The tendency towards de-risking and the new age of money laundering

Abstract

This paper addresses the changes in the banking environment and of the payment landscape in general. With the advent of new technologies and with the increasing focus on money laundering as a global issue, new pieces of legislation have been introduced. Under these circumstances, over the last decade arose the phenomenon of de-risking. This paper analyzes the drivers as well as the consequences of this tendency, which range from the impact on financial inclusion and trade finance to the relocation of risk to less regulated banking channels. Several examples are provided in the form of case studies. Starting from the applicable regulations, this thesis outlines the banking sector’s anti-money laundering (AML) compliance system. The general risks faced by financial institutions are covered by this paper as well as the risk appetite and the consequent customer rating process, with a particular focus on high-risk situations. The second part of the document focuses on the new means of money laundering which exploit new technologies and payment methods, thus providing a modern overview of the new threats posed in the changing banking industry. The final chapter of this paper considers and connects all the relevant factors previously treated. The aim is to highlight the most critical high-risk situations and to expose possible solutions and future developments.