Acknowledgement

I would like to give gratitude to all my professors and supervisors, as without their continuous support, I might not be able to complete this project. Along with this, I also want to acknowledge the contribution of my peers for giving me educational and moral support, which had helped me in moving ahead and performing well during this course of project. At last, I want to thank my family members as well, as they had provided me emotional support whenever I felt any obstacle.

Abstract

Background: “Money Laundering” and “Terrorist Financing” are major concerns related to the economic growth across the world.  The key purpose of this study is to examine the effectiveness of international Anti-money laundering (AML) regulations and legislation to intervene in the funding of terrorism. The secondary aim of this research is to evaluate the effectiveness of ATF legislation in reducing terrorist financing and money laundering.

Method: A secondary qualitative method has been used in this study to collect a range of relevant data. Google and Google Scholar have been used as the main databases for gathering data. However, a thematic analysis has been carried out to analyse the gathered secondary qualitative data for addressing the specific research questions.

Findings: It has been revealed that the terrorists in different countries are funded from different ways to perform their crimes, mainly though the money laundering process. Both these two crimes significantly affect the economy at both national and international levels. However, the AML and ATF regulatory as well as legislative frameworks play a crucial role in combating the terrorism financing and money laundering related criminal activities.

Conclusions: This study concluded that AML is effective in combating the money laundering or terrorism financing crimes. This legislative provision helps to create fear among the individuals or organisations by indicating significant punishment. However, the 6AML Directive in the EU is more effective in reducing these crimes as it has met the loopholes of the previous Directives.

Chapter 1: Introduction

1.1 Research Background

The risks of terrorist financing and money laundering have become a major concern for the financial system in Europe as well as the security of the citizens. As per the reports of the international organisations, continuous money laundering may account for 2%–5% of global Gross Domestic Product (GDP) on an annual basis[1]. Due to this reason, money laundering results in a danger for the integrity as well as the reputation of the financial system of a country. In this similar context, money laundering has become one of the major concerns mainly in the last three decades[2]. It has been found from the present relevant studies that the money laundering activities significantly and negatively impacts the international organisation and the governments of the countries. On the other hand, along with the increased globalisation and liberalisation of the economics and trades, money laundering is becoming a concerning international threat.

However, money laundering is considered as a stand-alone crime by the International law although it is usually prosecuted as an ancillary offence[3]. Money laundering is defined as a particular type of criminal activity, based on which the illegality of the proceeds is mainly concealed by disguising them as lawful and legal earnings. On the other hand, terrorist financing refers to a stage at which funds are illegally or legally collected as well as provided for the commission of the particular crime of terrorism in the future[4].

Focusing on the growing concerns of money laundering as well as terrorist financing, the Financial Action Task Force (FATF) was established by the G-71 summit in Paris in 1989[5].  It is an intergovernmental and independent body that is responsible for developing and promoting specific policies to protect the global financial system against terrorist financing and money laundering[6]. This regulative body provides effective recommendations for coping with these two legal issues based on the anti-money laundering (AML) and anti-terrorism financing (ATF) standards. AML is a broad and important category of the laws, procedures and rules that aims to stop money laundering crimes. In Europe, the new AML is mainly applied in the crypto sector, crypto-asset service providers and banking sector, focusing on the reduction of money laundering crimes[7].  On the other hand, the key purpose of the implementation of the ATF is to stop terrorists and criminals from abusing the financial system[8]. However, it has been noted that the current process of stopping these crimes are not effective enough. Due to this particular reason, Europe has implemented stronger anti-money laundering rules[9]. The key purposes of these two regulations are to make it difficult to hide any kind of illegal funds under layers of fictitious companies[10]. These rules also aim to strengthen checks on risky third countries. From these previous studies and reports, it has become clearer that terrorist financing and money laundering are the key issues in Europe. Taking these issues into consideration, this study has focused on the analysis of the effectiveness of AML and ATF in coping with money laundering and terrorist financing.

1.2 Problem Statement

For instance, it has been reported that the number of total money laundering cases registered at Eurojust has significantly increased from 315 in 2016 to 649 in 2021[11]. In the current years, it represents 12 to 14% of the total registered cases at the European Union Agency for Criminal Justice Cooperation[12]. This report has also indicated that more than 3000 cross-border money laundering cases have taken place in Europe (EU) in the last 6 years. From these contexts, it has been understood that the increment in the money laundering cases has become one of the key issues in European countries. On the other hand, these money laundering cases further result in damages in the financial sector institutions which further negatively influence the economic growth of the counties[13]. Apart from that, it has also been reported in 2019 that the financial sector of the EU will be exposed to raise levels of terrorist financing risks[14]. Moreover, according to the Financial Action Task Force (FATF), the Covid-19 has increased the rate of terrorist financing crimes as well as money laundering events[15]. Taking these problems into consideration, this present study has focused on the effectiveness of different legislative frameworks, including the ATF and AML regulations in reducing the number of terrorist financing or money laundering cases in the EU.

1.3 Research Aim

This study primarily aims to examine the effectiveness of international AML regulations and legislation to intervene in the funding of terrorism. The secondary aim of this research is to evaluate the effectiveness of ATF legislation in reducing terrorist financing and money laundering.

1.4 Research Objectives

The main objectives of this research are-

• To examine the AML and ATF regulations against financing terrorism and money laundering
• To identify the effectiveness of ATF legislations in combating the act of terrorism in the EU
• To identify the sources and methods of terrorist funding and the gaps in mechanisms developed by countries to combat money laundering and terrorist financing
• To recommend relevant anti-money laundering legislation to stop terrorist financing and money laundering

1.5 Research Questions

1. How effective are the AML and ATF regulations against financing terrorists and money laundering?
2. What are the methods adopted to stop or reduce terrorist financing and money laundering?
3. What are the deficiencies of the financial sector causing them to lack in success rate of combating terrorist financing and money laundering?
4. What are the effects of money laundering on economies?

1.6 Research Rationale

Terrorist financing and money laundering are the key barriers associated with the economic growth of any county. It has been noted that these two aspects are responsible for promoting corruption and crimes that further slowdown economic growth, and also reduce efficiency in the finance sector in a country[16]. In this similar context, it has been found that the numbers of money laundering crimes are increasing day by day across the world. Similarly, in European countries, the numbers of money laundering cases have increased in rapid manner since 2016[17]. From this context, it has been understood that the effectiveness of the existing legislations and regulations need to be analysed in terms of ensuring the reduction of such crimes.

