ANTI-MONEY LAUNDERING REGULATIONS AND BANKING SECTOR STABILITY IN Africa

Abstract

The study econometrically analysed anti-money laundering regulations and banking sector stability in Africa. A panel data on 51 African countries over the period of 2012 to 2019 were used. Secondary data were sourced from the World Bank’s indicators, the IMF, the Basel Institute on Governance other financial websites. The two-staged Generalised Moment Method (GMM) was used to analyse the effect of AML regulations on banking sector stability and the effects of the different levels of AML effectiveness and its impact on the banking sector stability in Africa. The study discovered that AML regulations had a significant positive effect on the stability of banking sectors in African countries. This indicated that whether there was high effectiveness or low effectiveness of the AML regulations, it would still have a positive impact on the stability of the banking sector of the country.

Keywords:

• anti-money laundering
• banking sector stability
• generalised moment method
• Africa

PUBLIC INTEREST STATEMENT

The purpose of our study is to analyse the effect of anti-money laundering regulations (AML) and banking sector stability in Africa. Data from the World Bank’s indicators, the IMF, and the Basel Institute on Governance on 51 African countries over the period of 2012 to 2019 were used. The study discovered that AML regulations had a significant positive effect on the stability of countries in Africa. The study also found that the level of AML effectiveness of a country did not have a negative impact on the banking sector stability of the country. This indicated that whether there was high or low effectiveness of the AML regulations, it would still have a positive impact on the stability of the banking sector of the country.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Mohammed Issah

Mohammed Issah received the BSc. degree (with honors) in Applied Accounting from Oxford Brookes University, Oxford, U.K., in 2004, the M.Sc. degree in Financial Management from the University of West of England, Bristol, U.K., in 2012, and another postgraduate degree in Financial Strategy from the University of Oxford, Oxford, U.K., in 2013. Mr Issah is a Chartered Accountant and a Fellow of the Association of Certified Chartered Accountant, U.K.

He was the Managing Director of FT Global Consulting in the UK and the Financial Controller for the Embrace Group in the UK for several years. He is currently the Managing Director of FT Global Investment Ltd and a Lecturer at the School of Graduate Studies at University of Professional Studies, Accra, Ghana. His research interests covers the corporate failure predictions, performance measurement, transfer pricing and Risk management.

The study’s major contribution is the introduction of a simple framework to identify and exploit linkages between Anti-money Laundering Regulations and Banking Sector Stability.