Anti-money laundering regulations and financial inclusion: empirical evidence across the globe

Isaac Ofoeda

Journal of Financial Regulation and Compliance, 2022, vol. 30, issue 5, 646-664

Abstract: Purpose - This study aims to examine the impact of anti-money laundering (AML) regulations on financial inclusion using a comprehensive measure of AML regulations developed by the Basel Institute on Governance. Again, this study investigates the existence of threshold effects in the AML regulations–financial inclusion nexus. Design/methodology/approach - This study uses panel data across 212 economies (developed, developing and Africa) of the globe-spanning from 2012 to 2019. This study uses the dynamic panel threshold estimation technique proposed by Seoet al.(2019). Findings - In general, the results indicate that AML regulations promote financial inclusion across the globe. However, AML regulations spur financial inclusion below the threshold of AML regulations, whereas, above the thresholds, AML regulations have damaging effects on financial inclusion. Further, the author finds that AML regulations have a detrimental impact on financial inclusion for developed economies. In contrast, AML regulations promote financial inclusion at all levels of AML regulations for African countries. Practical implications - The findings of this study imply that countries must make conscious efforts in combating the incidence of money laundering by establishing sound AML regulatory regimes as a means of promoting financial inclusiveness. However, there is a need for regulators to ensure cost-effective and efficient implementation of AML regulations. Originality/value - The value of this paper is its contribution to literature as it is a major attempt in empirically assessing the impact of AML regulations on financial inclusion. Again, to the best of the author’s knowledge, this is the first study to examine the non-linear relationship between AML regulations and financial inclusion.

Keywords: Anti-money laundering regulations; Financial inclusion; Money laundering; Threshold regression; Financial services; Anti-money laundering (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-12-2021-0106

DOI: 10.1108/JFRC-12-2021-0106

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