The agency dilemma in anti-money laundering regulation
| Pages | 26-37 |
| DOI | https://doi.org/10.1108/JMLC-01-2016-0007 |
| Published date | 21 January 2020 |
| Date | 21 January 2020 |
| Author | Mohammed Ahmad Naheem |
| Subject Matter | Financial compliance/regulation,Accounting & Finance |
The agency dilemma in
anti-money laundering regulation
Mohammed Ahmad Naheem
Mayfair Compliance, Frankfurt, Germany
Abstract
Purpose –The purpose of this paper is to provide a comprehensive theoretical framework that can be
applied tothe application of anti-money laundering(AML) regulation within the banking sector.
Design/methodology/approach –The paper is linked to a PhD study to be publishedin Winter 2015/
Spring 2016 that looks at trade-based money laundering and risk assessment using an agent–principal
relationshipto explain the underlying relationshipsaffected by regulation in a ML context.
Findings –The paper finds that imposing regulation andassuming that the banking sector is simply an
arm of law enforcement is not an effective approach and could actually contribute toward developing ML
schemes thatare too complex to be easily detected.
Practical implications –The paper has implications for the banking, regulatory and law enforcement
areas involvedin ML and its detection.
Originality/value –The paper offers originalityin providing a comprehensive multi-agency framework
that is cognisant of all factorsaffected by AML regulation. It extends beyond existing workthat has offered
agency insightsinto various sectors of AML and ML partners.
Keywords Trade-based money laundering, Banking regulation, Agency theory,
Anti-money laundering, Risk-based assessment
Paper type Viewpoint
Introduction
Anti-money laundering (AML) regulation is a key part of the reporting and compliance
requirements for banking and financial services across the globe. However, the
administrative and resource implications of AML compliance have been consistently
increasing, which is proving to be a burden on the banking sector (KPMG, 2014) and
increasing the costs for business clients because of time delays and increased information
gathering. There is a risk that compliancewill ultimately be implemented by the letter of the
law, i.e. because regulators want it,rather than by the intent that it was designed for, which
is to stop terrorism and ML activity. This paper explores the role and influence that AML
regulation needs to undertake in bank decision-making if it is to encourage the bank to
remain committed to fully implement all the compliance requirements.It focuses on models
The author acknowledges being the recipient of a research grant awarded by Princess Ālae as part of
Seven Foundation’s“2020 Banking Vision –building banks of the future”and he thanks her for the
continued support and motivation both to himself and other students who benefit through her
generosity. The author also thanks Professor Muhammad Jum’ah (a leading economist of this era
based in Damascus), who has continued to provide valuable input both through his teaching of the
science of economics and for his continued guidance. Please note that this paper was composed and
submitted for review to this journal in November 2015 –All the content was current at that point in
time. The banking, compliance and regulation industries alongside governmental policy making have
evolved greatly since November 2015, with new material from academic research emerging. These
points need to be taken into consideration when reading this paper.
JMLC
23,1
26
Journalof Money Laundering
Control
Vol.23 No. 1, 2020
pp. 26-37
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-01-2016-0007
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