Figure 1: Number of money laundering cases registered at Eurojust[18]

However, this particular topic has been chosen in this research because it can help to understand the purposes as well as effectiveness of both AML and ATF in the management of money laundering as well as terrorist financing crimes. Apart from that, the implementation and effectiveness of these two regulations can be known particularly from the context of Europe. In addition to that, the methods of terrorist financing in these counties can be known from this study. Apart from that, an idea regarding the gaps in mechanisms developed by countries to combat money laundering and terrorist financing can also be developed from the key findings of this peasant study. The impact of both these crimes on the economic growth of a country can be found from this study. Considering all of these aspects, it can be said that this present study is significant enough to be conducted. In this way, the findings of this study can contribute to the reduction of the crimes, improvement in the legal actions and regulation as well as economic growth at both the national and international contexts. Moreover, at the end of this study, relevant anti-money laundering legislation to stop terrorist financing and money laundering are recommended that can help different countries in this present count.

1.7 Significance of the Research

The major goal of this study is to examine the effectiveness of the AML legislative provisions in stopping the money laundering and terrorism financing related crimes, mainly in the EU countries. From this perspective, it can be said that the findings of this study is beneficial in dealing with all the money laundering and terrorist financing related activities. In this way, this study can help the countries to make effective initiatives regarding policy development, implementing regulations or modification of the existing laws to combat these crimes. In addition to that, this study can also help the governments of the countries by identifying the method and sources used in the terrorist financing process. Considering all of these aspects, it can be said that this study is significant enough to be conducted in the present context.

1.8 Dissertation Structure

This present study is going to be represented based on a total of six chapters as follows.

Chapter 1: Introduction– In this chapter, the aim, objectives and questions of this research have been introduced based on the identified problem background.

Chapter 2: Literature Review– A range of relevant literatures have been critically reviewed in this chapter to know the previous findings on the AML, ATF, money laundering and terrorist financing.

Chapter 3: Research Methodology– The methods used in this research is mentioned as well as the reasons of selecting these methods are also justified in this chapter.

Chapter 4: Results and Findings– All the gathered data have been analysed in this chapter.

Chapter 5: Application– In this chapter, a range of relevant case examples have been discussed, compared and contrasted to know different types of money laundering and terrorist financing methods used previously. In this similar context, the application of AML legislative provisions and other laws to solve such cases have also been discussed.

Chapter 6: Discussions and Conclusions– The key findings have been concluded in this chapter by addressing all the specific research questions.

Chapter 2: Literature Review

2.1 Introduction

In this chapter, different findings and views of different authors are critically reviewed to understand the existing findings regarding several aspects of “money laundering”, “terrorist financing” and associated legislations and regulations. In this particular context, a range of relevant scholar articles have been reviewed to find out the overall literature gap. Based on this identified gap in literature, further methodological planning of this present research has been done.

2.2 Money laundering as a crime

“Money laundering” is defined as a particular type of criminal act in which the individuals try to hide their specific illegal source of income through particular legal means[19]. It also refers to a particular process of counselling the original sources of money such as corruption, gambling, drug trafficking, embezzlement and so on by converting them into various types of legitimate source[20]. Similarly, from another literature, it has been known that the key purpose of “money laundering” is to generate money from criminal or illegal activities, but hiding those specific illegal origins[21]. Hence, “money laundering” is concisely defined as an act of cleaning up any dirty result for looking clean[22]. On the other hand, the AML No. 8 of 2010 defines the “money laundering” process in Article 1 as an act of spending, placing, transferring, entrusting, paying, bringing abroad, granting, donating, and exchanging money[23]. It also includes other acts of assets that are suspected or identified to be the outcomes of any criminal acts with the intention of disguising or hiding the origin of those assets, so that they further can appear to be legitimate assets[24]. However, reviewing a range of relevant literature, it has been understood that yet, “money laundering” does not have any comprehensive or universal definition. However, several researchers or experts have suggested that through “money laundering” any individual or group of individuals conceals their illegal application or illegal source of money or income by showing legal ways of spending or earning money.

Figure 2: Money laundering market[25]

“Money laundering” has been identified as a crime since 1936 in the United States (US) and during this time, the “money laundering” crime was mainly generated from trafficking in narcotics and firearms, committed by the crime mafia[26]. In this particular context, the companies’ purchases are mainly used for hiding those activities resulting from crime. However, in the international context, “money laundering” is defined as the technique of transfer, conversion, disguise, possession, concealment or use of any property or income derived from illegal activities[27]. “Money laundering” is one of the crimes prohibited by law and hence, it is qualified or distinguished as a criminal offence[28].

2.3 Concept of “Terrorist financing”

“Terrorist financing” refers to the collecting and the provision of the funds for the purposes of different terrorist activities. Financing terrorism is defined as the process of financing terrorist in both legal and illegal ways[29]. Terrorism financing is concisely defined as the provision of significant funds or providing financial support to the individual terrorist or group of terrorists[30]. Supporting these aspects, another study has explained terrorism financing as the provision, solicitation and collection of funds with the purpose of supporting terrorist acts[31]. In such a financing process, money may stem from illegal and even legal sources. On the other hand it has been noted that the financial needs of terrorists are divided into two categories including “broad organisational requirements” and “operational resources”. In this particular context, the operational resources are associated with specific terrorist attacks that include salaries of individual operatives, attack costs, logistics, communications, travel and training[32]. Apart from that, in cases of large terrorist groups, the purposes of funds are broad organisational requirements, such as developing and maintaining a terrorism infrastructure. In this similar context, the evidence from the previous literature indicates that the organisational costs are beyond the direct costs while the current operational costs of the terrorist attacks are very low compared to the damage they result[33]. On the other hand, terrorists’ resources are segmented into three categories based on the nature of these two funding requirements. These categories mainly include tangible and intangible resources, financial instruments and money[34]. Aligning these findings, another study has highlighted that financial instruments or money is the most required financial resource for the terrorists as it is utilised in buying weapons, writing propaganda, bribing local officials, providing  social network, paying operatives and so on[35]. On the contrary, another relevant literature has indicated that intangible resources are needed by the terrorist for planning terrorist activities. Moreover, the purposes of the tangible resources are to commit violence. On the other hand, another study has argued that the money or funding is the most important and required resource in the process of financing terrorism.

Figure 3: Link between “money laundering” and terrorism financing[36]

Reviewing a range of literature, the differences between the “money laundering” and “terrorist financing” process have been identified. For instance, it has been noted that in “terrorist financing” crimes, money can be sourced from both illicit and legal sources while in the cases of “money laundering”, money originates always from illicit sources[37]. In this particular context, another study has indicated that the “money laundering” activities differ from the “terrorist financing” crimes based on the types of income sources or funds[38].  On the other hand, it has also been noted that using the “money laundering” process, criminals make illicit funds legal while “terrorist financing” includes the collection of capital for carrying out different types of terrorist activities[39]. From these previous findings, it has been understood that the purpose of “money laundering” and “terrorist financing” are different but all these two acts are based on several criminal or illegal activities. Due to this reason, different legislative frameworks have been developed to combat such criminal activities. Taking all these aspects into consideration, most of the countries across the world have implemented specific measures for countering terrorism financing as part of their “money laundering” legislative frameworks.

