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

2020 ◽  
Vol 23 (1) ◽  
pp. 11-25
Author(s):  
Kalle Johannes Rose
Keyword(s):  
Money Laundering ◽  
Law And Economics ◽  
Financial Sector ◽  
Economic Incentive ◽  
Regulatory Framework ◽  
Economic Effects ◽  
Regulatory Change ◽  
Content Type ◽  
Corporate Clients ◽  
The Eu

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.

Non-compliance behavior of de-risking force the EU to enhance anti-money laundering regulation

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kalle Johannes Rose
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Law And Economics ◽  
Negative Impact ◽  
Regulatory Framework ◽  
Content Type ◽  
Functional Methods ◽  
Compliance Behavior ◽  
The Relationship ◽  
The Eu

Purpose Recent research shows that because of money-laundering risks, there has been an increase in the off-boarding of certain types of corporate clients in the financial sector. This phenomenon known as “de-risking” has been argued to have a negative impact on society, because it increases the possible risk of money laundering. The purpose of this paper is to analyze whether the de-risking strategy of financial institutions results in an expansion of the regulatory framework concerning anti-money laundering focusing on off-boarding of clients and, if so, is there a way to avoid further regulation by changing present behavior. Design/methodology/approach This paper applies functional methods to law and economics to achieve higher efficiency in combating money laundering. Findings In this paper, it is found that the continuing of de-risking by financial institutions because of the avoidance strategy of money-laundering risks will inevitably result in further regulatory demands regarding the off-boarding process of clients. The legal basis for the introduction of further regulatory intervention is that some of the de-risking constitutes a direct contradiction to the aim of the present regulatory framework, making the behavior non-compliant to the regulation. Originality/value There has been very little research concerning de-risking related to money laundering. The present research has focused on the effect on society and not the relationship between the financial institutions and the regulator. This paper raises an important and present problem, as the behavior of the financial institutions constitute a response from the regulator that is contradicting the thoughts behind the behavior of the financial institutions. It is found that the paper is highly relevant if an expansion of regulation is to be hindered.

De-risking or recontracting – the risk dilemma of EU money laundering regulation

2020 ◽  
Vol 21 (4) ◽  
pp. 445-458
Author(s):  
Kalle Johannes Rose
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Law And Economics ◽  
National Level ◽  
The European Union ◽  
Content Type ◽  
Market Effects ◽  
Proactive Approach ◽  
To Come ◽  
The Eu

Purpose Recent research and market effects within the European Union (EU) show a rising concern toward the de-risking of certain sectors/actors owing to the increased anti-money laundering regulation. Because of the enhanced due diligence and monitoring costs related to anti-money laundering and counter-terrorist financing regulation by the AMLD4 and AMLD5, several financial institutions now turn to de-risking their corporate client base to minimize not only costs from monitoring and onboarding but also the risks of sanctions and reputation. The purpose of this paper is to analyze the incentives behind de-risking and the relevant solution models to the de-risking “crisis.” Overall, to find, to what extend de-risking is efficient and when it is not and how to mitigate the concept. Design/methodology/approach This paper applies a functional approach to law and economics with the aim of reaching a higher level of efficiency in combatting money laundering through analyzing present regulatory and economic conditions. Findings It is found that de-risking within the EU opposes the aim of the present regulatory scheme regarding anti-money laundering. The paper finds that it is needed to divide the analysis of de-risking to a national and regional/union level. In addition, this paper establishes that the present strategy of de-risking at national level eventually will result in enhanced regulation to fulfill the aim of the present regulatory framework, which is why a proactive approach by recontracting the client base is recommended. At a regional level, it is found that de-risking is valid, why a solution needs to come from the EU enhancing control, monitoring and sanctions to establish trust and the possibility for financial inclusion. Originality/value Most of the recent research within the field highlights the problem of de-risking and therefore presents a range of initiatives to regulators and financial institutions at a global level. This paper solely focuses on the EU and shows that the de-risking dilemma demands financial institutions to take a proactive approach to contracting if unnecessary regulation is to be hindered. Furthermore, this paper shows that the concept of de-risking cannot be analyzed nor mitigated as one singular concept, but it needs to be addressed according to different levels of activity and geography.

