Exploring the role of corruption and money laundering (ML) on bank’s loan portfolio quality: a cross-country investigation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Nadir Hussain ◽  
Salman Masood Sheikh ◽  
Ijaz Hussain Shah
Keyword(s):  
Money Laundering ◽  
Random Effect ◽  
Developed Countries ◽  
Regulatory Structure ◽  
Loan Portfolio ◽  
Content Type ◽  
Transparency International ◽  
Regression Techniques ◽  
The Impact

Purpose Corruption and money laundering (ML) are severe concerns for both developing and developed countries. According to international organizations, such as Transparency International, the Basel Institute on Governance and the International Country Risk Guide, corruption and ML exist in every country. This research aims to investigate the impact of corruption and ML on the loan portfolio quality of banks. Design/methodology/approach From 2013 to 2019, this study used the panel data of 132 countries, including 87 highly corrupt and 45 least corrupt countries: the fixed effect and random effect econometric regression techniques for data analysis. Additionally, this study used the generalized methods of moment technique to check the result’s robustness. Findings This study shows that corruption and ML have diverse relationships with non-performing loans in highly corrupt and low corrupt countries. It is potentially because of the differences in the regulatory structure of a highly corrupt and least corrupt environment. Originality/value To the best of the authors’ knowledge, this study is the first attempt that provides a unique perspective on corruption, ML and its effect on the loan’s portfolio quality of banks. Furthermore, this study suggests that governments in highly corrupt environments develop robust anti-corruption and anti-ML regulations.

Modulating corruption and money laundering through the Bretton Woods Institutions: the case of less developed countries (LDCs)

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ejike Ekwueme
Keyword(s):  
World Bank ◽  
Money Laundering ◽  
Task Force ◽  
Developed Countries ◽  
Less Developed Countries ◽  
Content Type ◽  
Bretton Woods ◽  
Bretton Woods Institutions ◽  
The Impact ◽  
Soft Laws

Purpose The purpose of this paper is to readily bring to the fore, the vital dimension that the Bretton Woods Institutions, exemplified by both the International Monetary Fund (IMF) and the World Bank, has brought into the global economic template to dampen the momentum of corruption and money laundering through the impact of their activities in less developed countries (LDCs). The original mandate of the two institutions was to address the balance of payments and developmental issues of countries as a result of the devastating effects of the Second World War. However, this could not be achieved in an atmosphere engulfed with corruption and money laundering. As a result, it became necessary for them to intervene albeit through direct or indirect mechanisms demonstrated by the use of soft law bodies such as Basel Committee on Banking Supervisors (BCBS) and Financial Action Task Force (FATF). Design/methodology/approach This paper relies on primary legal documentations such as BCBS, FATF, articles of both IMF and World Bank to mention but a few in the analysis. The paper is doctrinal. Findings There is undoubtedly glaring indications that through the efforts of both IMF and the Bank, tremendous inroad has been made in LDCs in modulating the tempo of the malaise. Research limitations/implications This paper is addressed to the authorities that are concerned about the scourge of the malaise and the impact to pay more attention to the mechanisms of soft laws used by the Bretton Woods Institutions to get their anti-corruption message through in LDCs. Originality/value This lies on the fact that the efforts of both IMF and the Bank have awakened the importance that should be attached to some soft laws in curtailing the issues.

Effect of country image and materialism on the quality evaluation of Korean products

2019 ◽  
Vol 32 (2) ◽  
pp. 386-405 ◽  
Author(s):  
Byoungho Ellie Jin ◽  
Naeun Lauren Kim ◽  
Heesoon Yang ◽  
Minji Jung
Keyword(s):  
Product Quality ◽  
Online Survey ◽  
Quality Evaluation ◽  
Developed Countries ◽  
Country Image ◽  
Content Type ◽  
The Usa ◽  
Managerial Implications ◽  
The Impact

Purpose It is critical to understand how global consumers evaluate the quality of Asian products while marketing Asian products in the global marketplaces. The purpose of this paper is to examine the impact of Korea’s macro and micro country image and global consumers’ materialism level on the quality evaluation of Korean cosmetics among consumers in four countries. Design/methodology/approach Data from 900 participants were collected from consumers aged 20 or older living in economically developed countries (the USA and France) and economically developing countries (China and Vietnam) via professional online survey firms. Multiple regression analyses were used to analyze the data. Findings Along with the direct effect of macro and micro country image and materialism on product quality evaluation, a moderating effect of materialism and the respective country was discovered. Subsequently, the effect of macro country image on quality evaluation was found to be only significant in the USA and France and not in China and Vietnam. In contrast, the impact of micro country image was robust across all four countries. Furthermore, the effect of materialism on product quality was significant only in Vietnam. This implies that materialistic consumers in emerging markets might have favorable perceptions regarding the quality of Korean cosmetics. Originality/value This study advances country image research by providing new theoretical and managerial implications for countries whose image is less distinctive with respect to the effective marketing of products by the destination countries’ development status and consumers’ familiarity.

scholarly journals Do Islamic banks gain from corruption and money laundering (ML)?

