Re-thinking de-risking: a systems theoretical approach

Noémi També Bearpark and Dionysios Demetis

Journal of Money Laundering Control, 2021, vol. 25, issue 1, 27-49

Abstract: Purpose - This paper aims to explain the de-risking phenomenon through Luhmann’s risk/danger model and demonstrate that de-risking should be facilitated and encouraged. Design/methodology/approach - The paper applies Luhmann’s system theory and more specifically his risk/danger model to describe the de-risking phenomenon and identify recommendations to address its consequences. Findings - The paper finds that re-defining risk and the anti-money laundering (AML)’s community’s understanding of it can support key stakeholders’ understanding of money laundering (ML) risk and the way to better address consequences of AML decisions. Practical implications - The paper has implications for the banking and regulatory community in relation to the interpretation of de-risking. As systems aim to minimise their exposure to risk, they should not be prevented from de-risking. Originality/value - This paper aims to move away from a narrative description of AML phenomena and presents a theoretical foundation for the analysis of ML risk. The current response to de-risking which demonises it and aims to prevent it is deconstructed through this theoretical lens.

Keywords: Risk; Money laundering; Systems theory; Niklas Luhmann; Danger; Decision (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jmlcpp:jmlc-04-2021-0030

DOI: 10.1108/JMLC-04-2021-0030

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