The risk-based approach to AML: representation, paradox, and the 3rd directive

摘要

Purpose – This paper seeks to deconstruct the proposed risk-based approach to anti-money laundering (AML) and to relate it to the text of the European Union's 3rd Directive. The paper also aims to discuss a variety of risk-related aspects and how they have come to be constructed on the sociological perspective of risk and subsequently to examine the relation of risk elements to AML. Design/methodology/approach – The theoretical approach of the paper is based on the tradition of second-order cybernetics and on many of the theoretical concepts discussed by Niklas Luhmann, as well as his work on the sociology of risk. Findings – The implications for the risk-based approach on AML are discussed on the basis of how risk can be represented and categorized, and the paradoxes behind various such risk-classifications are analysed, thus offering a critique on the oversimplification with which risk has been appropriated within AML. Practical implications – The practical implications of this paper relate to how risk should be considered within the domain of AML and how financial institutions and financial intelligence units should mostly focus on re-constructing the aspects surrounding risk-communication. Originality/value – The originality of this paper lies in its unique treatment of risk within the context of AML, while clearly exposing the unavoidable observational paradoxes that the concept of risk induces, as well as examining the consequences on the risk-based approach for dealing with AML.