Disclosing anti-money launderers through CSR regulation – a new way to combat money laundering

Abstract

Purpose Recent research questions the innocence of companies outside the current EU money laundering regulation in terms of contributing to the externality problem of money laundering. The purpose of this paper is to examine how including anti-money laundering as an element of the EU corporate social responsibilities (CSR) directive can contribute to solving the externality problem of money laundering. Based on the principles of CSR and the economic effects of disclosure duties, this paper analyzes the implications an introduction of anti-money laundering policies and disclosure duties can have on corporate clients and the combatting against money laundering. Furthermore, it is the intention of this paper to argue how such a regulatory change can help the financial companies dividing “good” and “bad” clients to prevent money laundering from happening. Design/methodology/approach The method of this paper is a functional approach to law and economics. It seeks to enhance the efficiency of the regulatory framework combatting money laundering by including economic incentive theory. Findings Based on the regulatory framework of the fourth anti-money laundering and counter terrorist financing directive and the directive on criminalizing money laundering, this paper argues that inclusion of anti-money laundering in the EU CSR directive will contribute to solving the externality problem of money laundering in the EU. Additionally, the expansion of the regulatory framework can start a culture, where corporate clients to the financial sector will take active steps toward combatting money laundering. Originality/value The paper identifies a way to change the corporate perception of anti-money laundering prevention from having an incentive of minimal compliance/“race-to-the-bottom” to be a possible element of competition between companies through their CSR strategy. While most research focuses on the financial sector in terms of money laundering, this paper takes the next step and includes corporate clients in the financial sector.

Suspicious activity reporting in the United Kingdom and the United States: statutory obligations of auditors and optimal harvesting of information

“…Roberts and Scapens (1985) proposed that accounting information can be flawed, highlighting certain issues and concealing others. However, a legal obligation to disclose does not necessarily enhance the evidential weight of that which would otherwise have been disclosed voluntarily, informed by professional judgement (Yeoh, 2014; Rose, 2020). Information facilitates accountability and control; SARs provide statistics regarding the level of suspicious activity reporting across sectors, including accountants and tax advisors, lawyers, estate agents, brokers and commodities dealers.…”

Personal responsibility and knowledge about money laundering: a study with Brazilian accountants

“…Knowing the norms involves developing, absorbing and perceiving the reality to carry out a certain conduct (Price, 2020). The regulation gives the incentive to comply with the law because of the risk of being sanctioned, being generally reactive and not proactive (Rose, 2020). The accounting professional is obliged in the Brazilian context to report to the competent bodies on evidence of money laundering crimes (Simser, 2020).…”

“…Money laundering has probably existed since the first crime with a financial impact, as the criminal’s rational procedure is to hide his/her practice to obtain benefits (Krambia-Kapardis, 2020; Rose, 2020). The resources raised, through the overt or concealed practice of crimes, go through the money laundering process for reinsertion in the market with the appearance of lawfulness, circulating normally through the financial market.…”

“…The understanding of the responsibilities and elements of money laundering can help in the empowerment and efficiency of the accounting professional, and thus contribute to the social transformation of a corrupt environment into an environment of integrity. In addition, the effort to combat money laundering aims to reduce the profitability of illegal businesses and, thus, protect society and the economy (Rose, 2020).…”

Do third-party assurance and mandatory CSR reporting matter to philanthropic and financial performance nexus? Evidence from India

“…The choice or combination of compulsory reporting and assurance engagement has not received much attention in PHG-financial performance nexus. Also, CSR and firm performance showed both negative and positive associations in both the emerging economy and advanced economy (Beck et al, 2018;Kim et al, 2018;Salehi et al, 2018;Hou et al, 2019;Rose, 2020). CSR and PHG are associated (von Schnurbein et al, 2016) because the former is an element in CSR strategy (Denison, 1990).…”