Challenges of implementing an effective risk-based supervision on anti-money laundering and countering the financing of terrorism under the 2013 FATF methodology

Abstract

Purpose The purpose of this study is to assess whether level of income of a particular country affects the level of effectiveness in anti-money laundering (AML)/ countering the financing of terrorism (CFT) supervision to identify the most important recommendations in achieving high level of effectiveness and critically discuss the findings of the fourth round evaluations with the outcome of first two objectives. Design/methodology/approach The level of effectiveness was rated in terms of a four-point Likert scale given 4 for high, 3 for substantial, 2 for moderate and 1 for low level of effectiveness. The countries were ranked using a four-point Likert scale given 4 for high income, 3 for upper middle income, 2 for lower middle income and 1 for low income countries as per the categorisation of World Bank list of economies (World Bank, 2017). For the purpose of estimation, level of effectiveness was rated in terms of a four-point Likert scale given 4 for high, 3 for substantial, 2 for moderate and 1 for low level of effectiveness. The level of technical compliance was ranked using a five-point Likert scale given 5 for compliant, 4 for largely compliant, 3 for partially compliant, 2 for non-compliant and 1 for not applicable as per the ratings given in FATF 2013 methodology (FATF, 2013). Findings It was observed that the level of income of a particular jurisdiction has a positive relationship with the level of effectiveness in AML/CFT supervision. Statistical analysis reveal that AML/CFT framework on regulation and supervision of financial institutions (Recommendation 26) and providing guidance and feed back to reporting entities (Recommendation 34) have significant impact on effectiveness level on AML/CFT supervision over the powers of supervisors (Recommendation 27), regulation and supervision of designated non-financial business and professions (Recommendation 28) and sanctions (Recommendation 35). Research limitations/implications The research was limited to 36 fourth round mutual evaluation reports. Originality/value This paper is an original work done by the author as a result of the experience which the author received involving as an assessor in mutual evaluations.

Digital forensics and evolving cyber law: case of BIMSTEC countries

“…Having studied the risk-based AML/CFT supervision, Jayasekara (2018) states that technical assistance is required to low-income countries to upgrade the level of compliance owing to the lack of expertise in these countries. Cyber laws are also considered an emerging discipline that requires expert knowledge.…”

The concept of money laundering: a quest for legal definition

“…Legislators justified the expansion of the scope of predicate offence accompanied by the rational that this measure was essential to guard the legitimate economy from manipulation of funds of criminal source thus, the objective to defend the financial system from being abused. This aim, however, has not yet achieved (Pol, 2018;Jayasekara, 2018;Slot and Swart, 2019;Pol, 2020). This multifaceted use of the offence of ML has raised legal challenges which may hamper the successful implementation of the law.…”

“…Certainly, Criminal law generally requires a value to protect; either be an integrity of a financial system, national security or public order; however, criminal law endeavours to tackle with organized and serious crime because the concept is not of an easy definition, even it becomes more complex when it constitutes crime proceeds (Sergi, 2015). However, scholarship has been critical of the AML legal regime, arguing that such legal regime has not attained their targets yet (Pol, 2018;Jayasekara, 2018;Slot and Swart, 2019;Pol, 2020), whereas much has been discussed in the literature about the prevention of money laundering, development of AML regimes and their impact. There are some studies taken on the criminological aspects of money laundering and predicate offences (Islam et al, 2017;Rusanov and Pudovochkin, 2018;Paunovi c, 2019).…”

Proceedings of the Proceedings of The First International Conference on Financial Forensics and Fraud, ICFF, 13-14 August 2019, Bali, Indonesia

“…Money laundering is the process of taking the results generated by criminal activity and provide these results as legality (FMJ Teichmann, 2019). Money laundering activity is classified as one of the criminal offenses (Jayasekara, 2018), In fact, because money laundering has to be cross country, then money laundering is considered a criminal offense internationally (international crime). There are different ways by the perpetrators to conceal or disguise the origin of their funds, one of them by including the proceeds of crime into the financial system (Pramod, Li, & Gao, 2012).…”

“…The nature of this bank maximization needs to be balanced with the economic role played in society. From the regulatory perspective, it is important for regulators to determine whether enforcement action is made effective without damaging the health of banks and the financial system and potentially damaging the country's economy (Jayasekara, 2018).…”