Banks’ vulnerabilities to money laundering activities

Abstract

Purpose This paper aims to provide insights as to why money laundering persists in banks and their weaknesses as gatekeepers. Design/methodology/approach This paper contextualizes the design and proliferation of anti-money laundering (AML) measures; investigates the different manners of conceptualizing them; and provides insights pertaining to probable limitations of these measures. The paper relies on primary data from statutes and secondary data from published sources. Findings The paper’s findings suggest that competitive pressures, shareholders return imperative, and lucrative misaligned incentives for management contributed to weaknesses in effective compliance in banks. Practical implications Insights drawn from this paper reinforces the notion that banks need to seriously review their business approaches, as well as their roles as gatekeepers. Social implications Given the slew of corporate scandals and other materially harmful misjudgments in money-laundering compliance, banks might need to seriously review their role and obligations in the economy. Originality/value Much has been said about money-laundering activities enabled by the banking sector. This paper contributed to insights as to why they persist despite AML rules, and what measures could be further taken to enhance compliance effectiveness.

Threats of banks participation in the criminal proceeds legalization in the field of environmental protection

“…Given the slew of corporate scandals and other materially harmful misjudgments in money-laundering compliance, banks might need to seriously review their role and obligations in the economy [9].…”

Money laundering control systems, external auditor specialization and tax haven use: An empirical analysis of U.S. multinational financial corporations

“…The imposition of internal controls on money laundering for MFCs has placed more pressure on auditors in terms of the identification and evaluation of corporations' money laundering risks. Finally, our results should be of interest to policymakers and regulators of the financial services industry in the United States and elsewhere, given the level of scrutiny of this industry, its economic importance and the regulatory changes often imposed on it (FinCEN, 2013;Yeoh, 2020).…”

“…Despite the enactment of the Bank Secrecy Act of 1970 and the Patriot Act of 2011 in the United States, many financial corporations have been convicted of breaches or weaknesses in their money laundering 1 control systems (MLCS) (Basel Committee on Banking Supervision Guidelines, 2017; Moyer, 2018; Yeoh, 2020). For instance, U.S.…”

“…Examples of bank vulnerabilities to money laundering activities due to weak MLCS are not necessarily confined to the United States. There are many examples of similar cases arising in Europe (e.g., Barclays, Credit Agricole, Danske Bank, Deutsche Bank, HSBC, Internationale Nederlanden Groep [ING] Bank, PNB Paribus, Royal Bank of Scotland and Societe Generale) (Edwards et al, 2018; Yeoh, 2020).…”

Application of Gradient Boosting Algorithms for Anti-money Laundering in Cryptocurrencies

“…These guidelines are set to prevent criminals from injecting illicitly gained funds into the financial system while avoiding detection. A lack of AML controls can result in hefty fines, as can be seen with HSBC and Danske Bank scandals [54,55]. Given the rise in popularity of cryptocurrencies, coupled with the fear of criminals hiding behind the pseudonymous nature of this technology, governing bodies started to establish regulations to circumvent money laundering [13,17,28].…”