This book examines the interpretation of the risk-based approach (RBA) and its application across the banking industry. It explores the ways conflicting risk interpretation and deconstruction of money laundering risk have unintended consequences across the banking industry. Furthermore, it offers a theoretical framework that can be adopted and implemented by risk practitioners to address money laundering (ML) risks.
The interpretation and application of the RBA influences the way money laundering risk is perceived, presented, and managed, often resulting in misalignment among stakeholders. Moreover, AML practitioners interpret money laundering (ML) risk as an entity that can be contained, largely in ignorance of the fact that ML risk is self-referential.
The book therefore addresses complex inter-system feedback phenomena that lead to de-risking and re-risking, and offers a new ML risk communication framework on this basis. It will be of value to researchers and also to stakeholders within financial institutions, financial intelligence units and regulators in the fight against money laundering.
Author(s): Noémi També Bearpark
Series: CSR, Sustainability, Ethics & Governance
Publisher: Springer
Year: 2022
Language: English
Pages: 212
City: Cham
Introduction
Contents
About the Author
Abbreviations
List of Figures
List of Tables
Chapter 1: Introduction to Anti-Money Laundering
1.1 Section 1: Estimating the Extent of ML and Measuring AML Effectiveness
Estimating the Extent of ML
Assessing the Effectiveness of AML Frameworks
Are Fines Adequate Indicators of AML Effectiveness?
1.2 Section 2: Legislation and the Emergence of the Risk Narrative
International Bodies
Regional Initiatives
1.3 Section 3: Risk and Governance
Defining and Measuring Risk
Is Risk Real?
The Evolution of the Risk Discourse within Governance and the Risk-Based Approach
The Risk-Based Approach to ML Risk Governance
Why we Need Social Sciences to Understand Risk
References
Chapter 2: Risk and Luhmann´s Systems Theory
2.1 Luhmann´s System Theory (LST) and Social Systems
System, Boundary and Environment
Operational Closure, Autopoiesis and Self-Reference
Structural Coupling
Re-Entry and Observing Systems
Double Contingency and Communication
Function Systems and Binary Codes
Organisations and Decisions
2.2 Luhmann´s Sociological Theory on Risk
Risk Governance and Communication According to Luhmann
References
Chapter 3: Case Studies and Empirical Findings
3.1 Fieldwork and Research
3.2 The SAR Analysis and Escalation Process: Summary
Summary of FIU1´s SAR Process
Summary of FIU2´s SAR Process
3.3 The SARs Regime
FIUs Develop Competitive Advantages Over Others
Technology
Geographical Location
Law and Constitution
3.4 The Risk-Based Approach
Financial Institutions and Their Relationships with AML and ML
The Role of the Regulator
The Illusion of Risk Deconstruction
3.5 Risk Appetite, Intelligence and Re-entry
Risk Appetite and Intelligence
The Re-entry of Risk
3.6 Re-risking: A Consequence of De-risking
De-risking Is Risk Assessment
De-risking: Forcing the Re-entry of the Risk/Danger Distinction onto Other Systems
References
Chapter 4: Analysis and Discussion
4.1 Section 1: Extracting Propositions
ML Intelligence: Using Obliged Entities´ Risk Profiles
The FIU: Externalising Danger and De-risking
The Inefficiency of the Current SAR Regime: A Communication Issue
The FIU: Boundary Operationalisation and Attempts at Bridging Function Systems
De-risking and the Recursivity of Re-risking
The Important Role of Risk Taker as Risk Bearer
4.2 Section 2: Theoretical and Domain Contributions
Contributions and Recommendations
Re-risking: The Inevitability of De-risking
The Role of the Risk Bearer
Translation Codes
References
Chapter 5: Conclusion
5.1 Propositions´ Overview
5.2 Answering Key Issues
5.3 Applicability and Implications for Future Research
References