2.4 Effectiveness of AML

The AML is an act to prevent “money laundering” and reduce the number of financial crimes[40]. The AML in most of the countries, including in the EU countries, are implemented through laws, regulations and policies, in terms of preventing financial crimes and other illegal activities of criminals[41]. In this particular context, both local and global regulations have been established for preventing such financial crimes.  Supporting these aspects, another literature has indicated that the key purpose of the AML laws, regulation or policies is to detect as well as support several suspicious activities of “terrorist financing” and “money laundering”, such as market manipulation and security frauds[42]. It has been revealed that many countries have already implemented different types of AML laws or policies to improve their financial securities. Similarly, the EU has also developed a far-reaching legal regime under the AML that aims to counter and finally stop “money laundering” related crime activities[43]. From these cpmtects, it has been understood that AML is one of the most critical parts of the legislative framework of any country for reducing financial crimes. On the other hand, the AML in the EU has also extended to the entire crypto sector, as well as the crypto-asset service providers (CASPs) for stopping the “money laundering” activities.

The EU member States were forced to implement “the 4th “money laundering” Directive (4MLD)”, on 26 June 2016[44]. Since this date, a number of changes have taken place to the laws of AML in the UK and all the other EU member States in 2017. For example, in the UK, under the AML, the “Proceeds of Crime Acts 2002 (POCA)” and the “money laundering”, “terrorist financing” and Transfer of Frauds Regulations 2017” has come into action as the principle law for stopping the “money laundering” crimes through implementing the 4MLD[45]. As per this 4MLD, all the Member States of the EU must ensure that corporate as well as other legal entities incorporated within their territory hold adequate, accurate and current information on their beneficial ownership. In addition to that they also need to carry out a national risk assessment based on their exposure to “money laundering” and “terrorist financing”. Aligning these findings, another study has pointed out that such risk assessments need to be documented, made available and kept up to date to the particular competent authorities and member states[46]. Taking all of these aspects into consideration, the UK government has published different laws and policies under the AML. In this particular context, it has been noted that the UK government published the “Anti-Corruption Strategy 2017-2022 Strategy” in 2016, during the “Anti Corruption Summit” held in this country[47]. Similarly, On 30 September 2017, the “ the Criminal Finances Act (CFA)” came into force in the UK to enable this country to tackle “money laundering” and tax evasion, and to prevent other terrorism financing activities. On the contrary, a study has indicated that the CFA and the new corporate criminal offences for failure proposed certain significant changes to the AML laws for further preventing the introduced tax evasions.

It has been found from the previous studies that the implementation of the AML laws is crucial for protecting the integrity of the markets[48]. In addition to that it also helps to protect the global financial framework by mitigating the factors that facilitate financial abuse through “money laundering” and “terrorist financing” crimes. Supporting these findings, another study has also indicated that the “money laundering” investigation under the AML law is the only way of locating and restoring stolen funds from robbery, extortion, embezzlement or fraud “money laundering” activities[49]. In this similar context, another literature has shown that by implementing effective AML policies, in many countries, it has been possible to reduce the amount of “money laundering” crimes, to reduce damage on the economy. In this similar manner, this law is also effective in reducing risks of the financial sector of that particular country. On the contrary, some studies have argued that a lack of skills among the professionals is one of the key limitations in the implementation of the AML[50].

The primary objective of the European government is to determine the present “money laundering” situation as well as the relationship between the condition and organised criminal activities. In order to achieve this, numerous legal measures have already been adopted, and among these, “money laundering” has been recognised as illegal in order to seize, confiscate, and identify assets and capital used in crimes[51]. Despite the strong motivation and successful completion of this work, there were nevertheless substantial negative effects and drawbacks as a result of the AML legislation in the UK and the EU. For instance, the obligation put on private sector companies to identify, report, and/or stop “money laundering” activities they come across has considerably expanded. On the other hand, the findings of a literature have indicated that the new AML Law in the UK and EU had additional effects on a number of financial and legal organisations[52]. This can be explained by the increased restrictions placed on commercial transactions involving expensive commodities. The globalisation of economies has made it simple to move the proceeds of crime around the globe. In order to stop the transfer of unlawful proceeds from one country to another with somewhat laxer legislation, each government is expected to adhere to international regulations and strengthen its AMLATF systems. From the previous literature, it has been understood that in the actions against “money laundering” and terrorism financing, international collaboration is unavoidable[53].

2.5 Theoretical Framework

Theory of corruption

It is one of the most common theories of corruption. According to this particular theory, high levels of corruption originate from a wide divergence between the objectives and attitude of the government of a country and the particular societies[54]. In this similar context, many studies have defined corruption or criminal activities as the particular forms of criminal offence or dishonesty that is undertaken by an individual, a group of individuals or an organisation. Such corruption aims to entrust the positions of the associated authorities for acquiring illicit benefits or abuse power for one’s personal gain. From these theoretical aspects, it has been understood that power is abused in corruption related activities. In this similar context, terrorist financing or money laundering crimes abuse the power of the organisations that should operate in a legal manner. On the contrary, money is transferred in these criminal activities through different legal and illegal organisations as well as activities. Hence, these two crimes are also considered as concerning corruptions which are done by one individual or a range of business organisations. In this way, the economies at both national and international levels are drastically affected[55]. Taking the findings of these studies related to the theory of corruption, it can be said that effective actions are required to stop such illegal terrorist financing and money laundering activities.

Rational choice theory

The “Rational choice theory” indicates that people use their self-interests for making choices that will further provide them with the greatest benefit. In this similar context, another study has shown that this particular theory supports situational crime prevention by providing theoretical support[56]. Due to this particular reason, the “Rational choice theory” is considered as one of the most effective and comprehensive theoretical criminological frameworks for studying  as well as understanding the process of money laundering as well as the ways of prevention. As per this theory, any criminals or drug addicts try to maximise the utility of their enjoyment and benefits[57]. In this manner, they make their choices to do criminal activities over time as they get benefitted from such activities. As for this particular reason, this theory is also applied in the discussions and prevention of these crimes.

Considering the findings of these previous literatures, it can be said that both these theories can be implemented in the process of combating money laundering as well as terrorist financing process. In this particular context, focusing on the aspect of the “Rational choice theory”, the AML policies can be implemented by identifying the intentions of the people involved in these types of criminal activities. On the other hand, by taking the “Theory of corruption” in to consideration, the reasons or other aspects of the money laundering or terrorist financing related activities can be known.