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kinza Aish ◽  
M. Kabir Hassan ◽  
Qamar Uz Zaman ◽  
Sadaf Ehsan ◽  
Khurram Abbas ◽  
...  
Keyword(s):  
Money Laundering ◽  
Design Methodology ◽  
Random Effect ◽  
Islamic Banking ◽  
Islamic Banks ◽  
Bank Profitability ◽  
Content Type ◽  
Real Model ◽  
Effect Regression ◽  
The Impact

Purpose This paper aims to examine the impact of corruption and money laundering (ML) on the profitability and stability of Islamic banks. Design/methodology/approach This study used the data of 53 conventional and 19 Islamic banks of Pakistan and Malaysia to have comparative insights. The empirical methods include the fixed effect and random effect regression and generalized methods of moment for robust results. Findings The results indicate that Islamic banks gain from corruption and ML. Corruption and ML affect bank profitability and stability positively in a less corrupt environment, i.e. Malaysia; however, corruption hurts Islamic banks’ performance, and ML favours Islamic banking profitability and stability in a more corrupt environment, i.e. Pakistan. Originality/value The present study pioneers the debate on corruption and ML related to Islamic banking profitability and stability. This study provides important insights to regulators and Shariah advisors to build a real model of Islamic banking.

scholarly journals Data quality issues leading to sub optimal machine learning for money laundering models

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Abhishek Gupta ◽  
Dwijendra Nath Dwivedi ◽  
Jigar Shah ◽  
Ashish Jain
Keyword(s):  
Machine Learning ◽  
Data Quality ◽  
Money Laundering ◽  
Time Lag ◽  
Time Duration ◽  
Content Type ◽  
Case Closure ◽  
Definition Of ◽  
The Impact

Purpose Good quality input data is critical to developing a robust machine learning model for identifying possible money laundering transactions. McKinsey, during one of the conferences of ACAMS, attributed data quality as one of the reasons for struggling artificial intelligence use cases in compliance to data. There were often use concerns raised on data quality of predictors such as wrong transaction codes, industry classification, etc. However, there has not been much discussion on the most critical variable of machine learning, the definition of an event, i.e. the date on which the suspicious activity reports (SAR) is filed. Design/methodology/approach The team analyzed the transaction behavior of four major banks spread across Asia and Europe. Based on the findings, the team created a synthetic database comprising 2,000 SAR customers mimicking the time of investigation and case closure. In this paper, the authors focused on one very specific area of data quality, the definition of an event, i.e. the SAR/suspicious transaction report. Findings The analysis of few of the banks in Asia and Europe suggests that this itself can improve the effectiveness of model and reduce the prediction span, i.e. the time lag between money laundering transaction done and prediction of money laundering as an alert for investigation Research limitations/implications The analysis was done with existing experience of all situations where the time duration between alert and case closure is high (anywhere between 15 days till 10 months). Team could not quantify the impact of this finding due to lack of such actual case observed so far. Originality/value The key finding from paper suggests that the money launderers typically either increase their level of activity or reduce their activity in the recent quarter. This is not true in terms of real behavior. They typically show a spike in activity through various means during money laundering. This in turn impacts the quality of insights that the model should be trained on. The authors believe that once the financial institutions start speeding up investigations on high risk cases, the scatter plot of SAR behavior will change significantly and will lead to better capture of money laundering behavior and a faster and more precise “catch” rate.

Exploring the role of corruption and money laundering (ML) on banking profitability and stability: a study of Pakistan and Malaysia

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Qamar Uz Zaman ◽  
Kinza Aish ◽  
Waheed Akhter ◽  
Syed Anees Haidder Zaidi
Keyword(s):  
Money Laundering ◽  
Random Effect ◽  
Negative Relationship ◽  
Content Type ◽  
Regression Techniques ◽  
Banking Stability ◽  
The Government ◽  
The Stability ◽  
The Relationship

Purpose The purpose of this paper is to address the effect of corruption and money laundering (ML) on banking profitability and stability. Design/methodology/approach This study uses the panel data of 72 banks of Pakistan and Malaysia from 2012–2018. This paper uses fixed effect (FE) and random effect (RE) regression techniques for empirical testing and generalized methods of moment (GMM) technique for robustness tests. Findings This study founds consistent evidence that corruption has a positive and ML has a negative relationship with the banking profitability of Pakistan and Malaysia while the empirical evidence suggests that corruption and ML have a diverse impact on the banking stability of Pakistan and Malaysia. Further, this paper also founds that corruption and ML moderates the relationship between risk and banking profitability and stability. Practical implications The results reveal that the banks of the highly corrupt environment are more affected by corruption and ML than the least corrupt environment. Thus, it is recommended that the Government of Pakistan should formulate strong anti-corruption and anti-money laundering policies. Originality/value As per the knowledge of the authors, this research contributes to understanding the role of corruption and money laundering on the stability and profitability of Pakistan and, in general, it is the first attempt investigating the moderating role of corruption and ML between risk and banking profitability and stability.

