrored globalisation of financial crime require a renewed look at the role of internal audit. This paper critically examines the weaknesses in the current structure and proposes a new way of thinking about IAF. Design/methodology/approach The paper uses secondary data to analyse the current problems with IAF from both theoretical and empirical perspectives. The agency dilemma of answering to two masters in the audit committee and management and the problems associated with this in the context of recent AML cases against banks are discussed. Findings The main findings are that a new approach to internal audit is required that can operate effectively within a globalised banking and regulatory context, especially for AML compliance issues. A suggested approach is to develop regional audit committees and remove the internal stakeholder dilemma that is problematic to the IAF. Research limitations/implications The paper focused primarily on the AML context, and IAF may have other functions within the bank. However, the theoretical and practical problems are equally as applicable to other areas of work. Practical implications The implications from the paper are the recommendations on restructuring the function of internal audit, especially its role within management and governance, given the impartiality and objective role that it is supposed to perform. Originality/value The originality of this paper is the analysis of IAF within an AML context and the recommendation to reconsider the IAF role within a globalised banking service of the future. This has been suggested within a growing globalised criminal context, where money laundering is a reality and the complexity of this crime is increasing throughout the world.

Purpose – This paper aims to start with the assumption that money laundering through the use of investments will continue to occur and will become increasingly more complex to try and avoid detection. The paper aims to explore some of the theoretical factors that would need to be considered in any risk based framework and also to consider how an empirical model can try and prioritise the information and intelligence gathered through existing beneficial ownership and customer due diligence (CDD) systems. Design/methodology/approach – This paper uses an empirical example of money laundering with investments and highlights the red flag indicators that led to its eventual discovery. The theoretical framework considers the difficulties of information overload and suggests that any empirical model of risk-based assessment would need to be able to discern between the various types of risk information gathered. The paper has developed one empirical model that could be used. Findings – The paper suggests a model that breaks down beneficial ownership and CDD information into three areas: beneficial ownership for all major players, transparency of transactions and accountability of companies involved. Practical implications – The paper has implications for the banking, regulatory and law enforcement sectors working in Anti-Money Laundering (AML). Originality/value – The paper analyses a particular type of money laundering activity which it terms “investment laundering” using an empirical case study. It then develops a new theoretical and empirical risk assessment model to illustrate how risk-based approaches need to be able to discern between the different types of information gathered and the application to overall risk.

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Purpose – This paper aims to explore in depth some of the main criminal elements involved in trade-based money laundering (TBML) and outlines the gaps in banking risk assessment as a result of this. The focus is on new and emerging risks due to criminal manipulation of the anti-money laundering (AML) risk assessment processes. Design/methodology/approach – The paper uses secondary data to provide the current context in which TBML risk assessment is being carried out and how criminals have responded to this; it concludes the empirical section by surmising the emerging risks that AML risk assessment need to consider. The paper then introduces the basic components that future theoretical frameworks looking at banking AML risk assessment would need to consider. This includes a more in-depth understanding of how criminals are bypassing AML risk assessment so that countermeasures can be put in place and AML frameworks strengthened and updated. Findings – The main findings are that sophisticated criminal processes exist that can be used to bypass and divert current banking risk assessment techniques. An overdependence on traditional customer due diligence and transaction monitoring can easily be thwarted, and banks need to develop a stronger AML assessment framework. Research limitations/implications – The research focused primarily on client documentation; however, another area of research would be needed to cover criminal manipulation of trade documents and other components of TBML transactions. Practical implications – The implications from the research affect any financial organization undertaking AML risk analysis or compliance. It applies to the banking, insurance and auditing professions, as well as is of interest to academics working on TBML projects. Social implications – The social implications are that non-criminal clients within banks could be faced with tougher requirements for documentation and ID proof, which could reduce efficiency and, if not handled properly, even alienate further some sectors of society who are already struggling to access the main banking and financial services sectors. Originality/value – The originality of this paper is the inclusion of criminal responses to TBML risk assessment and a review of flaws and gaps in AML risk assessment procedures. Dynamic risk assessment needs to be continuously updated and new emerging market risks appropriately addressed. This paper highlights some of the current and emerging AML risks for the banking and financial services sector.

Purpose – This paper aims to provide an analysis of the HSBC Swiss bank accounts scandal, from the perspective of anti-money laundering (AML) compliance, and considers the future AML implications for the banking sector and HSBC. It reviews the use of a whistleblower to highlight AML irregularities rather than official reporting through the current AML compliance system. Design/methodology/approach – The paper uses secondary data to offer a viewpoint on the HSBC issues from a money laundering and financial crime perspective. The paper extracts key statements from staff at HSBC and regulators and examines how AML risk assessment was undertaken at this time and what changes need to occur in the future. It considers the implications of the current theoretical context for AML from an agency theory perspective. Findings – The main findings are that AML compliance needs to be embedded into a proactive corporate social responsibility approach rather than relying solely on regulation to improve detection and reporting of money laundering activity. Research limitations/implications – The research topic is new, and therefore, analysis papers and other academic writing on this topic are limited. Future research could consider the outcomes of the Swiss bank’s attempts to prosecute the whistleblower and whether this would have implications for future internal reporting and whistleblowing approaches to support AML compliance. Practical implications – The implications from the research are the recommendations to the banking sector on addressing AML deficiencies especially within the context of an evolving level of criminal sophistication towards money laundering. Social implications – The paper supports the argument for integrating social corporate responsibility and AML compliance to produce a whole bank response to financial crime. This is in contrast to the current systems, which seem to be prevalent within the financial services, of profit and business being seen as separate rather than integral to regulation and control. Originality/value – The originality of this paper is the current example of the HSBC Swiss case and the focus specifically on AML compliance rather than tax evasion, which has been the media angle on the issue.