2.6 “Money laundering” and “Terrorist financing” and associates laws in Europe

Both terrorism financing and “money laundering” crimes have been found as concerning risks to the stability and reputation of the society, integrity, proper function as well as financial system[58]. Supporting this aspect, another study has shown that an increased number of “money laundering” and “terrorist financing” crimes have negatively impacted the overall business process, mainly in the banking sector, societies and overall economic growth[59].

Due to these particular issues, in the European Union (EU), the fight against terrorist attack, terrorism financing and “money laundering” has become one of the highest priorities[60]. Taking these crimes into consideration, the EU has developed and introduced the “European Agenda on Security” for further launching a broad strategic approach[61]. As per the findings of this study, the European commission supports all the member states by ensuring security based on the allocation of several tools[62]. Thus, the EU has taken an initiative to facilitate the collection and exchange of important information. On the other hand, another study also showed that the EU has focused on a close and increased operational cooperation by supporting funding, training, innovation and research programs to eliminate these two crimes from all the countries[63]. In this similar context, it has also been found that the European Commission has focused on ways of improving the current legislation and regulations as well as enhancing their initiatives to strengthen their actions against terrorism financing and “money laundering”[64]. As a result, the EU has already passed “a Directive on combating terrorism”, “a Directive aiming at countering “money laundering” by criminal law”, “a (5th) Directive on the prevention of “money laundering””, “new legislative instruments on illicit cash movements” and “a Regulation on the mutual recognition of freezing and confiscation orders” in the last couple of years[65].  Apart from that “EU regulatory framework” has currently composed based on the “Directive 2015/849 (the 4th AML Directive)”, as amended by “Regulation 2015/847” and “Directive 2018/843” on information accompanying transfers of funds, in terms of combating these two crimes[66]. On the contrary, some studies have argued that the current legislations in the EU are ineffective in stopping the terrorism financing and “money laundering” crimes, as the number of these crimes in these countries are increasing day by day.

On the other hand, it has been noted that the 4th AML Directive adaptation was one of the most important initiatives for improving the efforts of the EU to combat the “laundering of money” as well as to counter the terrorism financing activities[67]. Oppositely, some studies have argued that it is a risk-based initiative of coping with the crimes[68]. On the contrary, it has also been revealed that this legal approach is effective in ensuring the effectiveness of measures of preventing or mitigating “money laundering” and “terrorist financing” are commensurate with the risks detected[69]. In this particular context, proper resource allocation is one of the most concerning requirements of this particular initiative. Apart from that, the “European Commission” had issued a proposal in 2016 to amend the “4th AML Directive and Directive 2009/101/EC” in order to comply with the “Commission Action Plan”. In this particular context, the proposed amendments to this regulation were designed for covering the existing gaps related to the new form of “money laundering” as well as “terrorist financing” activities[70]. However, the new means of financing terrorism include prepaid cards, virtual currencies. On the other hand, in another study, it has been explained that a key purpose of this amendment was to increase transparency in the financing process in these countries, for further ensuring better tackling laundering or fencing to the crime proceeds[71].

In an opposite manner, some studies have identified a range of issues associated with the amendments to the existing legislative framework related to these crimes. For instance, it has been explained in a literature that the newly proposed amendment’s implementation needs further modifications or changes in the existing legislative acts that have been already amended recently[72]. This particular transposition process is more complex and hence it may lead to certain inconsistencies. Due to this reason, it is considered as one of the limitations in the current changes in the legislative frameworks in the EU. On the other hand, in another study, it has been found that as per the amended “Article 2 of the 4th Directive”, the “ custodian wallet providers” and the “virtual currency exchange platforms” are to be added to the obliged entities’ list[73]. On the contrary, this amendment has been found as a rule-based approach, opposite to the risk-based approach. As a result, the risks related to the identified risks may remain constant in this overall tracking system. Considering the findings of these articles, it can be said that although the EU has taken several initiatives in the improvement of the legal framework for combating “money laundering” and terrorism financing related crimes.

2.7 Financial Action Task Force

It has been identified from the previous literature that the worldwide efforts to stop “terrorist financing” and “money laundering” crimes have become primary concern or importance after September 2001. As these two crimes significantly impacted the economy of different countries, in 2001, the FATF was established[74]. It is an international standard against “terrorist financing” as well as “money laundering”. The measures of FATF are viewed as the standards of leading international anti-”money laundering” that give a consistent, comprehensive and enhanced framework for combating  these two crimes[75]. Due to this particular reason, the FATF framework is considered as an international benchmark for national governments, in terms of implementing within their respective national jurisdictions in order to suppress, prevent and detect these two concerning crimes.

On the other hand, it has also been revealed from the previous studies that the process of the FATF encourages the countries to address the relevant deficiencies related to the management or combination of the terrorist financing related crimes[76]. On the other hand, it has also been seen that the FATF guidelines also help to protect the integrity of the international financial system through issuing a public warning regarding the risks emanating from the identified jurisdictions. Apart from that, another literature has indicated that considering the guidelines of the FATF, a large number of countries across the world have taken effective actions and developed policies in order to mitigate their risks[77]. In this particular context, these countries have also implemented appropriate policy and operational responses. Similarly, it has been found from another literature that the member countries of the FATF have demonstrated an effective risk understanding and appropriate responses with more than 80% achieving substantial[78]. Aligning these specific findings, another study has pointed out that the key goal or objective of the FATF is to set particular standards and promote effective implementation of operational, regulatory and legal measures, in terms of combating terrorist financing, money laundering as well as other relevant threats. In this way, the FATF helps to maintain the integrity of the international financial system. It has also been found that as an intergovernmental body, the FATF encourages global efforts to combat money laundering and the financing of terrorism[79].  Due to this reason, the countries are recommended to become a part or member of the FATF. In this way, these member countries can conduct mutual peer review in order to determine its levels of compliance with FATF’s Recommendations. Considering all of these aspects, it can be said that, the ATF or the overall FATF is enough effective in dealing with the terrorism financing as well as money laundering related issues.

2.8 Impact of “money laundering” and “terrorist financing” on Economy

According to the existing studies, “money laundering” damages financial sector institutions critical for economic growth, promoting crime and corruption that slow economic growth, reducing efficiency in the real sector of the economy[80]. Most global research focuses on two major money-laundering sectors, including drug trafficking and terrorist organisations. The effect of successfully clearing drug money is obvious: more drugs, more crime, and more violence. On the other hand, it has also been found that for transnational and organised crime to function effectively, “money laundering” is viewed as essential[81]. As a result, “money laundering” has a significant and negative impact on the social, political, and economic health of a nation.

