Anti-Money Laundering and Enterprise Risk Management

Abstract

This thesis investigates the link between Anti-Money Laundering (AML) and Enterprise Risk Management (ERM) as well as firm performance and ERM in the Ghanaian banking industry. The study attempts to construct two barometers; AML and ERM barometers using PCA methodology to gauge levels of compliance and adoption. The global financial system continues to be plagued with uncertainties that need effective dynamic operational risk management programmes in order to ensure financial institutions stay in business. Though risk management in banks has improved over the years with the adoption of enterprise risk management (ERM) and anti-money laundering compliance frameworks, the association between the two has not been tested. This study therefore adopts a positivist management research philosophy, a deductive and quantitative approach to establish the relationship between AML and ERM within the Ghanaian banking space. Also, the drivers of AML and ERM in Ghanaian banking sector are also investigated. Results indicate that, the eight COSO ERM input variables are statistically significant and could drive ERM in Ghanaian banks. Also, money laundering risk assessment, records management, compliance programme and corporate governance significantly predict AML in Ghanaian banks. In addition, AML influences banks adoption of ERM. Surprisingly, there was no statistically significant relationship between firm performance and ERM. The study concludes that as banks devote resources to AML compliance, the ERM improves. The study recommends that banks invest in their AML systems in order to improve their ERM. Furthermore, the study provides policy support to the global AML standard setters/regulators.