Deficient regimes of anti-money laundering and countering the financing of terrorism: agenda of digital banking and financial inclusion

Jayasekara, Sisira Dharmasri

doi:10.1108/jmlc-04-2020-0035

Cited by 14 publications

(12 citation statements)

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“…We use two independent variables to measure the strength of an AML/CFT regime of a jurisdiction, which considers the AML/CFT legal framework in terms of compliance with FATF 40 recommendations as well as the effective implementation of the legal framework in terms of 11 immediate outcomes. The strength of the AML/CFT legal framework of a country is measured in terms of the AML/CFT compliance index as proposed by Jayasekara (2020). We expect a negative relationship of the compliance index with bribery risk matrix, GTI and crime index because high values of compliance index discourage criminals.…”

Section: Methodsmentioning

confidence: 99%

How effective are the current global standards in combating money laundering and terrorist financing?

Jayasekara¹

2020

JMLC

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Purpose The purpose of this paper is to study the impact of global anti-money laundering and countering the financing of terrorism (AML/CFT) standards on combating money laundering and terrorist financing (ML/TF) efforts. This study will assess the impact of AML/CFT legal framework as well as the effective implementation of the framework on combating crimes. Design/methodology/approach The author develops an AML/CFT effectiveness index using the results of 11 immediate outcomes in mutual evaluation reports to measure the overall effectiveness of regimes in combating ML/TF. In addition to this index, the AML/CFT compliance index is used to measure the strength of the AML/CFT legal framework of countries. A model was developed and tested to measure the impact of the AML/CFT legal framework and its effective implementation on corruption, bribery, terrorism and crimes. Findings The results suggest that the effective implementation of the AML/CFT legal framework is important to combat ML/TF. The existence of a sound AML/CFT legal framework alone will not be sufficient to combat ML/TF. Therefore, countries are required to implement their legal framework effectively to achieve the AML/CFT goals of the country as well as the global policymaker. The empirical results show a significant relationship between the AML/CFT effectiveness index with the proxies the author used to capture corruption, bribes and crimes. Considering the wide range of implications of the crimes, which are related to ML/TF, this study suggests the global policymakers to further strengthen the monitoring mechanism of AML/CFT deficient countries to protect the global financial systems from criminals. Practical implications There is a dearth of studies on the impact of the effectiveness of the AML/CFT regime on combating ML/TF. Therefore, this study will lay the foundation for future studies on measuring the effectiveness of an AML/CFT regime. More appropriate measures will be developed in the future based on this foundation. Originality/value This paper is an original work done by the author, which discusses the impact of Financial Action Task Force standards on combating ML/TF. The AML/CFT effectiveness index is the original idea of the author, which can be used as a quantitative measure to capture the effectiveness of the AML/CFT regimes in future studies.

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Section: Methodsmentioning

confidence: 99%

How effective are the current global standards in combating money laundering and terrorist financing?

Jayasekara¹

2020

JMLC

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“…Although we contend that effective FATF regulations can positively affect the FI (Jayasekara, 2021), this positive relationship can be reversed if these regulations become excessive and overbearing (Ofoeda, 2022). The compliance to AML procedures has proven to become a resource-demanding business and costly.…”

Section: Introductionmentioning

confidence: 95%

A dynamic threshold analysis of effect of Financial Action Task Force (FATF) measures on financial inclusion: evidence from the world

Urooj

2023

JMLC

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Purpose This study aims to examine the effect of Financial Action Task Force (FATF) compliance on the degree of financial inclusion (FI) across 174 economies during the period from 2011 to 2021, including developed and developing countries. Design/methodology/approach This paper uses panel dynamic threshold regression to examine whether there is a threshold effect that exists in FATF compliance. Findings The findings show that FATF regulations enhance financial inclusiveness all over the world, but at the same time, FATF regulations regarding AML/CFT implications impose a high cost on financial institutions above the threshold of FATF compliance. Research limitations/implications This study’s findings indicate that nations should undertake deliberate struggle to reduce the prevalence of money laundering (ML) and terrorism financing by putting in place effective FATF regulatory frameworks to support FI. Originality/value This study’s findings indicate that nations should undertake deliberate struggle to reduce the prevalence of ML and terrorism financing by putting in place effective FATF regulatory frameworks to support FI. Regulators must, however, guarantee that the process is cost-effective and efficient.

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“…As a result, effective AML regulations should promote financial inclusion. Jayasekara (2020) assessed how the AML and counter-terrorist financing (CFT) regime affects financial inclusion and found that the level of a country’s AML compliance has a considerable impact on its financial inclusion. In a related study, Isern et al (2005) noted that customer due diligence regulations frustrate the account opening efforts of many low-income people.…”

Section: Review Of Literaturementioning

confidence: 99%

Anti-money laundering regulations and financial inclusion: empirical evidence across the globe

Ofoeda

2022

JFRC

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Purpose This study aims to examine the impact of anti-money laundering (AML) regulations on financial inclusion using a comprehensive measure of AML regulations developed by the Basel Institute on Governance. Again, this study investigates the existence of threshold effects in the AML regulations–financial inclusion nexus. Design/methodology/approach This study uses panel data across 212 economies (developed, developing and Africa) of the globe-spanning from 2012 to 2019. This study uses the dynamic panel threshold estimation technique proposed by Seo et al. (2019). Findings In general, the results indicate that AML regulations promote financial inclusion across the globe. However, AML regulations spur financial inclusion below the threshold of AML regulations, whereas, above the thresholds, AML regulations have damaging effects on financial inclusion. Further, the author finds that AML regulations have a detrimental impact on financial inclusion for developed economies. In contrast, AML regulations promote financial inclusion at all levels of AML regulations for African countries. Practical implications The findings of this study imply that countries must make conscious efforts in combating the incidence of money laundering by establishing sound AML regulatory regimes as a means of promoting financial inclusiveness. However, there is a need for regulators to ensure cost-effective and efficient implementation of AML regulations. Originality/value The value of this paper is its contribution to literature as it is a major attempt in empirically assessing the impact of AML regulations on financial inclusion. Again, to the best of the author’s knowledge, this is the first study to examine the non-linear relationship between AML regulations and financial inclusion.

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Deficient regimes of anti-money laundering and countering the financing of terrorism: agenda of digital banking and financial inclusion

Cited by 14 publications

References 1 publication

How effective are the current global standards in combating money laundering and terrorist financing?

How effective are the current global standards in combating money laundering and terrorist financing?

A dynamic threshold analysis of effect of Financial Action Task Force (FATF) measures on financial inclusion: evidence from the world

Anti-money laundering regulations and financial inclusion: empirical evidence across the globe

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