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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, School of Management Development, 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
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    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;
    All these keywords.

    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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