EU money laundering regulation limit the use of tax havens

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Kalle Johannes Rose
Keyword(s):  
Money Laundering ◽  
Financial Institutions ◽  
Law And Economics ◽  
Spillover Effect ◽  
Tax Avoidance ◽  
The European Union ◽  
Tax Havens ◽  
Content Type ◽  
Regulatory Approach ◽  
The Eu

Purpose Recent research shows that financial institutions in the European Union (EU) close branches, offices and correspondent connections to jurisdictions with less transparency due to possible sanctions related to the increase in EU money laundering regulation. This tendency is called de-risking and the purpose of this paper is to analyze whether the recent regulatory approach towards money laundering in the EU limits the incentive to have operations in tax havens. Design/methodology/approach This paper follows a functional approach to law and economics. Findings The paper finds that recent EU money laundering regulation increase an incentive for financial institutions to limit any connection to jurisdictions known as tax havens, where transparency is at minimum. Thereby, it can be discussed whether the spillover effect from money laundering regulation in to the fight of tax avoidance could support further regulatory interference. Originality/value The recent trend of de-risking in light of money laundering regulation is scarcely covered by present research. Furthermore, there has been no linking of this de-risking tendency and the effects or relation to the use of tax havens/low tax jurisdictions.

Estimating the destination of Mexican-based laundered funds: an application of the modified Walker-Unger model

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Juan Roman ◽  
Ana Machuca ◽  
Thomas Schaefer
Keyword(s):  
Money Laundering ◽  
Gross National Product ◽  
Physical Distance ◽  
Economic Effects ◽  
Content Type ◽  
Banking Secrecy ◽  
Financial Activity ◽  
Time Period ◽  
Money Launderer ◽  
Practical Implications

Purpose This study aims to apply the modified Walker-Unger model to show the degree of attractiveness of a country for Mexican-based money launderers to send their illicit funds for the 2000–2015 time period. Design/methodology/approach The modified Walker-Unger model is used to conduct the analysis, as it combines several independent variables related to an illicit financial activity. These allow the researcher to investigate the attractiveness of a market to money launderers and the possible economic effects of money laundering. In total, 13 categories of indicators were used, namely, gross national product per capita; banking secrecy; government attitude; society for worldwide interbank financial telecommunication membership; financial deposits; conflict; corruption; Egmont group membership; language; trade; culture, colonial background; and physical distance. Findings Model results suggest the preferred destinations for Mexican-based money launderers from 2000 to 2015 were Bermuda (i.e. from 2000–2004), Canada (i.e. in 2005 and 2006) and Monaco (i.e. from 2007–2015). Research limitations/implications Timing and availability of reliable data after 2015. Practical implications Aids in continuing to empirically validate the Walker-Unger model. There is little literature on models that quantify money laundering activity. Social implications May aid policymakers in targeting anti-money laundering policy to more relevant countries. Originality/value The first empirical investigation that looks to quantify money launderer activity in Mexico. Contributes to the limited literature of quantitative investigations on money laundering.

Anti-money laundering – the need for intelligence

2017 ◽  
Vol 24 (3) ◽  
pp. 472-479 ◽  
Author(s):  
Richard John Lowe
Keyword(s):  
Money Laundering ◽  
Organized Crime ◽  
Financial Services ◽  
National Level ◽  
Financial Sector ◽  
International Standards ◽  
Policy Makers ◽  
Content Type ◽  
The Military ◽  
The Impact

Purpose The purpose of this paper is to highlight the need for predictive intelligence to support anti-money laundering programs in the financial sector. Design/methodology/approach The methodology adopted herein consists of a literature review on the use of intelligence in anti-money laundering, the sources of intelligence and information used in the financial sector, supported by experience gained from investigating and prosecuting money laundering cases, and the assistance provided to financial services companies. Findings Banks and other regulated services are required to meet international standards to deny services to criminals and terrorists, identify suspicious activity and report to the authorities. Regulated businesses have large operations which check customers against sources that confirm their identity or against lists of proscribed or suspected offenders at an individual or national level. Their controls tend to look backwards when other organisations that rely on intelligence, such as the military, value predictive, forward-looking intelligence. The penalties that banks and others face for failure in their controls are increasingly severe, as looking backwards and not forwards reduces the extent to which the controls meet their purpose of reducing the impact of organized crime and terrorism. Originality/value This paper serves as a useful guide to alert and educate anti-money laundering professionals, law enforcement and policy makers of the importance of predictive intelligence in countering organized crime and terrorism. It also considers whether lessons in intelligence handling from other areas can inform a debate on how intelligence can be developed to counter money laundering.

