Financial institutions and anti-money laundering violations: who is to bear the burden of liability?
| DOI | https://doi.org/10.1108/JMLC-07-2021-0071 |
| Published date | 19 August 2021 |
| Date | 19 August 2021 |
| Pages | 671-680 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Muhammad Saleem Korejo,Ramalinggam Rajamanickam,Muhamad Helmi Md. Said |
Financial institutions and
anti-money laundering violations:
who is to bear the burden
of liability?
Muhammad Saleem Korejo
Business Administration Department, Sukkur IBA University,
Sukkur, Pakistan, and
Ramalinggam Rajamanickam and Muhamad Helmi Md. Said
Faculty of Law, Universiti Kebangsaan Malaysia, Bangi, Malaysia
Abstract
Purpose –Money laundering (ML) is one of the greatest challenges, the global community faces today.
Corporateentities such as financial institutions (FIs) are most susceptibleto facilitate and launder money. The
paper raises the following question: Who is to bear the burden of liability? Either a corporation or an
individual, thus this paper examinesliability issues in a corporate setting particularly financialinstitutions,
which arisefrom regulatory noncompliance or failure to oversightin the context of ML.
Design/methodology/approach –The study is legal doctrinal mainly based on case laws, legislation
and researcharticles.
Findings –Firstly, this study provides how the concept of liabilityin a corporate setting in UK and USA
has drifted from its traditional “duty to care”standard to a new “duty to oversight”and “Responsible
Corporate Officer”concepts resulting a shift in corporate to individual liability. Secondly, in the context of
anti-ML violationsin FIs, imposition of corporate or personalliability solely may not effectively deter ML and
may create conflictsbetween management and shareholders.
Practical implications –The paper can be a source to explore the issue of ML liability for regulatory
noncompliancebased on UK, USA and Pakistan law.
Originality/value –This paper demonstrates thatthe imposition of either corporate or personal liability
may create dilemma either for shareholders or management; however, a “combine or collective liability”
approach carries potential to retard ML activities in FIs and balancing the harm-penalties incurred upon a
corporationwhile addressing shareholders concerns.
Keywords United Kingdom, United States, Financial institutions, Anti-money laundering,
Corporate crime, Personal liability
Paper type Research paper
1. Introduction
Since inception of life, quest for money has been a major impetus for individuals and
entities. Business organizationsserve a platform for earning and exchanging money among
persons. There have been two majormodes to earn money either with legal means or illegal
proceeds. Money laundering (ML)is an example of the latter. ML is one of the major crimes
and greatest challengesthe global community faces today.
ML accounts for billions of dollars eachyear. There has been exponential growth in this
type of crime. Accordingto United Nations Office on Drugs and Crime estimates the amount
of money laundered globally in one year is US$800bn to 2tn, amountingtwo to 5% of global
Anti-money
laundering
violations
671
Journalof Money Laundering
Control
Vol.25 No. 3, 2022
pp. 671-680
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-07-2021-0071
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