Disclosing anti-money launderers through CSR regulation – a new way to combat money laundering

DOIhttps://doi.org/10.1108/JMLC-07-2019-0062
Pages11-25
Date21 January 2020
Published date21 January 2020
AuthorKalle Johannes Rose
Subject MatterFinancial crime,Financial compliance/regulation
Disclosing anti-money launderers
through CSR regulation a new
way to combat money laundering
Kalle Johannes Rose
CBS LAW, Copenhagen Business School, Frederiksberg, Denmark
Abstract
Purpose Recent researchquestions the innocence of companies outsidethe current EU money laundering
regulationin terms of contributing to the externalityproblem of money laundering.The purpose of this paper
is to examine how including anti-money laundering as an element of the EU corporate social responsibilities
(CSR) directivecan contribute to solvingthe externality problem of moneylaundering. Based on the principles
of CSR and the economiceffects of disclosure duties, this paperanalyzes the implications an introduction of
anti-moneylaundering policies anddisclosure duties can have on corporateclients and the combattingagainst
money laundering. Furthermore, it is the intentionof this paper to argue how such a regulatory change can
help the nancialcompanies dividinggoodand badclients to preventmoney laundering from happening.
Design/methodology/approach The method of this paper is a functional approach to law and
economics. It seeks to enhance the efciencyof the regulatory framework combatting money laundering by
includingeconomic incentive theory.
Findings Based on the regulatory framework of the fourth anti-moneylaundering and counter terrorist
nancing directive and the directiveon criminalizing money laundering, this paper argues that inclusionof
anti-money laundering in the EU CSR directivewill contribute to solving the externality problem of money
laundering in the EU. Additionally, the expansion of the regulatory framework can start a culture, where
corporateclients to the nancial sector will take active stepstoward combatting money laundering.
Originality/value The paper identies a way to change the corporate perception of anti-money laundering
prevention from having an incentive of minimal compliance/race-to-the-bottomto be a possible element of
competition between companies through their CSR strategy. While most research focuses on the nancial sector
in terms of money laundering, this paper takes the next step and includes corporate clients in the nancial sector.
Keywords CSR, EU, Regulation, Money laundering, Non-nancial entities, Criminalizing
Paper type Conceptual paper
1. Introduction
With the implementation of the fourth- and announcement of the fth anti-money
laundering and counter terrorist nancing directive (hereinafter 4AMLD and 5AMLD) EU
increased the focus on the externality problem of money laundering. However, recent
research (Rose, 2019) criticizes the scope of the present regulatory framework regarding
money laundering to be insufcient. The critique is that the regulation puts the
responsibility of combating money laundering on the nancial institutions and not their
clients. Even though the denition of moneylaundering demands intent or knowledge of the
illegal origin of funds, which the clients to thenancial institutions are more likely to have
than the nancial institutions themselves. The lack in the regulatory scope has the severe
consequence that corporations using nancial products do not have the incentives to enter
the ght against money laundering. Thus, leaving the solving of the externality problem of
money laundering to the nancial sector. This article will focus on corporate clients to
nancial institutionsand not include private clients.
Disclosing
anti-money
launderers
11
Journalof Money Laundering
Control
Vol.23 No. 1, 2020
pp. 11-25
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-07-2019-0062
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm

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