An expectation-performance gap between money laundering reporting officers and their directors – evidence from Germany

Lars Haffke

Journal of Money Laundering Control, 2021, vol. 25, issue 3, 567-593

Abstract: Purpose - Money Laundering Reporting Officers (MLROs) carry out day-to-day anti-money laundering (AML) tasks while directors ultimately remain responsible for AML compliance. Therefore, directors’ expectations of what their MLROs do should ideally coincide with what their actual tasks to minimise liability risk. This paper aims to test for gaps between MLROs and their directors in terms of knowledge, expectations and performance of AML tasks. Likewise, it is researched whether MLROs and directors communicate well with regard to MLROs’ tasks. Design/methodology/approach - This paper first develops a model for analysing the dyadic relationship between MLROs and their directors, based on the audit expectation-performance gap. Second, a paired electronic survey of MLROs and directors of German companies was conducted in autumn 2020, testing for participants’ knowledge, expectations and performance of possible AML tasks (n= 136 pairs). Findings - While there is no knowledge or performance gap among MLROs and directors, expectations among them are partially unreasonable and their communication needs to be improved. Additionally, this study suggests that MLROs of German non-financial businesses are less knowledgeable, perform AML duties more poorly, and communicate less effectively with their directors. Practical implications - Training of MLROs and communication with their directors need to be improved. Especially in the non-financial sector, action is urgently required. Originality/value - This paper reports the results of the first paired survey of MLROs and their directors, offering unique insights into their relationship and the status of private AML efforts.

Keywords: Germany; AML supervision; Communication gap; Designated financial businesses (DFB); Designated non-financial businesses and professions (DNFBP); Expectation-performance gap (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jmlcpp:jmlc-10-2021-0111

DOI: 10.1108/JMLC-10-2021-0111

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