Principles of compliance integrity: an anti-money laundering/anti-terrorist financing approach

Abstract

In response to a series of notorious financial frauds over the last few years, accounting professionals and academics have increased their efforts to identify methods to accurately assess the risk of white-collar financial crimes. However, recent financial crimes research as well as international standards have assessed overall crime risk without considering how white-collar workers perpetrate these crimes. Without an adequate understanding of the perpetration and concealment processes, designing effective procedures to assess these crimes will be difficult, as will ascertaining if any of the predicate offenses/financial crimes in question involved money laundering or terrorism financing (ML/TF). This objective of this dissertation is to investigate state-of-the-art approaches to anti-money laundering and anti-terrorism financing (AML/ATF) and concealment processes by analyzing factors related to ethical compliance. To improve the efficiency and effectiveness of AML/ATF, the dissertation integrates patterns of ML/TF schemes covered in the literature to develop a novel solution for an AML/ATF framework. This solution utilizes an anomaly detection approach based on artificial intelligence. The dissertation employs multiple methodologies. The first methodology section is a systematic literature review of existing studies on AML and ATF. First, based on specified criteria, it identifies articles from the period 2002–2018. A detailed citation-based analysis is conducted on articles from higher-ranked databases. Then, these articles are categorized according to common themes and subjected to comprehensive content analysis. The general findings of this review show deficiencies in the laws, acts, and preventive measures targeting money laundering and terrorism financing. The findings indicate the need for further, timely research in this area, particularly in terms of laws, regulations, and technological issues. In the second methodological section, the dissertation explores cybercrime from several different perspectives, analyzing the phenomena more deeply by drawing on the more sophisticated technical tools that have emerged. The main objective of this section is to examine the effect of unemployment rates and GDP growth per capita on cyber-attack levels in 10 countries (UAE, USA, India, Netherlands, Belgium, Spain, Canada, Japan, China, and Italy) during the period 2005–2017. Using feasible generalized least squares (FGLS), we provide evidence and insight regarding the reasons for fluctuating attack levels in these countries. These insights can serve as valuable guidance for governments and authorities as they take further steps toward combating and preventing these crimes. In the third section, the dissertation explores several issues related to the financial performance of listed companies in the UAE financial market. Drawing on agency theory and legitimacy theory, it extracts and analyzes four criteria: corporate governance (CG), corporate social responsibility (CSR), sustainability, and leadership. This section utilizes the powerful mechanism of the analytic hierarchy process (AHP) to analyze information collected via a questionnaire, and compares and prioritizes the elements in the designed AHP model. Our findings demonstrate the importance of CG in improving the overall financial performance of listed UAE companies. In our findings, the weakest emphasis is on outcome-based leadership. This paper makes several important contributions to the literature. First, it responds to the most recent calls from MENA region experts regarding new trends in the financial market. Second, the paper examines the performance of large, listed companies in the UAE financial market to identify approaches for lowering fluctuations in the stock exchange; this is among the first studies to do so. Third, this paper provides new insights for financial authorities, particularly through identifying gaps in corporate practices and in compliance with different financial audits. These insights can help not only with risk mitigation but also with improving listed companies' performance over the long run. Finally, the entire framework is novel, not having ever been developed in previous literature. Our aim is to explore several financial market-related issues that fall under the umbrella of financial ethics and are influenced by CG, CSR, and organizational performance sustainability disclosures. A survey is developed to collect information on ethics-related practices related to CG, CSR, and sustainability in corporations listed in the UAE stock market. Our study findings show a significant impact of CG and CSR on organizational performance. On the other hand, our findings show that sustainability has a neutral effect on performance. These findings can contribute to a guide for regulators to help them properly govern listed corporations, limit share price volatility, and enhance the stability of financial markets, all based on ethical practices. This study also has limitations, in that our sample does not cover all listed corporations. Further analysis should be conducted to better understand factors that affect the UAE stock market and to build a more comprehensive working model. This study may be useful to academics, governments, and authorities who seek to improve the state of financial markets through better legislation and law enforcement. Additionally, this study captures factors related to compliance, and this information may help the Financial Action Task Force (FATF) to reevaluate recommendations regarding the use of stock markets for money laundering. It may also encourage compliance based on ethical practices rather than technical processes. This paper is an attempt to fully examine the corporate practices governing UAE-listed corporations from an ethical perspective.