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Re-thinking de-risking: a systems theoretical approach

Author

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  • Noémi També Bearpark
  • Dionysios Demetis

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.

Suggested Citation

  • Noémi També Bearpark & Dionysios Demetis, 2021. "Re-thinking de-risking: a systems theoretical approach," Journal of Money Laundering Control, Emerald Group Publishing Limited, vol. 25(1), pages 27-49, July.
    • Handle: RePEc:eme:jmlcpp:jmlc-04-2021-0030
    DOI: 10.1108/JMLC-04-2021-0030
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