EU immigration policy prospects dim further on crisis

2015 ◽  
Keyword(s):  
Immigration Policy ◽  
Economic Effects ◽  
Individual Member ◽  
Current Crisis ◽  
Demographic Ageing ◽  
Member States ◽  
Content Type ◽  
Economic Developments ◽  
National Governments ◽  
The Eu

Subject EU immigration policy. Significance The EU has previously legislated to encourage the immigration of workers into the bloc, to counter the negative economic effects of demographic ageing. However, immigration policy is largely determined by individual member states. The results of EU pro-immigration schemes have been weak. National responses to the current influx of refugees and migrants have highlighted underlying member states differences over immigration, driven by economic, demographic and cultural divergences. Consequently, impetus for further EU pro-immigration action had largely stalled even before the current crisis. Impacts Asymmetric economic developments across the continent will continue to impede a common immigration strategy. Any opening of more legal avenues to convert asylum-seekers into economic immigrants will remain a matter for national governments. The current crisis will increase distrust and frictions among member states, while boosting populist forces. The crisis will bring into sharp relief the distinction between extra- and intra-EU immigration as a way of filling labour market gaps.

Brexit increases trade uncertainties in Brazil

2016 ◽  
Keyword(s):  
Negative Impact ◽  
Trade Agreement ◽  
Import Demand ◽  
Economic Effects ◽  
Political Crisis ◽  
Currency Markets ◽  
Content Type ◽  
Near Term ◽  
Severe Recession ◽  
The Eu

Subject Brexit's impact on Brazil's trade outlook. Significance The process of UK withdrawal from the EU (Brexit) will produce complex, uncertain and far-reaching economic effects. Brazil faces Brexit while undergoing a severe recession and profound political crisis. Trade has offered the only positive economic news in Brazil during 2016, owing largely to currency depreciation and depressed import demand. Impacts If Brexit reinforces the decline in Chinese growth, this will have a negative impact on Brazil's exports. Crucially, it is also likely to delay the conclusion of the free trade agreement between the EU and Mercosur. Near-term, Brexit represents an additional source of uncertainty, with increased instability in financial and currency markets.

'Golden visas' will persist despite EU clampdown

2018 ◽  
Keyword(s):  
United Kingdom ◽  
Money Laundering ◽  
Large Scale ◽  
Public Knowledge ◽  
Content Type ◽  
Transparency International ◽  
Eu Countries ◽  
Background Checks ◽  
The United Kingdom ◽  
The Eu

Subject The 'golden visa' controversy in the EU. Significance The European Commission's announcement on October 10 that it would investigate so-called 'golden visa' schemes follows a report by Global Witness and Transparency International warning that insufficient applicant background checks exposed the EU to large-scale money laundering and corruption. Impacts Greater public knowledge of golden visas will increase domestic pressure on governments. Scandals could worsen relations between the EU and non-EU countries. Applications for visas in the United Kingdom will likely decline if there is a Brexit deal.

Growing drone use will drive international regulation

2015 ◽  
Keyword(s):  
European Commission ◽  
Technological Development ◽  
Regulatory Framework ◽  
International Regulation ◽  
Content Type ◽  
Privacy Concerns ◽  
Red Tape ◽  
The Eu

Significance The EP's move gives parliamentary backing to the effort to develop common EU drone rules. The report advanced nothing novel, but will both encourage and put pressure on the European Commission to act. EU agreement on regulations governing drone use in controlled airspace and for commercial purposes would be a key step in expanding drone construction and services. Impacts The emergence of a comprehensive regulatory framework will trigger the full commercialisation of drone operations. The EP report will increase pressure on the European Commission and EU states to find funding to support drone technological development. The EU will seek to establish enough of a common regime to encourage development without so much 'red tape' as to deter investment. Regulators must also balance safety and privacy concerns against industry pressure to allow wider exploitation of the technology. Achieving the international 2028 target for full airspace integration will require resolution of several technological issues.

EU telecoms regulation poses competitiveness dilemmas

2016 ◽  
Keyword(s):  
European Commission ◽  
International Competitiveness ◽  
Regulatory Framework ◽  
Content Type ◽  
Market Consolidation ◽  
The Eu

Significance The European Commission is reviewing the EU regulatory framework for telecoms. In reforming the framework, and adjudicating on current telecoms mergers, policymakers face a tension between two priorities: promoting international competitiveness and investment, which generally entails market consolidation and incumbent power; and maintaining competition in national markets, which typically involves liberalisation and tough antitrust policies. Impacts With Deutsche Telekom becoming BT's largest shareholder as a result of the latter's EE acquisition, closer ties are likely in coming years. A full takeover is a possibility after the lapse of the three-year restriction on Deutsche Telekom increasing its 12% BT stake. This would require a shift in stance from the EU competition authorities, given their misgivings over more modest telecoms concentrations.

Sign in / Sign up

Export Citation Format

Share Document