Customer’s awareness, trust, discomfort and acceptance of anti-money laundering practices in Malaysian Banks
| DOI | https://doi.org/10.1108/JMLC-08-2021-0087 |
| Published date | 29 October 2021 |
| Date | 29 October 2021 |
| Pages | 864-881 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Zuliera Zariz Azman Aziz,Seri Ayu Masuri Md Daud |
Customer’s awareness, trust,
discomfort and acceptance of
anti-money laundering practices
in Malaysian Banks
Zuliera Zariz Azman Aziz
Ministry of Foreign Affairs Malaysia, Putrajaya, Malaysia, and
Seri Ayu Masuri Md Daud
Universiti Teknologi MARA Cawangan Selangor Kampus, Puncak Alam,
Selangor, Malaysia
Abstract
Purpose –This study aims to examine the associations betweencustomers’awareness of money laundering and
terrorism financing, trust in banking secrecy measures and discomforts in fulfilling the bank’s anti-money laundering
(AML) procedure and theiracceptance of existing practices of banks regarding AML and counter-terrorism financing.
Design/methodology/approach –This study adapts a set of survey instruments developed and
validated by priorstudies to collect the required data. A convenient sampleof 160 Malaysian bank customers
aged 18 andabove were surveyed to collect the data.
Findings –This study finds a significant relationship between the respondents’awarenessof money laundering
and terrorism financing, trust in banking secrecy measures and their acceptance of the bank’s AML and counter-
terrorism financing practices. However, no significant relationship is documented between the le vel of discomforts
experienced by customers in satisfying the banks’AML requirements and their acceptance of the banks’AML
practices. These results hold even after controlling for alternative explanations of the customers’acceptance of
banking practices examined in the extant literature: age, gender, location, literacy level and occupation.
Research limitations/implications –This study extends the literature on customers’acceptance of
banking practices more broadly by providing empirical evidence on the role of customers’awareness on
issues underlyingthe banking practices and their trust in the bank’s secrecy measures.
Practical implications –This study also provides some practical contributions by shedding some light on the
factors that could help banks increase the acceptance of AML practices among their customers. Thus, the findings of
this paper help banks focus their effort on these factors and hence increase acceptance rate more effectively.
Originality/value –Drawing on the elementsof the theory of reasoned actionsand technology acceptance
model and the extant research on trust-privacyand comfortability in a banking setting, this study proposes
an integratedapproach that is theoretically and empiricallygrounded.
Keywords Banking, Customer awareness, Customer acceptance, Customer comfort, Customer trust,
Money laundering
Paper type Research paper
1. Introduction
Money laundering remains a large-scaleissue for banks and financial institutions alike Bell
(2017). Illegal fundsfrom criminal activities are often laundered throughthe banking system
This paper has benefited from the constructive comments from the participants of the 6th
International Conference of Governance and Accountability held virtually in April 2021.
JMLC
25,4
864
Journalof Money Laundering
Control
Vol.25 No. 4, 2022
pp. 864-881
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-08-2021-0087
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
to disguise their illegitimate origins (Tagoe, 2003;Teichmann and Falker,2020, 2021).
Therefore, banks are expected to be the front-liners in combating money laundering and
terrorism financing. Due to this critical role, Malaysian banks and financial institutions
are required to comply with the AML requirements of the Anti-Money Laundering,
Anti-TerrorismFinancing and Proceeds of Unlawful Activities Act (AMLA) 2001.
A key requirement of AMLA 2001 is that banks have to implement the “Know Your
Customer”(KYC) procedure. The main objective of KYC is to identify and verify
customer identities and sources of funds deposited into the banks. There are three
common steps involved in a KYC compliance framework, which are customer
identification, customer due diligence and enhanced due diligence. Banks usually employ
three basic authentication factors, namely, something the customer possesses (e.g.
identity card, registered mobile number), something the customer knows (e.g. PIN,
personal information) and something the customer is (e.g. biometric characteristics). A
KYC solution that depends on more than one factors is typically more difficult to
compromise than a single factor system.
However, private bankers often view KYC requirements as additional work,
additional red tape and off-putting to clients in a highly competitive field (Ruce, 2011).
For corporate customers, repeatedly providing the necessary information can be time-
consuming, particularly for companies working with multiple banks and operating in
several different markets (Brace, 2015). Thus, a key challenge for banks is to balance
between maintaining financial integrity and customers’comfort. Despite the importance
of effective customers’authentication, arduous KYC requirements have been documented
to cause existing customers to alter their banking relationships or even switch banks
(Gelb and Castrillon, 2019;Reuters, 2016). Arguably, an important antecedent of the
KYC’s success in detecting money laundering and terrorism financing is the customers’
willingness to accept the KYC procedure. Accordingly, it is imperative to uncover the
factors that could improve customer’s acceptance of the KYC system incremental to
customers’easiness.
In Malaysia, Latif and Abdul-Rahman (2018) discovered that bank customers lack the
understanding and awareness regarding financial crime and money laundering, the
importance of the KYC procedure and the fight against money laundering. They are also
not aware of the use of bank as a conduit for money laundering and terrorist financing
activities and the socio-economic effects of money laundering on those involved. Banking
secrecy is potentially one of the main barriers to curb money laundering. Under the
Malaysian AML laws, banks can disclose a customer’s information on the grounds of
suspicion of money laundering. Although the AMLA 2001 provides sufficient safeguards
to ensure that the disclosure of a customer’s information is carried out in amanner that is
not prejudicial to the interest of legitimate customers (Rahman, 2014), there is the
important question of whether customers can trust banks in safeguarding their private
information. Accordingly, this study examines the links between customers’awareness
of money laundering, level of customers’trust in banking secrecy measures, customers’
discomforts in fulfilling the KYC requirements and customers’level of acceptance of the
banks’AML practices.
2. Literature review
Known tools used by money launderers across the world to camouflage their illegal funds
include the use of high-value physical commodities, real estate projects and some bank
transactions (Imeny et al., 2021;Teichmann, 2017). Several of the most trusted banks, e.g.
JPMorgan Chase, HSBC, StandardChartered, Deutsche Bank and Bank of New York Mellon
Anti-money
laundering
practices
865
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