The Problem of Regulating the Easy Way Out: EU Money Laundering Regulation

Research output: Contribution to journalJournal articleResearchpeer-review

Abstract

Purpose: Current research within law and economics focus on money laundering as an externality problem caused by financial institutions. Thus, when existing research and legislation place the responsibility on financial institutions, it creates a void where it is neglected that clients of financial institutions may, in fact, play a vital role in the problem of externality. However, based on the definition of money laundering, this paper aims to examine and analyze the need to focus on the clients as part of the externality problem with regard to money laundering.
Design/methodology/approach: This paper examines how a lack of regulatory focus on the clients of financial institutions lead to inefficient anti-money laundering regulation. Through a functional approach of law and economics, it analyzes the externality problem of money laundering based on both the legal definition and the economic conditions of the problem.
Findings: Based on the fourth anti-money laundering directive, the paper argues that present regulation has a tendency to focus on financial institutions, thereby not considering the entire scope of the externality problem in money laundering. For regulation to efficiently combat money laundering, it is necessary to place some responsibility on the clients of financial institutions and not solely on the financial institutions. Nevertheless, the inclusion of client responsibility might lead to some legal or economic complications, which need to be subject to further research.
Originality/value: The paper identifies the need for a fundamental change in the perception of the externality problem of money laundering, and thus, presents the required approach to reach an efficient solution.
Original languageEnglish
JournalJournal of Money Laundering Control
Volume22
Issue number4
Pages (from-to)666-677
Number of pages12
ISSN1368-5201
DOIs
Publication statusPublished - 2019

Keywords

  • Anti-money
  • Counter terrorist
  • Externality problem
  • Law and economics
  • Money laundering
  • Regulation

Cite this

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title = "The Problem of Regulating the Easy Way Out: EU Money Laundering Regulation",
abstract = "Purpose: Current research within law and economics focus on money laundering as an externality problem caused by financial institutions. Thus, when existing research and legislation place the responsibility on financial institutions, it creates a void where it is neglected that clients of financial institutions may, in fact, play a vital role in the problem of externality. However, based on the definition of money laundering, this paper aims to examine and analyze the need to focus on the clients as part of the externality problem with regard to money laundering. Design/methodology/approach: This paper examines how a lack of regulatory focus on the clients of financial institutions lead to inefficient anti-money laundering regulation. Through a functional approach of law and economics, it analyzes the externality problem of money laundering based on both the legal definition and the economic conditions of the problem. Findings: Based on the fourth anti-money laundering directive, the paper argues that present regulation has a tendency to focus on financial institutions, thereby not considering the entire scope of the externality problem in money laundering. For regulation to efficiently combat money laundering, it is necessary to place some responsibility on the clients of financial institutions and not solely on the financial institutions. Nevertheless, the inclusion of client responsibility might lead to some legal or economic complications, which need to be subject to further research. Originality/value: The paper identifies the need for a fundamental change in the perception of the externality problem of money laundering, and thus, presents the required approach to reach an efficient solution.",
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The Problem of Regulating the Easy Way Out : EU Money Laundering Regulation. / Rose, Kalle Johannes.

In: Journal of Money Laundering Control, Vol. 22, No. 4, 2019, p. 666-677.

Research output: Contribution to journalJournal articleResearchpeer-review

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