A critical analysis of anti-money laundering and funding of terrorism legislation in relation to the banking sector

Abstract

The financial crimes of money laundering and funding of terrorism could potentially cause considerable and irrevocable damage to society at large. The world has witnessed a number of cases involving money laundering and has also experienced the negative effects of terrorist funding. Following the 9/11 terrorist attacks, international bodies and organisations have acknowledged that regulators are to legislate against the crime of terrorist financing to avoid future attacks from unfolding. Unfortunately, there can never be one system which completely rules out money laundering and terrorist financing crimes from penetrating financial entities. Nonetheless, through experience and tighter controls, many of these crimes can be detected and thus, prevented. This thesis provides an in-depth analysis of the international and local initiatives undertaken in combatting money laundering and terrorist financing. Reference is particularly made to the Financial Action Task Force’s (‘FATFs’) 40 +9 Recommendations and other guidelines, the EU’s Directives on preventing money laundering and funding of terrorism, the Prevention of Money Laundering and Funding of Terrorism Regulations and the Financial Intelligence Analysis Unit’s (‘FIAUs’) Implementing Procedures. Where necessary, suggestions were put forward for consideration. The role of credit institutions in the fight against money laundering and terrorist funding is also analysed. Credit institutions are said to be on the frontline of this battle and therefore, much of the responsibility of preventing and detecting such crimes falls upon them. This responsibility ultimately depends upon the effectiveness of the Anti-Money Laundering/Counter Financing of Terrorism (‘AML/CFT’) regimes implemented. Elements of an effective AML/CFT regime are delved into and reference is made to interviews conducted by the author of this thesis with the Money Laundering Reporting Officers (‘MLROs’) of four credit institutions in Malta as well as with a representative of the FIAU.