The money laundering risk posed by low-risk financial products in South Africa : findings and guidelines

Purpose – The purpose of this paper is to investigate the level and nature of criminal abuse of financial products that are classified as posing a low anti-money laundering/combating of financing of terrorists (AML/CFT) risk in South Africa to determine the effectiveness of the simplified due diligence measures that apply to these products.

Design/methodology/approach – The paper presents empirical research on the views of bank officials and law enforcement officials regarding the criminal abuse of South African financial products that are subject to simplified customer due diligence controls.

Findings – South Africa's AML/CFT laws allow certain deposit-taking institutions and money remitters to implement simplified customer due diligence measures in relation to specific low-risk products that are mainly designed to allow previously unbanked persons to access financial services. The paper finds that the products have been abused by criminals but that the incidence of such abuse and the amounts involved are low. The paper investigates possible weaknesses in the current system that allow limited criminal abuse to occur. It concludes with a number of guidelines that emerge from the study and are of value to regulators that wish to implement a similar system.

Originality/value – The South African AML/CFT scheme in relation to low-risk products is of interest to many international regulators that are grappling with the interplay between effective AML/CFT controls and the impact of strict controls on the ability of socially and economically excluded persons to access appropriate financial services. This paper provides evidence that appropriately designed controls can facilitate financial inclusion while limiting the risk of criminal abuse.

Identifying and managing low money laundering risk : perspectives on FATF's risk-based guidance

Purpose – The purpose of this paper is to investigate Financial Action Task Force (FATF)'s risk-based guidance to combat money laundering and terrorist financing to determine its approach to the identification and management of low-risk providers, products and transactions.

Design/methodology/approach – The paper analyses the relevant FATF recommendations and its guidance notes and reflects on key questions for regulators and financial institutions.

Findings – FATF has not defined “risk” for purposes of the risk-based approach. The absence of a clear definition complicates the identification of low-risk products. FATF do provide an example of a risk matrix that can be used to identify low-risk banks, but the example is based on assumptions and generalisations that are not sustainable. In addition, it identifies certain low-value transactions as “low risk” transactions. The paper reflects on the role of value as an indicator of risk and concludes with a number of suggestions to clarify the conceptual framework.

Originality/value – Low-risk products and transactions are often overlooked because the risk-based approach focuses attention on high-risk matters. Low-risk products are however crucial to the efforts to increase financial inclusion. The paper identifies gaps in the current conceptual framework and indicates ways in which they can be addressed.

Modelling money demand for a panel of eight transitional economies

In this article, we estimate money demand functions for a panel of eight transitional economies, using quarterly data for the period 1995:01 1995 to 2005:03. We find that real M1 and real M2 and their determinants, namely real income and short-term domestic interest rate, are cointegrated, both for individual countries as well as for the panel. Long-run elasticities suggest that consistent with theory, real income positively and nominal interest rate negatively impact real money demand. Our test for panel Granger causality suggests short-run bidirectional causality between M1 and M2 and their determinants. Finally, our tests for stability of the money demand functions reveal more cases of unstable money demand functions when M2 is used as a proxy for money demand.

Do indicated preventive interventions for depression represent good value for money?

The prevention of depression is of growing interest to researchers and policy makers. However, the question of whether interventions designed to prevent depression provide value for money at a population level remains largely unanswered. The current study assesses the cost-effectiveness of two indicated interventions designed to prevent depression: a brief psychological intervention based on bibliotherapy and a more comprehensive group-based psychological intervention following opportunistic screening for sub-syndromal depression in general practice. Method: Economic modelling using a cost utility framework was used to assess the incremental cost effectiveness ratios (ICERs) of the two interventions within the Australian population context, modelled as add-ons to current practice. The perspective was the health sector and outcomes were measured using disability-adjusted life years (DALYs). Uncertainty was measured using probabilistic uncertainty testing and important model assumptions were tested using univariate sensitivity testing. Results: The brief bibliotherapy intervention had an ICER of AU$8600 per DALY and the group-based psychological intervention had an ICER of AU$20 000 per DALY. The majority of the uncertainty simulations for both interventions fell below the cost-effectiveness threshold value of $50 000 per DALY. Extensive sensitivity testing showed that the results were robust to the assumptions made in the analyses. Conclusions: Following screening in general practice, both psychological interventions, particularly brief bibliotherapy, appear to be good value for money and worthy of further evaluation under routine care circumstances. Acceptability issues associated with such interventions, particularly to primary care practitioners as providers of the interventions and health system administrators, also need to be considered before wide-scale adoption is contemplated.

Money and VELS

An evidence-based formative assessment or a diagnostic profile of a student can be constructed to meet the objectively assessed needs of each student. This will help identify at the outset what individual students already know and can do and the lessons can begin building directly on that. A few other students whose level of knowledge may not be the same can be provided with extra different help so that they can catch up.