A nexus between corruption, money laundering (ML) and inflation: evidence from South Asian countries

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Ijaz Hussain Shah ◽  
Kinza Aish
Keyword(s):  
South Asian ◽  
Money Laundering ◽  
Regression Models ◽  
Random Effect ◽  
Asian Countries ◽  
Content Type ◽  
Corruption Perception ◽  
The Impact ◽  
The Relationship ◽  
Practical Implications

Purpose Many studies of corruption and money laundering (ML) have been conducted throughout the previous few decades. The impact of corruption and ML on economic growth, banking performance and corporate financial performance has been the focus of various research. The present study aims to investigate the relationship between ML, corruption and inflation. Design/methodology/approach This study used the panel data of five South Asian countries from 2013 to 2019 (Pakistan, India, Bangladesh, Sri Lanka and Nepal). Further, fixed effect (FE) and random effect (RE) econometric regression models are used to analyze the data. Additionally, generalized methods of moment (GMM) technique is used to check the results robustness. Findings This study discovered that corruption and ML have a significant and positive link with inflation in five South Asian nations using the corruption perception index and the anti-money laundering (AML) index. Practical implications This research advises that government authorities strengthen anti-corruption and AML laws enforcement. Originality/value To the best of the authors’ knowledge, this is the first paper that explains the linkage between corruption, ML and inflation in five south Asian nations.

Do disclosure and transparency affect bank’s financial performance?

2019 ◽  
Vol 19 (6) ◽  
pp. 1344-1361
Author(s):  
Isaiah Oino
Keyword(s):  
Risk Management ◽  
Corporate Governance ◽  
Financial Performance ◽  
Financial Institutions ◽  
Content Type ◽  
Loan Portfolios ◽  
Cent Level ◽  
Transparency And Disclosure ◽  
The Impact

Purpose The purpose of this paper is to examine the impact of transparency and disclosure on the financial performance of financial institutions. The emphasis is on assessing transparency and disclosure; auditing and compliance; risk management as indicators of corporate governance; and understanding how these parameters affect bank profitability, liquidity and the quality of loan portfolios. Design/methodology/approach A sample of 20 financial institutions was selected, with ten respondents from each, yielding a total sample size of 200. Principal component analysis (PCA), with inbuilt ability to check for composite reliability, was used to obtain composite indices for the corporate governance indicators as well as the indicators of financial performance, based on a set of questions framed for each institution. Findings The analysis demonstrates that greater disclosure and transparency, improved auditing and compliance and better risk management positively affect the financial performance of financial institutions. In terms of significance, the results show that as the level of disclosure and transparency in managerial affairs increases, the performance of financial institutions – as measured in terms of the quality of loan portfolios, liquidity and profitability – increases by 0.3046, with the effect being statistically significant at the 1 per cent level. Furthermore, as the level of auditing and the degree of compliance with banking regulations increases, the financial performance of banks improves by 0.3309. Research limitations/implications This paper did not consider time series because corporate governance does not change periodically. Practical implications This paper demonstrates the importance of disclosure and transparency in managerial affairs because the performance of financial institutions, as measured in terms of loan portfolios, liquidity and profitability, increases by 0.4 when transparency and disclosure improve, with this effect being statistically significant at the 1 per cent level. Originality/value The use of primary data in assessing the impact of corporate governance on financial performance, instead of secondary data, is the primary novelty of this study. Moreover, PCA is used to assess the weight of the various parameters.

Is internal and external mechanism of governance enriching the performance of the banking sector of Pakistan?

