Adopting a risk‐based approach to AMLCTF compliance: the Australian case
| DOI | https://doi.org/10.1108/13590791111127741 |
| Pages | 169-182 |
| Published date | 10 May 2011 |
| Date | 10 May 2011 |
| Author | Milind Sathye,Jesmin Islam |
| Subject Matter | Accounting & finance |
Adopting a risk-based approach
to AMLCTF compliance:
the Australian case
Milind Sathye and Jesmin Islam
Faculty of Business and Government,
University of Canberra, Canberra, Australia
Abstract
Purpose – The purpose of this paper is to develop a possible method of money laundering and
terrorism financing (MLTF) risk assessment in non-bank entities that are the subject matter of
anti-money laundering and counter terrorism financing (AMLCTF) Tranche II in Australia.
Design/methodology/approach – The objectives are achieved by proposing a scorecard of risk
assessment under its various dimensions drawing from the literature on credit-scoring models.
The method of analogy has been used and appropriate changes made to the elements of typical
credit-scoring model to arrive at a risk assessment model under AMLCTF II. The theory in which the
paper is grounded is theories of money laundering regulation. Theory suggests an inverse relationship
between money laundering regulation and the amount of money laundering. The more effective the
regulatory mechanism the more costly it is for money launderers to launder funds and the lesser the
amount of money laundering.
Findings – It was found that the AMLCTF Tranche II will impose several obligations the AMLCTF
Tranche II legislation will impose several obligations on the entities such as accounting firms. These
obligations require the identification, mitigation and management of MLTF risk arising out of provision
of product/service. Two types of risks need to be managed by entities: regulatory risk and business risk.
This paper, therefore, proposed a possible method for approaching the issue of risk assessment drawing
from the literature on credit-scoring models.
Research limitations/implications – Future studies can undertake such surveys and gather more
empirical evidence regarding the application of the model suggested and its utility in real world
scenarios.
Practical implications – The approach developed in this paper has value to the policy makers in the
government in addressing risk assessment policy issues in the MLTF area in the context of non-bank
entities such as professional services, e.g. that of accountants. The relevant bodies will also find value in
this paper because currently there is no guidance as to how to address the issue. Also, future
academics/researchers can take this first approach as a guide and go on do further research in this area
and to refine policy issues in this area. No established practice exists in this area at the moment. This
paper attempts to provide a guideline.
Originality/value – This paper addresses a major unanswered question in the subject of anti-money
laundering. The question addressed in this paper, which has not been researched before is how MLTF
risk can be assessed in the context of non-bank entities such as professional services, e.g. that of
accountants. The model will be useful to user groups such as organizations dealing with bullions,
precious stones and precious jewellery, real estate, professional and business services such accounting,
auditing and financial services for implementing the AMLCTF Tranche II. The relevant bodies will also
find value in this paper because currently there is no guidance as to how to addressthe issue.Also future
academics/researchers can take this first approach as a guide and go on do further research in this area
and to refine policy issues in this area.
Keywords Australia, Moneylaundering, Terrorism, Financing
Paper type Research paper
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-0790.htm
AMLCTF
compliance: the
Australian case
169
Journal of Financial Crime
Vol. 18 No. 2, 2011
pp. 169-182
qEmerald Group Publishing Limited
1359-0790
DOI 10.1108/13590791111127741
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