Money Laundering Risk: From the Bankers’ and Regulators Perspectives

AbstractWith the vulnerability of banking institutions in terms of exposure to money laundering, satisfactory money laundering risk assessment is vital. In banking institutions, the frontline officers who are dealing with customers for banking activities such as opening an account, savings, withdrawal and remittance are the frontline of defense responsible to undertake money laundering risk assessment. A series of interviews conducted with compliance officers who supervise the assessment of money laundering risk and a central banker who supervise the regulation on anti-money laundering are analyzed in order to understand how frontline officers discharge their duties in assessing money laundering risk in Malaysian banking institutions. Interview findings suggest that money laundering risk is a real risk in the banking institutions, and the frontline officers should be adequately competent in discharging their duties. Even if the banking institutions are equipped with automated risk management solutions, manual (human expertise) is indispensable in assessing money laundering risk. Support provided by the compliance department is seen as complementary for the roles played by the frontline officers and monitoring ensued by the regulatory authority should have enhanced the compliance intensity in the banking institutions