Cross-jurisdictional financial crime risks: what can we learn from the UK regulatory data?
| Date | 29 June 2023 |
| Pages | 608-617 |
| DOI | https://doi.org/10.1108/JFC-03-2023-0044 |
| Published date | 29 June 2023 |
| Author | Mete Feridun |
Cross-jurisdictional financial
crime risks: what can we learn
from the UK regulatory data?
Mete Feridun
Department of Banking and Finance, Eastern Mediterranean University,
Gazi Magosa, Turkey
Abstract
Purpose –Financial crime presents a serious threatto the stability and integrity of the global financial
system. To combat illicit financial activities, regulatory bodies worldwide have implemented various
measures, including the requirement for financial institutions to assess the financial crime risks they
are exposed to in the jurisdictions they operate in. These risks include inadequate anti-money
laundering and countering the financing of terrorism frameworks and other financial crime risks that
have significant strategic implications for firms’geographical footprints and customer risk
classifications. This paper aims to make a contribution to the literature by undertaking a cross-country
analysis of 158 countries to shed light on what drives perceived jurisdiction risk of the UK financial
services firms.
Design/methodology/approach –Capturing firms’perceptions of financial crime risk requires
significant data collection efforts, including surveys and interviews wit h key personnel. This can be highly
resource-intensive and may require acces s to sensitive information that firms may be reluc tant to share.
Furthermore, the dynamic nature of financia l crime risks means that perceptions can c hange rapidly in
response to changes in the regulatory and g eopolitical landscape. As a result, captu ring and monitoring
firms’perceptions of financial crime risks req uires ongoing monitoring and analysis. Capturing firms’
perceptions of financial crime risks at a cr oss-jurisdictional level is a particularly complex and ch allenging
task that requires careful consideration of a ra nge of factors. As a result of data limitations, empir ical
investigation of the factors underlyin g the firms’perceptions of jurisdiction risk is in its i nfancy. This
paper uses regulatory financial crime da ta from the UK in a multivariate regressi on analysis, following
a general-to-specific approach where any redun dant variables were removed from the general mo del
sequentially.
Findings –Results suggest that perceivedjurisdiction risk is significantly and positively associated with
evasion of tax and regulations, whileit is significantly and negatively associated with political stabilityand
regulatory stringency.These have important implications for home and host supervisors with respectto the
factors that driveperceived jurisdiction risks and the evaluation of the nature of inherent financialcrime risks
within regulated firms. The findingsconfirm the critical role of the shadow economy, politicalstability and
regulatory rigor in shapingjurisdiction risk perceptions. From a policy standpoint, the findingssupport the
case for taking prompt policyaction to identify, prioritize and implement specific and targetedmeasures with
respect to the shadow economy, political stability and rigor of regulations to improve international firms’
perceptionsof jurisdiction risk.
Originality/value –While there exists different measures of financial crime risk, it is notoriously
challenging to capture firms’perceptions of it, particularly at a cross-jurisdiction level. This is because
financial crime risks can vary significantly across different jurisdictions due to differences in legal and
regulatory frameworks,cultural norms and levels of economic development. This makes it difficult for firms
to compare and evaluate the financial crime risks they face in different jurisdictions. Besides, firms’
perceptions of financial crime risks can be influenced by a range of subjective factors, including personal
experiences, media coverage and hearsay. These perceptions may not always align with objective risk
assessments, which are based on more systematicand empirical methods of risk measurement. This paper
JEL classification –C33, E43, G21, O33
JFC
31,3
608
Journalof Financial Crime
Vol.31 No. 3, 2024
pp. 608-617
© Emerald Publishing Limited
1359-0790
DOI 10.1108/JFC-03-2023-0044
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1359-0790.htm
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