Geographical risk of money laundering in the European banking system

Abstract

The issue of risk of money laundering in the European banking system was presented in the article. It describes two approaches used by regulators to prevent the mentioned phenomenon: the rule-based approach and the risk-based approach. The author also identified strategies which are used by banks as entities functioning to maximize profit in the conditions of having full and incomplete information by the FIU. Then, the European countries were analyzed with respect to participating reports on suspicious transactions in the total number of reports, which are sent by all the obligated entities to the national financial intelligence units. We also verified the value of two indicators: the value of above-threshold transactions and the value of financial penalties, which are imposed on banks for failure to comply with the rules on anti-money laundering. Some hypotheses were examined. With the increase in GDP per capita grows the maximum value of the mentioned financial penalties grows. There is a negative correlation between the share of banks in the total of reported suspicious transactions and GDP per capita, which is an effect of extending the list of the obligated entities and the lack of the differentiation of sanctions in the various categories of such entities. In connection with the applying of transitional period for implementing the directive by the banks, there is an inverse relationship between the amount of the penalty, and the number of suspicious transactions reports.