Supporting these findings, another study has pointed out that money laundering is responsible for the promotion of several corruptions and crimes that further decrease economic growth of a country[82]. It in turn results in a decrease in the productivity of the real sector economy of a particular country. Due to this reason, money laundering is considered as one of the major issues for both financial and emerging markets across the world. In this particular context, another study has found out that the emerging markets develop the economy of the countries and also significantly influence the financial sector of a country. Due to this particular reason, the growing emerging markets are the main targets for performing any money laundering activities[83].  On the other hand, it has also been found from a previous study that by creating drastic money demand changes, the money laundering activities also result in large fluctuations in international exchange rates and capital flow as well[84]. From the results of these studies, it has become clear that money laundering has a negative and significant impact on both the national and international economic system. Taking the above reviewed aspects into consideration, another study has highlighted that the money laundering crimes mainly negatively impact economic growth rate, money demand, income distribution, tax revenues, and the profits of the financial organisations[85]. In this particular context, it has been understood that the sectors, mainly the real estate or financial sectors that are involved in the money laundering investments are mostly impacted by this crime. On the other hand, as these sectors are major contributors to the economic development of a country, money laundering negatively impacts the economy of a country as well.

2.9 Literature Gap

Reviewing a range of literature, a range of information related to “money laundering” and “terrorist financing” and their associated literature have been known. On the contrary, there are also certain limitations. For example, different studies have indicated different aspects of the legislative provisions of the anti-”money laundering” but there are limited information related to its impact on the EU. Due to this reason, the impacts of this legislation on only the EU countries have not been known. It can be considered as a gap of this literature.

2.10 Summary

Summarising the overall results of the literature review, it can be said that “money laundering” as well as “terrorist financing” are the major concerns in the EU countries. In this particular context, several AML laws, policies or regulations have been introduced in different countries to stop these crimes. However, based on the identified literature gap, this present study has focused on the analysis of the impacts of the AML legislative framework on the prevention of these two concerned crimes, in the context of EU.

Chapter 3: Research Methodology

3.1 Introduction

In this chapter, all methods used in this research are explained. In this particular context, the reasons for selecting the specific methods are justified. In addition to that, the ethical considerations maintained in this research are also explained in this research.

3.2 Research Philosophy

There are mainly three types of research philosophies including positivism, interpretivism and realism[86]. In this present study, the positivism philosophy has been used as it helps to gather a range of factual data in respect to the specific research questions. Apart from that, based on a limited or lack of interference of the researcher, it can be possible to collect data[87]. In this way, it can be possible to understand the impacts of the AML on the prevention of “money laundering” and “terrorist financing” crimes.  From this point of view, it can be said that, positivism philosophy will be most suitable for this present study.

3.3 Research Approach

There are mainly two types of research approaches including inductive and deductive approaches. The key purpose of the inductive approach is to develop or introduce any new theory or concept while deductive approach is based on the rest of any existing theory or concept[88]. On the other hand, the key aim of this study is to know the effectiveness of the already existing AML and ATF laws. The theories or concepts of money laundering and terrorism financing as well as associated laws, have already been introduced by the previous relevant studies. Taking it into consideration, it can be said that in this present study, there is no requirement of developing any new theory or concept. From this point of view, it can be said that deductive approach will be the most appreciate approach for this present research.

3.4 Data Collection Methods

There are mainly two types of data, including qualitative data and quantitative data. Quantitative data are numeric data, which can be collected from both primary and secondary sources[89]. On the contrary, the qualitative data are informative data that can also be collected from these two sources[90]. In this percent study, a secondary qualitative method has been selected for collecting relevant data. Following this method, only qualitative data have been collected from a range of secondary sources. In this particular context, Google and Google Scholar have been used as the main two online databases for collecting data. In this way, secondary data have been collected from relevant articles, journals, and books from, by accessing the Google Scholar database. In addition to that, relevant qualitative data have been gathered from the newspapers, industry reports and government reports. In this method, based on the specific research objectives and questions, a total of 4 themes have been developed for further analysis.

This particular method has been selected for this research because it helps to collect data within a shorter period. Apart from that, it is also easier to analyse qualitative data compared to quantitative data. Apart from that both cost and time can be saved in this research process. Hence, a huge amount of information related to previous money laundering and terrorist financing activities can be gathered though this particular data collection method. From this point of view, it can be said that the secondary qualitative method is the most appropriate data collection method for this present study.

3.5 Data Analysis Method

As mentioned above, a range of secondary qualitative data, related to different aspects of AML have been collected. Taking into consideration, a thematic analysis has been carried out. In this particular context, the developed themes have been analysed by comparing and contrasting the data extracted from the secondary resources. In this way, the thematic analysis method can help to determine the relationship between “money laundering” and “terrorist financing”. In addition to that, the influences of the AML on both these criminal activities can also be known from this data analysis results.

3.6 Ethical Consideration

Ethical maintenance is one of the most important parts of a research. As it is a secondary research, the protection and proper use of data are the main ethical concerns. However, ethical approval has been taken from the university before starting the activities of this research. Apart from that the Data Protection Act 1998 has been followed in this research to ensure that all the collected and used data are secured. In addition to that, following this aspect, the authors of all the journals and articles from which data collected, have been acknowledged. In this way, it has been possible to ensure ethical consideration of this present research.

3.7 Summary

Summarising the overall discussions in this chapter, it can be said that a secondary qualitative method has been used as the data collection as well as data analysis method. In this particular context, data have been gathered from a range of sources including journals, articles, books, news and so on.

Chapter 4: Results and Findings

4.1 Introduction

In this chapter, all the collected secondary qualitative data are analysed using the thematic analysis method. In this particular context, 4 themes have been developed and analysed based on a range of data collected from the relevant articles, journals and news. The results of this thematic analysis has been further compared and contrasted with the findings of literature review to conclude the key findings of this study.

4.2 Thematic Analysis

Theme 1: AML legislative framework is effective for stopping financing terrorism and money laundering in the EU

The findings of a previous study shows that the implementation of the AML legislative framework helps to reduce the number of crimes related to terrorism financing and money laundering[91]. On the other hand, it has also been found that some other jurisdictions were introduced in many countries to deal with the terrorism financing and money laundering crimes. In this particular context, the findings of a study have revealed that a new Spanish Act of financial ownership was introduced in Germany and France[92]. However, it has been noticed that there were certain shortcomings of this Act related to automation in processing of personal data, information access by third parties without consent, data protection and so on. From this context, it has been understood that this particular legislative framework is not effective for combating the specific two crimes.

