Structural deterrents of combating white-collar money laundering in emerging economies: evidence from Sri Lanka

Abstract

Purpose

The purpose of this paper is to discuss how agency conflicts between people and main government organs affect the combatting ability of white-collar money laundering in an emerging economy.

Design/methodology/approach

This paper uses a qualitative design under the philosophy of interpretivism. The case study research strategy is used inductively to investigate how structural limitations affect white-collar money laundering.

Findings

This study reveals that serious agency conflicts exist between public and main government organs which are detrimental to the rights of people to enjoy a crime-free society. First agency conflict of people and legislature intensifies as a result of limited understanding of the legislature and failure to take precautionary actions to develop an anti-money laundering and countering the financing of terrorism (AML/CFT) regime with evolving global standards. This delay has resulted in identifying Sri Lanka as a deficient AML/CFT regime twice. The second conflicts arise between people and the executive which is a serious conflict due to misuse of statutory power and failure to perform duties. The independence and integrity of administrative authorities who perform executive functions were inherent problems of implementing a sound AML/CFT regime. Lack of monitoring, nonavailability of an independent audit and inappropriate reporting channels were other encouraging factors of administrative organs to misuse statutory power. The third conflict between people and the judiciary was not intensified because the function was not so exposed to create agency conflicts. After all, an adequate number of cases had not proceeded to the judiciary due to inherent limitations as a result of intensified first two agency conflicts. The agency conflicts have intensified over the years and AML/CFT regime has been ineffective as a result of limited influence and understanding of the principal, people. Therefore, the principal has to influence the agents to make reforms in the AML/CFT regime to make the country a white-collar crime-free country.

Research limitations/implications

This study uses a case study strategy to assess the context of Sri Lanka as an emerging economy. It is recommended to take into consideration the contextual facts when the findings are applied to other jurisdictions.

Originality/value

This paper is an original work of the authors which discusses how agency conflicts arise between people and three main government organs in implementing a sound AML/CFT regime in Sri Lanka as an emerging economy.

Citation

Jayasekara, S.D., Perera, K.L.W. and Ajward, R. (2023), "Structural deterrents of combating white-collar money laundering in emerging economies: evidence from Sri Lanka", Journal of Money Laundering Control, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JMLC-05-2023-0097