A working paper published by the US-based Center for Global Development has criticised anti-money laundering and countering the financing of terrorism (AML/CFT) regulations for increasing the costs and reducing the availability of banking services over the last decade.
The Impact of Anti-Money Laundering Regulation on Payment Flows: Evidence from SWIFT Data further argues that AML/CFT regulations have substantially failed to curb money laundering or terrorist financing.
Regulatory pressure on international banks to fight money laundering and terrorist financing has increased substantially in the past decade the paper points out.
It also finds that at the same time there has been a rise in the number of complaints of banks denying transactions or closing the accounts of customers either based in high risk countries or attempting to send money there, the process known as de-risking.
Using SWIFT data, the working paper investigates the impact of the increase in regulatory risk, driven by the inclusion of countries on internationally-recognised lists of high risk jurisdictions, on subsequent cross-border payments.
The study finds that countries that have been added to a high risk greylist face up to a 10 per cent decline in the number of cross border payments received from other jurisdictions, but no change in the number sent.
The paper also finds that a greylisted country is more likely to see a decline in payments from other countries with weak AML/CFT institutions.
Given that countries that are placed on these lists tend to be poorer on average, these impacts are likely to be more strongly felt in developing countries the report concludes.
The Impact of Anti-Money Laundering Regulation on Payment Flows: Evidence from SWIFT Data can be downloaded from here.
Categories: Trade Based Financial crimes News