A critical analysis of compliance by local banks with measures for the prevention of money laundering and funding of terrorism

Abstract

This research examined three different policy-making organisations, the Financial Intelligence Analysis Unit, the Financial Action Task Force and the Committee of Experts on the Evaluation of Anti-Money Laundering and the Financing of Terrorism. A comparative study on the preventive measures recommended by these organisations, with respect to money laundering and funding of terrorism, was carried out. Additionally, this study aimed to investigate the level of compliance of local financial institutions with such measures. This was done through the use of online questionnaires which were addressed directly to the Money Laundering Reporting Officers of all local banks. A quantitative study was performed with the aid of a scoring system which was developed to analyse the various similarities and differences amongst the participating financial institutions. The responses to such questionnaires and the values obtained from the scores allocated, concluded that all participating banks adequately cater for the risks introduced by money laundering and funding of terrorism irrespective of their size, turnover generated or the number of employees. Furthermore, this study highlighted the efficiency of local banks in witnessing suspicious transactions and shed light on how frequent they have to deal with such situations in their day-to-day business. Since the scoring system established provides a ranking system of the different levels of compliance ranging from “Non-Compliant” to “Compliant”, one can utilise such system as a selfassessment tool. This will assist local financial institutions to take informed decisions on whether any improvements should be carried out in order to obtain a higher level of compliance. Although this scoring system relates to the current recommended preventive measures, it can easily be adjusted to the laws and regulations which are constantly changing in today’s dynamic environment.