Sigma ratings: adapting the credit rating agency model for the anti-money laundering world

Published date20 December 2019
Date20 December 2019
Pages1-10
DOIhttps://doi.org/10.1108/JMLC-06-2019-0046
AuthorDaniel Cash
Sigma ratings: adapting the credit
rating agency model for the
anti-money laundering world
Daniel Cash
Law School, Aston University, Birmingham, UK
Abstract
Purpose Sigma Ratings is a new entrant to the anti-money laundering(AML) marketplace and seeks to
alleviate some of the inherent aws withinthe AML regime. This paper aims to examine those awsand ask
whetherSigma may succeed in this bourgeoning marketplace.
Design/methodology/approach This paper is based upon a normative methodology, which takes
place after reviewingthe relevant literature to examine the potential successfor Sigma Ratings.
Findings The paper nds that thereis indeed a position for Sigma Ratings in the marketplace,and that it
may alleviatekey issues within the AML regime.
Originality/value The paper presentsSigma Ratings to the literature for the rst time and positions this
againstan examinationof the role of banks within AML Sigmas main demographic.
Keywords Anti-money laundering, Integration, Money laundering, Financial funds,
Credit rating agencies, Sigma ratings
Paper type General review
Introduction
The regulations and laws governing the worldof anti-money laundering (AML) process are
extensive, and the literaturesurrounding the eld even more so. Particularly with regards to
the literature, there are a number of theoretical perspectives advanced for either how to
progress the system of AML, or toshow why the current system is ineffective. In this article,
however, we will be examining a practical response to perceived issues within the AML
process from the private sector. By adapting the model used so successfully by the leading
credit rating agencies, the new offering Sigma Ratings exists to compliment the current
AML regime by injecting independent and quantiable data into the process so that
associated partiesmay be more efcient in the battle against money laundering.
Theoretically this new offering is very welcome. The potential in allowing associated
parties to become more efcient in dealing with entities that may be used as vehicles for
money laundering is positive. However, there are a number of issues to examine before
declaring whether this new venture will be a success, both from the side of Sigma and its
model, and also from the side of its potential role in the AML environment. To remain
focused on the task at hand, this article will concentrate on the role that banks play in the
AML regime, mainly because a large bank is fundingthe new offering (Barclays), a number
of banks have recently been nancially punished for their failings within the AML regime,
and also because the banking industryhas been identied in the literature as a particularly
important pinch-pointforwhich money laundering can occur. The article will progress on
the basis of rst presenting the concept of money launderingand the ght against it, which
will allow us to understandclearer the need to focus on the banking industry. To accompany
that analysis, the article will continueby examining the role of the banking industry in more
Credit rating
agency model
1
Journalof Money Laundering
Control
Vol.23 No. 1, 2020
pp. 1-10
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-06-2019-0046
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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