Financial institutions and anti-money laundering violations: who is to bear the burden of liability?

Abstract

Purpose Money laundering (ML) is one of the greatest challenges, the global community faces today. Corporate entities such as financial institutions (FIs) are most susceptible to facilitate and launder money. The paper raises the following question: Who is to bear the burden of liability? Either a corporation or an individual, thus this paper examines liability issues in a corporate setting particularly financial institutions, which arise from regulatory noncompliance or failure to oversight in the context of ML. Design/methodology/approach The study is legal doctrinal mainly based on case laws, legislation and research articles. Findings Firstly, this study provides how the concept of liability in a corporate setting in UK and USA has drifted from its traditional “duty to care” standard to a new “duty to oversight” and “Responsible Corporate Officer” concepts resulting a shift in corporate to individual liability. Secondly, in the context of anti-ML violations in FIs, imposition of corporate or personal liability solely may not effectively deter ML and may create conflicts between management and shareholders. Practical implications The paper can be a source to explore the issue of ML liability for regulatory noncompliance based on UK, USA and Pakistan law. Originality/value This paper demonstrates that the imposition of either corporate or personal liability may create dilemma either for shareholders or management; however, a “combine or collective liability” approach carries potential to retard ML activities in FIs and balancing the harm-penalties incurred upon a corporation while addressing shareholders concerns.

An analysis of Pakistan’s accountability law after June 2022 amendments: implications and effectiveness of anti-corruption campaign

“…Since corruption is a form of economically motivated crime, the convention recognizes the link between corruption and various forms of crime like organized crime and ML. There is inseparable association between corruption and ML: as corruption crimes are generally committed for obtaining private illicit gain however, ML is all about concealment of such illicit private gain in order to avoid confiscation or freeze of such wealth (Korejo et al , 2022a); and the Convention also identifies that States through political will, legislative measures and institution building like NAB can deter and fight corruption effectively. With snatching powers from the anti-corruption watchdog-NAB through recent legislative move appears to be against the spirit of the Corruption Convention.…”