Deficient regimes of anti-money laundering and countering the financing of terrorism: agenda of digital banking and financial inclusion
| DOI | https://doi.org/10.1108/JMLC-04-2020-0035 |
| Published date | 23 July 2020 |
| Pages | 150-162 |
| Date | 23 July 2020 |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Sisira Dharmasri Jayasekara |
Deficient regimes of anti-money
laundering and countering the
financing of terrorism: agenda of
digital banking and
financial inclusion
Sisira Dharmasri Jayasekara
Financial Intelligence Unit, Central Bank of Sri Lanka, Colombo, Sri Lanka
Abstract
Purpose –The purposeof this paper is to discuss the dilemma of digital banking and the financialinclusion
agenda of countries with the level of strengthof the anti-money laundering and countering the financing of
terrorism(AML/CFT) regime.
Design/methodology/approach –This study develops an AML/CFT compliance index using the
assessment data of FATFto measure the level compliance strength of countries to measurethe impact of the
strength of the AML/CFT regime on the financial inclusion. Financial literacy, literacy, number of bank
branches and income level of countries are used as other control variables in regression analysis, which is
used to test the developedmodel.
Findings –The results suggest that the AML/CFTcompliance level of a country is a significant factor in
determining the levelof financial inclusion.Besides, the number of bank branches for100,000 people, literacy
and financial literacy are significant factorsin financial inclusion. However, the results reveal that financial
literacy is significant over literacy in determining financial inclusion. Therefore, having considered the
importance of the AML/CFT regime for financialinclusion, regulators are required to strengthen the AML/
CFT regime and make clarity on the AML/CFT regulations.This clarity will promote the digitalization and
financialinclusion over time.
Practical implications –Most of the studies related to financial inclusion and AML/CFT aspects are
qualitative. Therefore, this is only the start of measuring the strength of an AML/CFT regime. More
appropriatemeasures will be developed in the future based on thisfoundation.
Originality/value –This paper is an original work done by the author, which discusses the issues of
digital banking and financial inclusion agenda of countries with the compliance strength of the AML/CFT
regime. The AML/CFT compliance index is the original idea of the author, which can be used as a
quantitativemeasure to capture the strength of the AML/CFT regimesin future studies.
Keywords Financial inclusion, AML/CFT compliance index, Digital banking,
Entrepreneurial regulation
Paper type Research paper
1. Introduction
Digital banking is growing at a higher phase because of increased competition in the
banking industry as well as the rapid development in information and communication
technology. Thisevolution in digitalization enables financialinstitutions to provide efficient,
high quality, timely and economical services to the customers. Despitethese developments,
anti-money laundering and countering the financing of terrorism (AML/CFT) regime of
some jurisdictions have failed to support digitalization in the banking sector because of
JMLC
24,1
150
Journalof Money Laundering
Control
Vol.24 No. 1, 2021
pp. 150-162
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-04-2020-0035
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 continue reading
Request your trial