2017 ◽  
Vol 17 (4) ◽  
pp. 629-642 ◽  
Author(s):  
Sundas Sohail ◽  
Farhat Rasul ◽  
Ummara Fatima
Keyword(s):  
Corporate Governance ◽  
Banking Sector ◽  
Good Governance ◽  
Random Effect ◽  
Random Effect Model ◽  
General Meeting ◽  
Governance Structure ◽  
Board Structure ◽  
Content Type ◽  
The Impact

Purpose The purpose of this study is to explore how governance mechanisms (internal and external) enhance the performance of the return on asset (ROA), return on equity (ROE), earning per share (EPS) and dividend payout ratios (DP) of the banks of Pakistan. The study incorporates not only the internal factors of governance (board size, out-ratio, annual general meeting, managerial ownership, institutional ownership, block holder stock ownership and financial transparency) but also the external factors (legal infrastructure and protection of minority shareholders, and the market for corporate control). Design/methodology/approach The sample size of the study consists of 30 banks (public, private and specialized) listed at the Pakistan Stock Exchange (PSE) for the period 2008-2014. The panel data techniques (fixed or random effect model) have been used for the empirical analysis after verification by Hausman (1978) test. Findings The results revealed that not only do the internal mechanisms of governance enhance the performance of the banking sector of Pakistan but external governance also plays a substantial role in enriching the performance. The findings conclude that for a good governance structure, both internal and external mechanisms are equally important, to accelerate the performance of the banking sector. Research limitations/implications Internal and external mechanisms of corporate governance can also be checked by adding some more variables (ownership i.e. foreign, female and family as internal and auditor as external), but they are not added in this work due to data unavailability. Practical implications The study contributes to the literature and could be useful for the policy makers who need to force banks to mandate codes of governance through which they can create an efficient board structure and augment the performance. The investments from different forms of ownership can be accelerated if they follow the codes properly. Social implications The study facilitates the bankers in incorporating sound codes of corporate governance to enhance the performance of the banks. Originality/value This work is unique as no one has explored the impact of external mechanism of governance on the performance of the banking sector of Pakistan.

scholarly journals Knowledge sharing in open source software communities: motivations and management

2015 ◽  
Vol 19 (4) ◽  
pp. 791-813 ◽  
Author(s):  
Zilia Iskoujina ◽  
Joanne Roberts
Keyword(s):  
Knowledge Sharing ◽  
Open Source ◽  
Open Source Software ◽  
Online Communities ◽  
Descriptive Analysis ◽  
Online Questionnaire ◽  
Content Type ◽  
The Individual ◽  
The Impact

Purpose – This paper aims to add to the understanding of knowledge sharing in online communities through an investigation of the relationship between individual participant’s motivations and management in open source software (OSS) communities. Drawing on a review of literature concerning knowledge sharing in organisations, the factors that motivate participants to share their knowledge in OSS communities, and the management of such communities, it is hypothesised that the quality of management influences the extent to which the motivations of members actually result in knowledge sharing. Design/methodology/approach – To test the hypothesis, quantitative data were collected through an online questionnaire survey of OSS web developers with the aim of gathering respondents’ opinions concerning knowledge sharing, motivations to share knowledge and satisfaction with the management of OSS projects. Factor analysis, descriptive analysis, correlation analysis and regression analysis were used to explore the survey data. Findings – The analysis of the data reveals that the individual participant’s satisfaction with the management of an OSS project is an important factor influencing the extent of their personal contribution to a community. Originality/value – Little attention has been devoted to understanding the impact of management in OSS communities. Focused on OSS developers specialising in web development, the findings of this paper offer an important original contribution to understanding the connections between individual members’ satisfaction with management and their motivations to contribute to an OSS project. The findings reveal that motivations to share knowledge in online communities are influenced by the quality of management. Consequently, the findings suggest that appropriate management can enhance knowledge sharing in OSS projects and online communities, and organisations more generally.

A critical approach to trade-based money laundering

2014 ◽  
Vol 17 (2) ◽  
pp. 230-242 ◽  
Author(s):  
Melvin R.J. Soudijn
Keyword(s):  
Money Laundering ◽  
Task Force ◽  
Critical Approach ◽  
Content Type ◽  
Traded Goods ◽  
True Value ◽  
Police Investigations ◽  
Financial Action Task

Purpose – The purpose of this paper is to broaden the discussion on trade-based money laundering (TBML). The literature is too narrowly focused on the misrepresentation of the value, quantity or quality of the traded goods. This focus leads to the analysis of price anomalies as a signal of over- or under-invoicing. However, TBML can also occur without manipulation of these factors. Design/methodology/approach – A review of the literature and case study of police investigations. Findings – Financial action task force (FATF) definitions are seriously flawed. The question of whether detecting TBML on the basis of statistical trade data is effective should be much more open to debate. Police investigations show that goods are shipped at their true value within the context of TBML. Research limitations/implications – Using outliers to identify and act on cases of TBML has often been propagated, but scarcely been used to actually show TBML. Real findings are needed. Practical implications – Goods intended for TBML can also be paid for in cash. These cash payments are often out of character with the normal clientele. This should alert companies and compliance sections of banks alike. Originality/value – The critique on the FATF definition opens the field for a more fitting definition. The description of actual TBML cases makes it possible to better understand this method of money laundering.

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