Anti-money laundering requirements for economic and legal support to reduce the risks associated with banks’ financial operations
Keywords:
financial monitoring, anti-money laundering legislation, risk-oriented approach, bank, reporting institution, supervisory functions, enforcement actionsAbstract
Objective to analyze the anti-money requirements for economic and legal support to reduce the risks associated with bank’s financial operations.
Materials and methods. The study considers the requirements established by the FATF international standards for implementing the risk-oriented approach to financial monitoring at the state level and the level of reporting institutions (RI). The study emphasis is placed on the risk criteria applied by banks while performing financial operations towards anti-money laundering and combating the financing of terrorism (AML/CFT) (including those related to their customers, types of products and services, the method of obtaining them, and the geographical location of the states where customers or institutions are incorporated, through which money laundering processes take place, etc.) and requirements for managing the necessary AML/CFT internal procedures. According to the author, a threat to destabilize the banks’ financial standing and deteriorate the parameters of their financial operations is expressed by the causal effect of incurred reputational risks and financial losses resulting from the enforcement actions applied due to violating the requirements specified by the financial monitoring legislation, that is, the implementation of the so-called compliance risks. The trends in the banks’ propensity towards compliance risk creation in the field of financial monitoring represented the scope of an analytical study based on the apparatus of descriptive statistics and criterion analysis.
Results. As can be seen from the results based on analyzing the bank groups identified subject to the forms of the enforcement actions applied by the supervisory authority, the formed samples are heterogeneous due to the wide spread in the amounts of fines imposed in proportion to the offenses committed. As an additional criterion for identifying convergent-divergent trends, the study considered the capital source used to compare the scale and frequency of fines set upon banks with private, foreign and state capitals.
Conclusion. Above all, the article concludes that banks with foreign capital show less disregard and are exposed to AML/CFT compliance risks to a smaller extent.
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