Administrative model of financial intelligence units: an analysis of effectiveness of the AML/CFT regime
| DOI | https://doi.org/10.1108/JMLC-05-2021-0048 |
| Published date | 06 August 2021 |
| Date | 06 August 2021 |
| Pages | 511-525 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Sisira Dharmasri Jayasekara |
Administrative model of financial
intelligence units: an analysis of
effectiveness of the
AML/CFT regime
Sisira Dharmasri Jayasekara
Financial Intelligence Unit, Central Bank of Sri Lanka, Colombo, Sri Lanka
Abstract
Purpose –The purpose of this paper is to study the impactof the model of an financial intelligence unit
(FIU) and the availabilityof resources of an FIU on the strength of the anti-money laundering and countering
the financingof terrorism(AML/CFT) legal framework and the overall effectivenessof the AML/CFT regime
.
Design/methodology/approach –The authors use FIU specific characteristics to measure the impact
on the developed AML/CFT Compliance Index (Jayasekara, 2020a) and AML/CFT Effectiveness Index
(Jayasekara, 2020b) in measuringthe overall effectiveness of an AML/CFT regime. In addition, the impactof
an AML/CFT regimeon the cost to exportsand gross domestic product are modeled.
Findings –The empirical results suggest that the model of an FIU is an important determinant of an
effective AML/CFT regime.The administrative model of FIU shows a negative relationshipwith the overall
effectiveness of the AML/CFTregime. The availability of resources which was measured in terms of human
resources at FIUs shows a significantpositive relationship with the effectiveness. However, the model of an
FIU and the availability of resources of an FIU are not significant determinants of a sound AML/CFT legal
framework. The results furtherreveal that effective AML/CFT regimes promote economic growth and also
international trade by reducing the cost of exports. Therefore, policymakers are required to reassess the
administrative model FIU of the countryand have to adopt a suitable model which has been assigned more
power to implementthe regime.
Practical implications –This study was initiallydesigned to capture more FIU specific variables usinga
questionnaireto widen the scope of the study. However, the low response rate to the questionnaireforced us to
rely on publicly available data on FIU characteristics. Therefore, appropriate FIU specificvariables may be
developedin future research based on this foundation.
Originality/value –This paper is an original work done by the author that discusses the FIU specific
characteristics on the overallstrength and effectiveness of AML/CFT regimes and further extends the use of
originallydesigned AML/CFT Compliance Index and AML/CFT EffectivenessIndex.
Keywords Gross domestic product, AML/CFT Compliance Index, AML/CFT effectiveness index,
Cost to export, Model of an FIU, Resources of an FIU
Paper type Research paper
1. Introduction
Afinancial intelligence unit (FIU) is a very important part of an effective regime of anti-
money laundering and countering the financingof terrorism (AML/CFT). An FIU functions
as the focal point of the AML/CFT regime of a jurisdiction. According to the Egmont Group [1],
countries have to establish an FIU that serves as a national center for the receipt and
analysis of suspicious transaction reports; and other information relevant to money
laundering, associated predicate offenses and terrorist financing and for the dissemination
of the results of that analysis. Further, the FIU should be able to obtain additional
Financial
intelligence
units
511
Journalof Money Laundering
Control
Vol.25 No. 3, 2022
pp. 511-525
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-05-2021-0048
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