The risk‐based approach to anti‐money laundering: problems and solutions
| Date | 11 October 2011 |
| Published date | 11 October 2011 |
| DOI | https://doi.org/10.1108/13685201111173820 |
| Pages | 346-358 |
| Author | Anna Simonova |
| Subject Matter | Accounting & finance |
The risk-based approach
to anti-money laundering:
problems and solutions
Anna Simonova
Forum for Company Law and Financial Market Law (FOCOFIMA),
Faculty of Law, University of Copenhagen, Copenhagen, Denmark
Abstract
Purpose – The purpose of this paper, which is a part of a PhD thesis, is to detect problems associated
with the risk-based approach to anti-money laundering (AML), as well as present ways to improve the
risk-based approach.
Design/methodology/approach – The method is law and economics. The PhD thesis itself is also
based on a comparative analysis of the Danish and British AML regimes.
Findings – The main findings are: failure to develop adequate risk-based AML systems, taking into
account varying levels of money laundering risk, is not only to be considered in the context of legal risk
but also and more importantly in the context of integrity risk; anti-money laundering (AML) has to be
made part of financial and non-financial institutions’ corporate social responsibility policies; the Risk
Analysis Manual provided by the Central Bank of The Netherlands lists very specific and comprehensive
assessment criteria for a broad range of risks facing financial institutions. This manual could be
considered by international bodies and individual financial institutions in informing their risk control;
due to their intelligence access, cross-national agreements of cooperation and exchange of information
and contacts to multiple stakeholders, financial intelligence units are better placed in educating financial
institutions on AML matters by means of regular typology publications and other guidance based on
SARs and other intelligence; and AML considerations should be incorporated in other areas of law, such
as immigration law concerning wealthy individuals, if the AML regime is to achieve its intended impact.
Originality/value – The paper highlights how the AML regime in general and the risk-based
approach in particular could be improved so as to meet concerns of both regulatory authorities and
regulated entities.
Keywords Denmark,United Kingdom,Money launderingcontrol, Law, Risk-basedapproach, Legalrisk,
Integrity risk,Risk of money laundering, Creative compliance,Letter and spirit of the law
Paper type Research paper
I. Introduction
Business and entrepreneurship have been and are being driven by risk taking and
exploration of new opportunities. The concept of risk has been an inherent part of the
business lexicon for quite a while. In certain areas of law, the concept of risk has
likewise manifested itself. Clear examples are insurance law, tort law and interna tional
trade law. Since 1988, the concept of risk has also been incorporated into financial
markets law (Basel I), specifically capital adequacy regulation which aims at ensuring
that financial institutions hold sufficient regulatory capital to compensate for credit
risk, market risk and operational risk. Different concepts of risk are continuously
introduced into the legal lexicon. In 2003, the concept of risk was explicitly introduced
into the AML regime (FATF standards). It is a central concept and it reoccurs
continuously in the AML regime. However, the concept risk does not have one settled
meaning. The International Organisation for Standardisation (ISO, 2009) has given
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1368-5201.htm
JMLC
14,4
346
Journal of Money Laundering Control
Vol. 14 No. 4, 2011
pp. 346-358
qEmerald Group Publishing Limited
1368-5201
DOI 10.1108/13685201111173820
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