Banks’ vulnerabilities to money laundering activities
| DOI | https://doi.org/10.1108/JMLC-05-2019-0040 |
| Pages | 122-135 |
| Date | 15 January 2020 |
| Published date | 15 January 2020 |
| Author | Peter Yeoh |
| Subject Matter | Financial compliance/regulation,Financial crime,Accounting & Finance |
Banks’vulnerabilities to money
laundering activities
Peter Yeoh
School of Law, Social Sciences and Communications,
University of Wolverhampton, Wolverhampton, UK
Abstract
Purpose –This paper aims to provide insights as to why money laundering persists in banks and their
weaknessesas gatekeepers.
Design/methodology/approach –This paper contextualizesthe design and proliferation of anti-money
laundering (AML) measures; investigates the different manners of conceptualizing them; and provides
insights pertainingto probable limitations of these measures. The paper relieson primary data from statutes
and secondarydata from published sources.
Findings –The paper’sfindings suggest that competitive pressures, shareholders return imperative, and
lucrativemisaligned incentives for management contributedto weaknesses in effective compliance in banks.
Practical implications –Insights drawn from this paper reinforces the notion that banks need to
seriouslyreview their business approaches, as well as their roles as gatekeepers.
Social implications –Given the slew of corporatescandals and other materially harmful misjudgmentsin
money-laundering compliance, banks might need to seriously review their role and obligations in the
economy.
Originality/value –Much has been saidabout money-laundering activities enabled by thebanking sector.
This paper contributed to insights as to why they persistdespite AML rules, and what measures could be
furthertaken to enhance compliance effectiveness.
Keywords Anti-money laundering, Bitcoin, Whistleblowing, Virtual currencies, European banks,
Jurisdictional risk, Financial disruptions
Paper type General review
Introduction
Three recent banking case incidents in Europe sparked money-laundering concerns in the
region and across the world. The first involved a highly respected bank from Denmark
(Shwartzkopff, 2019). The second involved a generally highly respected global mega
German bank that has links with the Danish bank as its US subsidiary is said to keep
Danske’s shady billions flowing (Harding, 2019). The third involved a large global Dutch
bank that pad a e775m settlement due to serious shortcomings in money laundering
prevention (Jaeger, 2018).To put in context, money laundering persistsas a key operational
risk for banks globally, but European banks seemed to be over-represented in the steady
flow of cases of banks disciplined for anti-money laundering and sanction violations
(Edwards et al., 2018).
The revelations of these three large money-laundering activities helped to justify recent
updated EU anti-money laundering (AML)directives, the most recent of which are the EU’s
5th anti-money laundering directive (5AMLD) that came into force in July 2018 (Marria,
2018;Osborne, 2018), and the 6th anti-money laundering directive (6AMLD) requiring
member states to transpose this into national law by 3 December 2020 (Europa, 2018).
However, these also triggered thequestion as to whether the updated European AML rules
JMLC
23,1
122
Journalof Money Laundering
Control
Vol.23 No. 1, 2020
pp. 122-135
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-05-2019-0040
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