Independent Researcher, Boston, Massachusetts, USA.
Review Article
World Journal of Advanced Research and Reviews, 2024, 23(03), 1445-1468
Received on 29 July 2024; revised on 06 September 2024; accepted on 09 September 2024
The roles of banks, consulting firms and governments are intertwined in combating financial crime. Banks are on the frontlines as they process financial transactions and engage directly with customers. Banks are extraordinarily strategic because they interface with customers and are heavily involved in handling financial transactions worldwide. They watch accounts for any suspicious activity and report such activities to the legal bodies as expected under AML regulations. Consulting firms help banks, as well as other financial organizations to create various tools for evaluating threats and devising strategies for firms to conform to. They also do training in the area of financial crime prevention. Governments put in place measures in the form of legislation that seeks to prevent and curtail acts such as money laundering, financing of terrorism and tax evasion among others.
Materials and Methods: The study’s literature was obtained from electronic databases. Only the articles that investigated the effectiveness and efficiency of anti-money laundering/counter-terrorist financing policies and regulations and/or sources that compared financial institutions’ cooperation with consulting companies and governmental agencies were included. Among the reviewed sources 53 from 1980 till 2023, which included academic books, journal articles, government and international organization reports.
Results: The literature shows that relying on the regulation is inadequate for controlling finance related crimes. Banks have a profit-driven culture and it lacks scrupulousness towards integrity risks. For the same purpose, prescriptive regulations increase disproportionate compliance costs for small jurisdictions and financial institutions. Companies seeking risk management services get these from consulting firms that also profit from molding compliance frameworks. Syndication enables the employment of unique features possessed by each party. While the banks have an effective network and reach, the consulting firms can analyze data accurately, and the government has statutory power and control.
Discussion: Shifting social norms are another driver: peoples’ behavior in financial markets today is a shift from that of even a decade ago and there is a need to address financial crime in a shared manner and increase cooperation at a global level. To put measures in place, the roles and responsibilities should be well defined based on strengths of each of the entities. Banks are also in good shape for transaction monitoring although they need some regulation to do so. Analyzing the motives for consulting firms, it is possible to state that the provision of technical solutions is possible only if there are factors that guarantee the transparency of actions. Governments provided the blueprint in achieving the proportionate, risk adjusted policies while leaving it to the private sector to drive the processes. This is because we have seen that financial globalization means that nations have to ideally move in synchrony. International agencies such as the UN, FATF, FSB, IMF and others have contributed to the development of international standards, whereas in national situations, the effects vary from one country to another.
Conclusion: It can therefore be seen that no single entity can deal with such complicated concepts of transnational financial crimes in isolation. The utilization of the mandated strategies by banks, consulting companies and governments as essential collaborators in tandem with their core competencies is the most useful approach. This triumvirate, therefore, has great potential to add real value to anti-financial crime efficiency when properly aligned and adequately supervised in a manner consistently and holistically operationalized.
Financial crime; Digital finance; Money laundering; Anti-money laundering (AML); Fintech; Blockchain; Artificial Intelligence (AI); Machine learning; Know Your Customer (KYC); Financial Action Task Force (FATF)
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Prince Iheonunekwu. The trifecta against financial crime: A collaborative analysis of the roles of banks, consulting firms, and governments. World Journal of Advanced Research and Reviews, 2024, 23(3), 1445-1468. Article DOI: https://doi.org/10.30574/wjarr.2024.23.3.2739