In many countries, it has been seen that the AML is effective for stopping terrorism financing and money laundering[93]. On the contrary, another study has indicated that the implementations of AML legislations are costly because of the negative effect on the efficiency of domestic and international banking[94]. From this context, it has been understood that high cost is one of the most concerning drawbacks of implementing the AML legislations in the EU countries. Conversely, another literature has argued that citizens of the EU countries have benefited from the implementation of this AML legislative framework, in terms of a drastic reduction in the money laundering multiplier effect[95]. In this particular context, the findings have indicated that the public benefits in the EU outweigh the cost of AML regulations. Supporting this finding, another study has highlighted that the implementation of the effective AML regulations results in the increment in the cost of the criminal organisations in a country. Due to this reason, the AML legislative framework is further considered as the most efficient way of reducing money laundering. Considering the findings of all these relevant studies, it has become clear that the AML legislation has both positive and negative influences on the process of combating the money laundering and terrorist financing crimes. Due to this reason, several changes have taken place in the existing AML legislation in different countries. For example, a list of changes has been suggested to the existing AML Directive in the EU for addressing the loopholes in the policies or regulations[96]. The goal of these proposed changes are to exchange as well as to use information and to cooperate between financial intelligence units (FIUs) of the EU member states. Taking it into consideration, the proposed changes in this AML legislation seek to be in line with other policies in the EU states the reformed data protection regime to ensure effectiveness of the AML.

However, a comparative study was conducted to understand the effectiveness of the AML legislation in the UK and Malaysia. In this particular context, both these countries share a similar legislation structure for carrying out the comparison. Based on this comparison, this study concluded that the Money Laundering Act under the AML legislative framework in the UK is more comprehensive and effective compared to the AML Acts of Malaysia in the context of the standard of proof and specific offences covered[97]. In contrast, another study has critiqued that the AML legislative framework in the UK changed and also highlighted its failure in clearly defining “suspicious activity”[98]. This shortcoming has further led to a low threshold to report. However, from these previous two literatures, it has been understood that the effectiveness of the AML legislative frameworks are different in different countries. Due to this reason, it is essential to implement AML policies, laws or regulations based on the best effective framework. In this particular context, another study has shown that international cooperation is required for the improvement of the AML legislative provisions in all the countries.

Theme 2: ATF Regulations help to combat terrorism financing related crimes

It has been found from the previous literature that the EU countries have implemented a range of regulations to reduce the number of crimes related to terrorism financing. In this particular context, a study has found that the EU government adopted a particular Directive to combat terrorism[99]. This particular framework further helps to strengthen the overall legal framework of the EU in terms of preventing any kind of terrorist attacks. From this context, it has been known that the regulations of the ATF are effective in reducing the number of terrorist crimes. On the other hand, the findings of other literature has indicated that based on the ATF regulatory framework, the FATF has already issued a number of guidance and best practices papers about the implementation of specific recommendations[100]. Based on the particular international standards, the FATF regulations create a source of fear to the terrorists towards any further terrorism activities. From this point of view, it can be said that the ATF regulations recommended by the FATF also help to reduce the chances of terrorism financing. Due to this reason, the business organisations need to implement the regulations or policies recommended by the FATF in their overall organisational or business management policies and practices. In this way, they can ensure effective AML practices and transparency in their overall business operations.

On the other hand, it has been seen that based on the ATF legislative framework, the FATF was established as an inter-governmental policy making body to set and implement particular international standards[101]. One of the key purposes of this policy making body is to develop as well as to promote effective policies both at national and international levels for successfully combating money laundering and the financing of terrorism. There are a total of 39 members of the FATF in the present time, all of which have already implemented effective policies or actions to stop any kind of terrorist financing and money laundering activities[102]. Similarly another study has also indicated that complying with businesses with the regulations or policies suggested by the FATF is effective because these are considered as effective global efforts to combat a range of crimes related to money laundering and terrorist financing[103]. In this way, it can also be possible to reduce the number of such crimes in the countries. From all of these points of view, it can be said that the current ATF regulatory frameworks are effective in reducing and also eventually stopping the crimes related to terrorist financing and money laundering.

Theme 3: Five models are used as sources of financing terrorism

Terrorists in most of the countries are financed from different sources in terms of performing their specific criminal activities. In this particular context, from a previous literature, it has been noted that the five specific models are considered as the financial resources for the terrorists. These models mainly include, “state sponsoring model”, “popular support model”, “entrepreneur model”, “model of cyber crime financing” and “model of criminal proceeds”[104]. In this particular context, it has been found that in the previous years, the “state sponsoring model” was the most widely used source of terrorist financing, mainly during the era of the Cold War[105]. In this financing process, the terrorist network or group enjoys support from some form of communities. These monetary supports helped in the funding process of the terrorists. On the other hand, it has also been seen that in the recent decades, along with the growth of information and communication technologies, the opportunities for economic development as well as fear of attracting crimes are promoted[106]. These improved technologies help to improve communication, training, recruitment and funding of the terrorist. Aligning these findings, another study has explained that the Cybernetic Financing models have become the most common sources of terrorist financing. In this similar context, it has also been found that the availability of this particular source of terrorist financing increases the number of cyber crimes as a part of terrorist financing[107].

On the other hand, it has also been seen that a large number of terrorists are also involved in other types of occupations such as management, legitimacy, and real estate businesses and so on[108]. On the basis of these occupations, these terrorists become able to raise and move their funding. This particular type of financing process is associated with the Entrepreneur Model of terrorist financing. Supporting these findings, another study has indicated that in the present time different corporate operations are considered as the key sources of terrorist financing. Apart from that it has also been noted that the Model of Criminal Proceeds is another source of terrorism financing. In this particular context, it has been found that due to increased levels of combat on the finances of global terrorism, the terrorism organisations are not getting financed from the available commercial or other legal activities. Due to this reason, this increasing combating process pushed most of the terrorist organisations to get increasingly involved in different illegal financing activities[109]. Another study has also argued that it is a significant reason for the increasing number of terrorist activities such as drugs trafficking, fraud, extortion, robbery, extortion, smuggling, money laundering, oil theft, forgery, and so on. Reviewing this literature, it has been understood that the terrorists in different countries can be financed from different sources. In this particular context, mainly the terrorist or the groups of terrorists or the entire terrorist organisations select the ways in which they can increase their funding for doing any criminal activities. From this context, it has also been known that the considering the types of terrorist activities, the involved individuals or the organisations choose the most suitable methods or models of their financing. Hence, it is essential to identify whether any business organisations in a country is involved in such processes of financing or supporting the terrorists.

