Incompetency of the Anti-Money Laundering Legal Regime

Posted: March 27th, 2020

Incompetency of the Anti-Money Laundering Legal Regime

Richard Gordon determines the ineffectiveness of the anti-money laundering (AML) legal regime by addressing the private sector’s incapacity to observe customer transactions and report on possible terrorism funding to the federal government[1]. These financial institutions do not possess the adequate proficiency, regulatory and economic inducements, and information necessary to reinforce law enforcement.

One criterion that he applies is the private sector’s inability to refer to empirical approaches to verify criminal activity. As a result, Recommendation 5 mandates financial institutions to corroborate the aim and disposition of a client’s business relationship[2]. If the profile and association cannot be verified, then the organizations can use a baseline to restrict any transactions and report the matter to law enforcement agencies[3]. The issue arises when the prerequisites for profiling incorporate a risk element that monitoring and reporting conditions lack due to the processes’ subjective nature.

The criterion is agreeable since the Recommendations set for monitoring and reporting as well as identification and profiling can be subject to biased interpretations by financial institutions. It is also important to note that such loopholes are enhanced by vague metrics and rules that concentrate solely on compliance approaches hence facilitating money laundering[4]. Such ambiguities only immobilize the regime’s ability to enforce AML laws effectively.

Addressing the AML legal regime’s ineffectiveness necessitates an overhaul of the current system and focusing on public financial reporting systems. Gordon posits that analysis should be dispensed to the public sector to allow the development of proficiency in audit selection and tax management within the public sector[5]. Allocating the responsibility to the public sector will also enable the creation of an empirical system capable of recognizing criminal activity in the client’s transactions.

These measures will be valuable in enhancing the system’s effectiveness in curbing money laundering by enabling compliance with the Financial Action Task Force’s Recommendations[6]. By addressing the ambiguities that facilitate criminal activity as well as finance terrorism, the approaches will establish preventive tactics that enhance the government’s global responsibilities as far as money laundering is concerned.

[1] RICHARD K GORDON, 2010 LOSING THE WAR AGAINST DIRTY MONEY: RETHINKING GLOBAL STANDARDS ON PREVENTING MONEY LAUNDERING AND TERRORISM FINANCING 1-60 (20 ed.).

[2] RICHARD K GORDON, 2010 LOSING THE WAR AGAINST DIRTY MONEY: RETHINKING GLOBAL STANDARDS ON PREVENTING MONEY LAUNDERING AND TERRORISM FINANCING 1-60 (20 ed.).

[3] RICHARD K GORDON, 2010 LOSING THE WAR AGAINST DIRTY MONEY: RETHINKING GLOBAL STANDARDS ON PREVENTING MONEY LAUNDERING AND TERRORISM FINANCING 1-60 (20 ed.).

[4] Linn White, The anti-money laundering complex in the modern era, 133 THE BANKING LAW JOURNAL, 571-599 (2016).

[5] RICHARD K GORDON, 2010 LOSING THE WAR AGAINST DIRTY MONEY: RETHINKING GLOBAL STANDARDS ON PREVENTING MONEY LAUNDERING AND TERRORISM FINANCING 1-60 (20 ed.).

[6] Navin Beekarry, The International Anti-Money Laundering and Combating the Financing of Terrorism Regulatory Strategy: A Critical Analysis of Compliance Determinants in International Law, 31 Nw. J. Int’l L. & Bus. 137 (2011).