ANALYSIS OF GLOBALISATION IN SHAPING ANTI-MONEY LAUNDERING AND COUNTER-TERRORIST FINANCING STRATEGIES IN SRI LANKA'S BANKING SECTOR

Abstract

This study focuses on the relationship between the anti-money laundering (AML) and counter-terrorism financing (CTF) measures and the minimisation of Money Laundering (ML) and Terrorism financing (TF) risks in licensed commercial banks (LCBs) in Sri Lanka. Perceiving the increasing risk of illicit financial flows to financial stability, particularly with the emerging economies in mind, the research covers a crucial gap in empirical research on the influence of globalisation on AML/CTF effectiveness. With a positivist, quantitative, cross-sectional design, data were collected using structured questionnaires using purposive and snowball sampling of AML/CTF professionals in Sri Lankan LCBs. The outcomes reveal that there is a strong desire for internal commitment to AML/CTF compliance on the part of the banking professionals and a mostly favourable attitude of practitioners to the existing frameworks. Nevertheless, difficulties are still present in handling the complexities brought about by cross-border financial activity. Importantly, Transaction Monitoring Systems (TMS) and Training and Awareness (TA) turned out to be statistically significant predictors of the ML/TF risk reduction. In addition, globalisation showed a rather small but consistent moderating effect, especially amplifying the effects of TMS and TA. The results emphasise the need to invest in strategic monitoring systems, which are up to global standards, and continuous training of staff. Moreover, attention should be focused on compliance with procedure to risk-based approaches (RBA), enhanced due diligence (EDD), and regulatory compliance (RC), result-oriented application. All in all, the study is of significant value for the Sri Lankan policymakers and regulators who realise the need for further international cooperation and a flexible approach to the adaptation of AML/CTF frameworks to the circumstances of the globalised financial environment. It also addresses one of the most important empirical and theoretical gaps, providing practical recommendations for building up AML/CTF systems in developing economies.