The Role of Compliance Technologies in Helping UK Banks Mitigate Trade-Based Money Laundering (TBML) According to the Regulatory Risk-Based Approach (RBA)

  • Mariola Jolanta Marzouk

Student thesis: Doctoral Thesis

Abstract

Trade-based money laundering is considered to be the most pervasive money laundering method, commonly defined as moving illicitly obtained funds via trade transactions in an attempt to legitimise their origins. It links to grievous offences such as tax evasion, fraud, drug sales, arms sales, corruption, human trafficking, goods smuggling, illicit goods sales, environmental crimes, terrorism financing, and many other predicate crimes to money laundering. Despite many measures to address its prevalence, trade-based money laundering persists as a significant economic threat to the UK. Banks, in particular, face intense regulatory scrutiny to mitigate all types of money laundering as they process a significant number of transactions daily.
Given that compliance technologies increasingly play critical roles in banks' anti-money laundering strategies, this study aims to explore UK banks' use of those tools and how and to what extent they can help banks mitigate trade-based money laundering in accordance with the risk- based approach. The systematic literature review and primary data collection via 27 semi- structured interviews were conducted to achieve the research aim. Participants represented senior banking compliance professionals and those with experience in the compliance software industry.
The thematic analysis of both revealed that compliance technologies cannot, at present, help UK banks mitigate trade-based money laundering risks in accordance with the risk-based approach because banks are incentivised through fines to follow the rule-based approach and, as such, apply technologies to make the expensive compliance processes easier and cheaper.
The literature review highlighted that the discussion on banks' use of regulatory compliance technologies to mitigate trade-based money laundering is very minimal. This thesis, therefore, closes the knowledge gap with the empirical data collection findings detailing how and to what extent banks use compliance technologies to mitigate trade-based money laundering.
Poor trade-based money laundering knowledge explains why banks do not apply a risk-based approach to mitigate it. Therefore, the practical recommendations for the anti-money laundering discipline focus on expanding the Financial Action Task Force’s trade-based money laundering definition, embracing alternative trade-based money laundering perspectives, and improving public-private communication channels to better incentivise innovation.
Date of Award29 Jan 2024
Original languageEnglish
Awarding Institution
  • University of Portsmouth
SupervisorBranislav Hock (Supervisor), David William James Shepherd (Supervisor) & Paul Michael Gilmour (Supervisor)

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