Money laundering influence on financial institutions and ways to retaliate
| DOI | https://doi.org/10.1108/JMLC-11-2021-0123 |
| Published date | 18 January 2022 |
| Date | 18 January 2022 |
| Pages | 133-147 |
| Subject Matter | Accounting & finance,Financial risk/company failure,Financial compliance/regulation,Financial crime |
| Author | Darshan Kumar,Mark Eshwar Lokanan |
Money laundering influence on
financial institutions and ways
to retaliate
Darshan Kumar and Mark Eshwar Lokanan
Faculty of Management, Royal Roads University, Victoria, Canada
Abstract
Purpose –This paper aims to advancethe professional knowledge, experience andexpertise of anti-money
laundering (AML) professionalsby focusing on how money laundering (ML) impacts a variety of financial
institutions(FIs) and in what ways the FIs can retaliate to detect, prevent and mitigate the risk of ML.
Design/methodology/approach –This paper use data from secondary sources. Many FI cases have
been includedsuch as a bank money service business (MSB) and insurance companies.
Findings –There should be a culture of compliance in organizations. Upper management, such as a
designated committee or board members, should set the tone of compliance. Money launderers take
advantage of every possibleopportunity to convert illicit proceeds into clean proceeds with any institutionor
profession.
Originality/value –This paper used a case study approach to study the nuances of money laundering
activitiesin various jurisdictions.
Keywords Compliance, Financial institutions, Anti-money laundering, Money laundering
Paper type Research paper
1. Introduction
Money laundering (ML) involves taking criminally gained proceeds and disguising their
illegal sources to use the funds to perform legal or illegal activities. In simple terms, ML is
the process of making dirtymoney look clean. When a criminal activity generates extensive
profits, the individual or group involved finds multiple ways to use the funds without
drawing attention to the principal activity or persons involved in producing such profits.
Criminals accomplish this goal by concealing the sources of these funds by changing their
form or moving them to a place where theyare highly unlikely to attract attention. Criminal
activities that lead to ML can include narcotics trafficking, extortion, illegal arms sales,
illegal imports/exports,smuggling and human trafficking.
In addition to affecting FIs and NBFIs, ML and TF can also have an impact on a nation’s
economy. Criminals make use of the private sector of the country in which they engage in
legitimate business and disguise their illegal funds. Furthermore, criminals make FIs weak.
They can make the economy of a country worse by negatively affecting and destabilizing
the financial systems. In addition, the flow of illicit fundscan weaken government and lead
to legal, social and reputationalrisks.
The increase in ML has led to the development of a plethora of internal risk-based
standards to mitigate the threats of criminalnetworks that find loopholes through which to
misuse the financial industry. Moreover, many international organizations have been
formed to prevent the misuse of their respective financial systems. However, individuals
involved in ML always find different ways to circumvent these organizations. AML
regulation is costly. The cost of human resources, training, computer systems, information
Money
laundering
influence
133
Journalof Money Laundering
Control
Vol.26 No. 1, 2023
pp. 133-147
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-11-2021-0123
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