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Modelling the Risk Profiles of Clients in the Fight Against Money Laundering and Terrorism Financing

Author

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  • Arnoldo R. Camacho

    (Department of Finance, INCAE Business School, Costa Rica)

Abstract

Global standards require financial intermediaries (FIs) to develop risk profiles to fight money laundering and terrorism financing. International typologies and multivariate analysis techniques are used to define profiles and develop models to classify clients; indicators are proposed to assess the vulnerability and exposure of intermediaries and the quality and stability of the models. Statistical evidence proves significant to validate profiles, avoiding the use of subjective criteria, generalizations, or stereotypes; a time-, resource-, and cost-efficient process is designed for FIs to monitor transactions and clients; the models are shown to be useful to assist intermediaries and regulators to deter these types of crimes.

Suggested Citation

  • Arnoldo R. Camacho, 2013. "Modelling the Risk Profiles of Clients in the Fight Against Money Laundering and Terrorism Financing," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 12(2), pages 97-120, December.
  • Handle: RePEc:ijb:journl:v:12:y:2013:i:2:p:97-120
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    References listed on IDEAS

    as
    1. Marco Arnone & Pier Padoan, 2008. "Anti-money laundering by international institutions: a preliminary assessment," European Journal of Law and Economics, Springer, vol. 26(3), pages 361-386, December.
    2. Edward I. Altman, 1968. "Financial Ratios, Discriminant Analysis And The Prediction Of Corporate Bankruptcy," Journal of Finance, American Finance Association, vol. 23(4), pages 589-609, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    emerging markets and developing economies; anti-money laundering and combat of terrorism finance; financial and capital markets; profiling risky clients;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K42 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Illegal Behavior and the Enforcement of Law

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