Theme 4: Different Acts can be developed under the AML legislative framework to reduce money laundering and terrorist financing crimes

Under the AML framework, different countries have introduced various types of Acts, policies or regulations. In this particular context, it has been found that, in the United States (US), the Money Laundering Control Act (1986) was introduced under the AML legislative framework[110]. The primary aim of this law implementation was to make the specific hiding and reinvestment of illegal profits generated from a criminal enterprise into a new federal offence[111]. In this way, it becomes possible to control the people involved in the money laundering activities. From this point of view, it can be said that the EU can develop this type of Act for reducing the two crimes in the EU member states. On the other hand, another study has indicated that the government needs to give more focus on the Acts related to drug abuse, robbery, smuggling and other illegal activities to force people to stop such activities[112]. In this way, it can also be possible to reduce the number of crimes related to money laundering and terrorist financing. It has also been found from many studies that the implementation of the FATF suggested regulations are effective for the countries to combat these crimes. In this particular context, all the business organisations within and outside of the EU, need to modify their business policies based on the standard policies of the FATF[113]. In this way, it can be possible to avoid any illegal activities related to money laundering and terrorist financing.

Apart from that, it has been seen that in the year 2000, in responding to the requests from the United Nations to expand its initiatives in the field of AML, the inappropriate behaviour of OFC (Offshore Financial Centres) were identified[114]. In specific, this authority body established an OFC assessment method and also investigated how it could incorporate AML project in with its actions, especially surveillance along with newly created Financial Sector Assessment Program (FSAP). Additionally, the use of shell companies to undertake these activities to launder the illicit proceeds, as observed in laundering schemes such as the Troika Laundromat and the Azerbaijani Laundromat (OCCRP, 2017, OCCRP, 2019), gives rise to the need for reviewing the literature on shell companies[115]. From these points of views, it can be said that the awareness of the organisations need to be increased in terms of motivating them not to be involved in such money laundering or terrorism financing activities.

On the other hand, it has been found from the previous studies that when any organisation was forced to pay a fine for any kind of money laundering or terrorist financing activities, they had not performed such activities further[116]. It indicates that the fine or monetary punishment strategy under the AML legislative framework helps to combat the criminal activities related to terrorist financing or money laundering. Similarly, another study has indicated that the applications of the AML legislations help to identify whether the organisation have effective AML practices or controls[117]. In this way, the transparency in the overall business operations of the organisations can be ensured. Hence, comparing and contrasting the findings of these five previous studies, it can be said that in the future, the governments of the countries need to ensure that all the financial organisations have effective AML controls. In this way, it can be possible to reduce the number of money laundering and also the associated terrorist financing activities in the EU.

4.3 Summary

Summarising the overall analysis in this chapter, it can be said that as per the findings of the previous literature, the AML and ATF regulatory as well as legislative frameworks play a crucial role in comparing the terrorism financing and money laundering related criminal activities. It has been noticed that the terrorists in different countries are funded from different ways to perform their crimes.

Chapter 5: Applications

5.1 Introduction

In this chapter, the applications of different AML based laws, policies and regulations are discussed using the previous relevant case examples. In this way, different processes of money laundering and terrorist financing within the EU and outside the EU can be known. On the basis of these cases, it can also be possible to further recommend effective ways of stopping such money laundering or terrorist financing activities in the future.

5.2 Application of AML

From the above analyses and literature review, it has been known that the number of money laundering and terrorism financing crimes have increased across the EU and all over the world. It has also been noted that financing terrorism and money laundering activities can be done in different ways. In this particular context, from the case of “The Bank of Credit and Commerce International (BCCI) scandal”, it has been seen that it started its operations in 1972 and then expanded outside the UK a few years later[118]. BCCI received allegations after an investigation by Price Waterhouse in 1990 which was associated with falsified transactions and unregistered deposits. In addition to that, in this particular case, other allegations were also involved in the use of sophisticated processes such as bribery and privacy havens. From this context, it has been understood that unregistered deposit is one of the key signals of money laundering activities and this crime can be done through primacy havens and bribery. However, as a result of this case, under the AML legislative framework of the EU, the BCCI was closed by the Bank of England by indicating that the fraud or money laundering activity was too massive to reform. After the occurrence of this case and its result declaration, this country incorporated stricter regulations and policies related to money laundering. On the contrary, it has also been revealed by some previous studies that there are still some shortcomings in these AML regulations when it comes to optimal compliance. From this particular case analysis, it has been known that as a court result of any money laundering cases, the organisations involved in such rime activities would be permanently closed based on the government’s orders.

In another case of the “Wachovia Bank”, it has been seen that this bank was involved in the drug trafficking processes as a part of their money laundering activities[119]. Wachovia was one of the leading and largest banks in 2010 in the United States (US). As per this case, during 2010, this particular bank allowed cartels from Mexico for laundering an estimated $380 billion from 2004 to 2007. In this particular case, the money laundering process was associated with smuggling and drug trafficking, in which, the involved drug cartels smuggled U.S. dollars drug sales across the Mexican border. In this laundering process, this involved organisation and its members used money exchangers for depositing into their personal bank accounts. In this particular context, the Wachovia bank failed to determine the specific origins from where they got those funds. Due to this reason, the AML laws, mainly the Third AML Directive, were implemented based on the enactment of the “Criminal Justice (Money Laundering and Terrorist Financing) Act of 2010”. As a result of this case, this bank was forced to pay around $110 million in asset forfeiture to the government of the US. From this case, it has been understood that the organisations involved in the money laundering activities in the US, need to pay a huge amount as fine as per the AML legislative provision.

On the other hand in the case of “HSBC Holdings”, other ways of money laundering and associated legislative action has been noticed. HSBC Holdings is one of the largest banks in Europe but it was also involved in money laundering crimes. In this particular case, this bank failed to prevent or stop drug cartels from utilising this bank to launder more than one billion dollars during 2012[120]. In this particular case, it was determined by the investigators that poor regulations of this bank led them to be the primary conduit for the drug cartels with one being in Colombia and other in Mexico. Through this money laundering process, this bank laundered more than $881 million in drug money. In order to solve this case, the 3rd AML Directive was applied. As per the result of this case, as an organisation involved in money laundering crime, this bank had to pay a total of $1.9 billion fine.

Similarly, in the case of “Danske Bank”, during 2007, this bank was warned by the Russian central bank as it was being used for transactions of suspicious size[121]. Eventually, in 2010, the board of directors of this bank became aware of a large number of deposits coming from Russia. In 2013, it was recognised that 99% of the profits of this bank came from different non-residents, while most of them were from Russia or post-Soviet countries. In Spite of getting several warnings, until 2016, this bank did not stop operating their business with such non-residents. Due to this reason, since 2017, this bank has been identified as the biggest scandal in Europe with the “European Commission’s” $ 228 billion money-laundering lawsuits. Due to this reason, the AML legislative provision applied in this case as well. As a result, this bank was being filed with $ 2 million.

