A causal model of the declaration intention of banks for suspected money-laundering transactions based on organizational commitment perspective

Author:Te-En Chan, Ya-Hui Chan, Shu-Ping Lin
Position:Department of Business and Economic Law, CTBC Business School, Tainan City, Taiwan
Pages:403-425
SUMMARY

Purpose Anti-money laundering has attracted much global attention, driving banks to invest in the establishment of suspicious transaction report mechanisms for the declaration of suspicious transactions. However, very few studies discuss how to influence bank employees to proactively declare suspicious transactions. Therefore, the purpose of this study is to, based on an organizational... (see full summary)

 
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A causal model of the declaration
intention of banks for suspected
money-laundering transactions
based on organizational
commitment perspective
Te-En Chan
Department of Business and Economic Law, CTBC Business School,
Tainan City, Taiwan, and
Ya-Hui Chan and Shu-Ping Lin
Department of Banking and Finance, CTBC Business School, Tainan City, Taiwan
Abstract
Purpose Anti-money laundering has attracted much global attention, driving banks to invest in the
establishment of suspicious transaction report mechanisms for the declaration of suspicious transactions.
However, very few studies discuss how to inuence bank employees to proactively declare suspicious
transactions. Therefore,the purpose of this study is to, based on an organizational commitment perspective,
establish a causal model that can assist banks to identify key factors affecting the intention to declare
suspicioustransactions.
Design/methodology/approach This study rst summarized ve factors regulatory focus,
organization climate, situational constraints, personality traits and role stress and their composition
constructs as the basis for measurements. An interview-based survey of nine Taiwanese banks was
conducted. Then, this study adopted thedecision-making trial and evaluation laboratory method to analyse
the interplay between the ve factorsto identify the causal model and to explore the differences in the effects
of the key factors, arising from the different organizational and job patterns, on the intention to declare
suspicioustransactions.
Findings The resultsshow that regulatory focus and organizational climateare the most important causal
factors affecting employeesintention to declare suspicioustransactions, whereas role stress and personality
traits are the most inuenced effect factors. In addition, this study also conrmed that under different
organizationaland job patterns, the understanding of employees will change.
Originality/value This paper provides insight into the interplay between the ve factors based on an
organizational commitment perspective. The ndings can assist banks in managing and monitoring the
implementationof the suspicious transaction report mechanism.
Keywords Suspected money laundering, Declaration intention, Organizational behaviour,
Organizational commitment, Decision-making trial and evaluation laboratory method, Bank
Paper type Research paper
1. Introduction
The USA passed the PatriotAct in October 2001, which raised global anti-money laundering
(AML) and anti-terrorism standards to an unprecedented level and which gives banks the
Funding: This work was supported by the Ministry of Science and Technology, Taiwan (R.O.C.)
under Grant MOST 106-2410-H-432-004-MY2.
Declaration
intention of
banks
403
Journalof Money Laundering
Control
Vol.23 No. 2, 2020
pp. 403-425
© Emerald Publishing Limited
1368-5201
DOI 10.1108/JMLC-12-2019-0098
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1368-5201.htm
responsibility of performingcustomer due diligence on foreign exchange and private banks,
making the USA a pioneer in the cooperation between the publicand the private sectors in
AML and a model for other nations to follow. However, the recent international
investigation and disclosure of many suspicious transactions have also made the AML
mechanism of banks a major nancial problemthat has to be re-examined. From a practical
point of view, the establishmentof an AML mechanism must be started from two directions,
one is establishing the money-launderingcrime,which is to criminalize money laundering;
the other is having preventive provisions in place,which is to achieve the purpose of
preventing money laundering through the establishment of a banking declaration system.
This study focusses on the latter,which is expected to reduce the risk of banks being used as
a money-laundering channel signicantly by enhancing the specic conduct of banks to be
in accordance with the AML declarationmechanism.
In fact, the current AML mechanism is divided into two types: one is for the currency
transaction report,which regulates that the banking sector should declare cashdeposits and
withdrawals of customers to the nancial intelligence unit, and the other is for the
suspicious transaction report (STR), which primarily relies on the proactive reporting of
suspicious transactions by the employeesafter they are detected or identied. It can thus be
inferred that both mechanisms involve the regulation of declaration procedures, and it has
further highlighted the judgement and initiative of the banks and their employees on the
declaration in the STR mechanism.Therefore, this study pursues an in-depth investigation
of the STR mechanism by considering related issuessuch as the government, organizations
and personnel, so that it can truly enhance the intention of bank employees to proactively
declare suspicioustransactions.
Even though the problem of AML has attracted much attention in global nancial
markets, past studies have mainly focussed on reviewing existing practices or giving
recommendations for improvementfrom the legislation and regulation perspective (Ogbodo
and Miseseigha, 2013). Limited studieshave been conducted to explore how to inuence the
organization and its employees and improve their intention to declare suspicious
transactions. AML is mainly done in banks, and promoting the declaration of suspicious
transactions is like launching an important policy in an organization, which requires the
cooperation of employees of the organization with a high degree of approval. Therefore, the
main contributionof this study lies in that it establishes a causal modelthat can assist banks
in managing and monitoring the implementation of the STR mechanism, based on
organizational behaviour theories, while taking into account the inuencing factors at the
government, organization and personnel levels, and that it identies the key factors
affecting the employeesintentionto declare suspicious transactions. In this way, this study
not only mitigates the lack of discussion of existing research in this area but also provides
specic recommendationsfor improving AML in the future.
In organizational behaviour theories, organizational commitment is considered to be the
most critical variable affecting the work behaviour and organizational performance of
employees of the organization (Chun et al.,2011;Fu and Deshpande, 2014). Organizational
commitmentwas rst proposed by Becker (1960),who dened it as the strength of individual
identicationand individual participation in the organization. Then, Meyer and Allen (1997)
stated that organizational commitment is a psychological state that characterizes the
employees relationships with the organization; and has implications for the decision to
continue membership in the organization.Similarly, Barroso Castro et al. (2005) dened
organizational commitment as the feeling of belonging employees have towards the
organization, which inuences their ability to perform above and beyond expectations in
achieving organizational goals. In other words, employees with high organizational
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