Factors related to the Central Bank instructions on money laundering
| Date | 03 July 2017 |
| Published date | 03 July 2017 |
| DOI | https://doi.org/10.1108/JMLC-07-2016-0028 |
| Pages | 274-291 |
| Author | Osama Omar Jaara,Abdelrahim M. Kadomi |
| Subject Matter | Accounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
Factors related to the Central
Bank instructions on money
laundering
Osama Omar Jaara
Department of Accounting, American University of Madaba,
Amman, Jordan, and
Abdelrahim M. Kadomi
Department of Finance, Middle East University, Amman, Jordan
Abstract
Purpose –This paper aims to investigate Jordan’s framework specics of the anti-money laundering (AML)
policy and factors related to the Central Bank instructions on money laundering.
Design/methodology/approach –A questionnaire has been distributed to a random data sample of 100
branch bank managers and supervisors who have a sufcient experience in this issue, and a t-test statistical
technique has been used.
Findings –The results revealed that commercial banks of Jordan are committed to the instruction of the
central bank, and they are highly qualied in all investigated measures.
Practical implications –This study supports the Central Bank of Jordan’s efforts in combating money
laundering, which encourage all commercial banks of one country to follow the same adopted regulations to
identify and report transactions of suspicious behaviour: investigate capability of the tellers and customer
account representatives to report such activities, use AML software, lter customer’s data classify available
information according to levels of suspicion or based on the uncertain customers without being subject to the
institutional secrecy jurisdiction and to work under cooperative management.
Originality/value –It has been recommended to utilize more advanced technology, intensify training and
ensure for more knowing clients’ knowledge. The importance of this paper is to insure the following: rst, the
banking system is obliged to recognize and report suspicious money laundering transactions, regarding up to
date the FATFA equivalence status of other countries; second, increase the awareness and ensure the central
bank efforts’ success; third, assure the adequacy of different issues such as the internal control system tools;
devices or tools availability; and sufcient employees’ qualications in facing launderers attempts; fourth, to
be sure that suspected transactions are checked against any commercial bank records; nally, to be sure that
commercial banks are giving enough considerations to all the AML proactive actions such as the regulations
of checking while opening an account, accepting money on deposit, giving loans, issuing a debit card,
traveller’s check and collecting enough information about new clients.
Keywords Training, Internal control, Commercial banks, Administrative devices and equipment,
Curbing money laundering, Knowing the clients
Paper type Research paper
1. Introduction
Countries around the world are facing difcult on-going money laundering challenges. Their
differences relate to their specics, such as the nature of their nancial sector, adopted
anti-money laundering (AML) policies and the central bank’s ability to develop a suitable
related factors framework. However, each country needs a central bank to create its own
framework capable of removing obstacles and improving a sufcient AML policy. In doing
so, they need to identify which factors are to be included.
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1368-5201.htm
JMLC
20,3
274
Journalof Money Laundering
Control
Vol.20 No. 3, 2017
pp.274-291
©Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-07-2016-0028
The Central Bank of Jordan’s instructions include an awareness of and commitment to the
banking sectors effective prudential regulations, amendments and explanations, as well as
all the current circulars. Part of the regulations deals with the supervision and control of
curbing money laundering, and a commitment to international regulating bodies, such as
NAFTA, or cooperating with local legal legislative supervisory committees and maintaining
a client’s documentation.
The role and importance of internal control procedures for detecting or preventing money
laundering operations can be identied by the guidelines and policies issued by the
administration of commercial banks as well as the training given to employees on related
issues; a banks’ automated programmes or systems; the sudden or signicant changes of
their clients’ accounts; the accomplishment of all the clients-specic information; and
creating a culture of compliance to ensure staff adhere to the bank’s policies and processes.
However, the level of sophistication of the internal control systems should be commensurate
with the size, structure, risks and complexity of the individual bank. The larger, more
complex banks are more likely to implement better compliance departmental internal
controls. Banks are in need of appropriately trained personnel, and training efforts are
required to achieve the regulatory requirements and adherence to the bank’s internal
policies, procedures and processes. The bank’s training programme must assure that the
needs of all personnel are tailored to each specic responsibility. It should also encompass
information related to applicable business lines relevant to regulatory requirements as well
as the activities and overall risk prole of the bank and be updated on an on-going basis and
incorporate current developments or changes to internal policies, procedures and processes.
It is difcult for individual banks to comply with the central bank’s AML regulations
without specic technology. In Jordan, bankers perceive the adoption of AML technology as
a risk mitigation tool and a regulatory measure. Improving technology includes adopting
better practices, adequate oversight, effective risk management and maintaining full
compliance with local or international laws and regulations. Knowing the customer policy
for banks is critical in insuring that suspicious transactions are reported based on law
enforcement via the forms provided by the central bank. It is a prerequisite step that a bank
must le specic information about transactions occurring in each bank. Knowing
customers refers to maintaining reliable sources, investigating any proposed transactions or
business, keeping documentation on high-prole customers, such as politicians, as well as
negative news about customers in high-risk industries or countries and monitoring
customers that have repeated suspicious transactions.
2. Literature review
2.1 Central banks and money laundering
A substantial number of nancial institutions and scholars have argued about what the
denition of money laundering is. For instance, the Organization for Economic Cooperation
and Development (2009) dened money laundering as the process by which illegal funds are
converted into seemingly legitimate funds. The funds are described as “dirty” because they
come from illegal activities, such as drug transactions, tax evasion, smuggling, theft, arms
trading or other corrupt practices. In addition, the US Department of the Treasury (2000)
states that launderers are trying to disguise the origins of money obtained through any
activities designed to make it look as though the funds were obtained from legal sources.
On the contrary, money laundering, as dened by the Jordanian AML Law No. 46 in 2007,
is:
[…] every conduct involving acquisition, possession, disposing of, moving, managing, keeping,
exchanging, depositing, investing of funds or manipulating its value or movement and transferring,
275
Money
laundering
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