A study of the effect of technological innovation on the prevention of money laundering

Abstract

Technological innovation has impacted the lives of people due to the increase of services that are being offered in the technological market, mainly through the internet. One of the services is Financial Technology (FinTech), which refers to financial technology which boosts the development of financial business. Although FinTech offers a faster online customer experience, it is abused by many. Meanwhile, Regulation Technology (RegTech) tries to mitigate Money Laundering (ML). In light of the above, this research aims to analyse how technological innovation has hindered or facilitated the prevention of ML due to the extension of financial services. This research will analyse the views of professionals who carry out procedures in their business model to prevent ML and regulators who are obliged to regulate the financial market on the Maltese Islands. The researcher analysed the above from three different perspectives: awareness, enforcement and legislative adequacy of ML. These themes emerged from a set of questions asked to the professionals in attempt of answering the research question. Amongst 8 different professions, banking personnel were interviewed in order to obtain a banking perspective in light of the impact of technological innovation in the banking sector. Regulation and law enforcement personnel were also interviewed to gain insight on how they combat ML presently and in the future. Other important interviewees contributed their perspectives and enriched this research by providing more perspectives on Anti-Money Laundering (AML). The results of this research conclude that there is awareness amongst preventers of ML on the Maltese Islands and a more risk-based approach towards clients is currently being enforced through legislation to ensure that all the risks of FinTech are mitigated. However, one of the implications which the results showed was that RegTech is sometimes too expensive to adopt by smaller businesses and other ways have to be found to balance out this burden.