It has become clearer from the analyses of all the above-mentioned four cases, that mainly the organisations operating in the financial sector or the banks are mostly involved in the money laundering activities. However, comparing and constructing all these three cases, based on the amount and types of money laundering the specific AML Directives are applied. Due to this particular reason, in the BCCI Scandal, the organisation was forced to be permanently closed while in the other two cases, the involved organisations had to pay huge amounts of fines. Apart from that it has also been known that AML is effective in such cases, based after the occurrences of these cases, a range of regulations were applied in the countries. In addition to that several modifications took place in the AML Directives based on the identified gaps. In this way, based on the applications and modifications of the AML legislative provisions, it has been possible to create a fear for the banking and other organisations in the EU and many other countries regarding money laundering crimes. However, it has also been revealed that in order to deal with the money laundering cases, the AML laws and regulations are implemented in both the EU and US.

On the other hand, in the case of “The Benex Scandal”, a large amount of money was linked to the Russian mafia and it made its way worldwide, even including to the bank of New York[122]. According to this particular case, during 1996-1999, nearly $7 billion was laundered from Russia through a number of Becs and Benex accounts at the Bank of New York. From this context, it has been recognised that this money laundering case was linked to the financing to the terrorism activities of the Russian Mafia. This case indicates that the terrorist financing cases can be associated with the terrorism financing and hence, it is required to implement effective laws to prevent both these two types of crimes. The AML laws were also applied in this case to stop the money laundering activities. The result of this case indicates that a high-scale police operation took place in this case for producing several arrests. From this perspective, it has been known that the AML regulations are also applicable in stopping the terrorism financing related activities.

On the other hand, in the case of the “Standard Chartered Bank”, there was a lack of AML practices in this organisation.  As for this reason, this bank broke sanctions against Iran by ignoring regulatory agreements and working with Iranians during 2005-2006[123]. Due to this reason, this organisation was recognised as involved in money laundering as well as terrorism financing crimes. Due to this reason, this bank was penalised $ 670 million in 2012 in terms of such violations. In this similar context, the New York’s Department of Financial Services (DFS) accused this bank in relation to the failure of Iran’s government in anti-money laundering controls. Due to the failure of the AML practices, the FATF has also identified serious deficiencies in the AML controls of this bank because of rigorous client-related controls in the U.K. Taking these failures into consideration, both the US and UK authorities fined this Standard Chartered Bank a total of $ 1.1 billion. This case also indicates that a huge amount of file is one of the major and most widely used punishments for the organisations involved in any money laundering as well as terrorism financing activities.  In addition to that, this case also indicates a direct connection between money laundering and terrorist financing activities.

From the analysis of these above two cases, it has been understood that money laundering is one of the major sources of terrorism financing in the EU and many other countries across the world. Apart from that the organisations having poor AML practices or controls, are mostly involved in such criminal activities. However, from these cases, it has been understood that as per the AML laws; the organisations need to pay fines if they are recognised as the sources of money laundering and terrorism financing.

5.3 Summary

Summarising the overall discussions in this chapter, it can be said that the AML is one of the most important legislative frameworks for combating money laundering as well as terrorist financing cases. In this particular context, it has become clear that the organisations recognised as the responsible for such crimes, have a poor or a lack of effective AML controls in their business operations. Moreover, due to the applications of the provisions of the AML, as well as the modifications in the previous AML Directives, there are strict restrictions on money laundering and terrorist financing related activities in the EU. Thus, the results of these relevant previous cases wit

Chapter 6: Discussions and Conclusions

6.1 Discussion

The primary aim of this present study is to critically evaluate the effectiveness of the money laundering legislative provisions in terms of combating the money laundering and terrorist financing crimes. In order to meet this specific aim, four specific research questions have been developed. The first question of this research is about the identification of the effectiveness of the AML legislations on stopping the relevant crimes. In this particular context, from the analysis of the first theme, it has been found that in the EU, the AML legislations are more effective in respect to the frameworks of other countries like Malaysia. Apart from that it has also identified that there are certain limitations in the implementation process of these laws or regulations. In this similar context, it has also been revealed that the AML legislative framework in the EU has been modified based on several changes to introduce the fourth Directive of AML. Similarly, from the results of the literature review, it has been understood that the AML legislative framework is effective for reducing and eventually stopping the crimes related to terrorist financing as well as money laundering. From this context, it has been recognised that the findings of the literature review support the results of the thematic analysis. Hence, it can further be said that the first research question has been addressed successfully.

The second research question is about the effectiveness of the ATF regulations in the EU countries. From the results of the literature review, it has been seen that the FATF plays a crucial role in the implementation of relevant ATF regulations, in order to stop the terrorism activities. In this particular context, these regulations have mainly focused on the financing process of the terrorist in both the national and international context. In a similar manner, from the analysis of theme 2, it has been noticed that the EU has already adopted specific Directive and associated regulations. In this way, the EU countries have been able to take several actions against the terrorist financing process. On the other hand, it has also been seen from both the literature review and thematic analysis that the regulations of the FATF helps to prevent the organisation from involving any money laundering or terrorist financing related activities. In this way, the second question of this present research has also been answered.

The third question of this research has emphasised on the sources as well as methods of financing terrorism, mainly in the EU. In this particular context, it has been found from the analysis of the third theme that there are mainly five common models used in the financing process. Among these, it has also been found that the criminal proceeds and cybercrime financing are the most common and most widely used models of financing the terrorists in the present period. However, limited information has been revealed from the findings of the literature review part. In this particular manner, the third question of this research has also been addressed.

Similarly, from the analysis of range relevant previous cases, it has been seen that many business organisations, mainly the banking or other financial sectors are mostly involved in the money laundering or terrorist financing cases[124]. From this context, it has also been deduced that the governments of any country need to give more focus on the business activities of all the banking organisations. In this particular context, it needs to make mandatory to implement effective AML laws and ATF regulations based on the guidelines of the latest 6 AML Directive and FATF[125]. In this way, it can be possible to increase transparency in the cash flow an overall operations in the business businesses. Apart from that, from these cases, it has been noted that AML related laws or Criminal Acts are applied in the cases of money laundering and terrorist financing. Considering the overall results of the thematic analysis as well as case applications, it has been revealed that the AML is effective in reducing the chances or occurrences of the money laundering and terrorist financing activities.

6.2 Conclusion

This study has aimed to review the effectiveness of the AML legislative provisions in combating money laundering as well as terrorist financing crimes. In order to meet this aim, a thematic analysis has been carried out to address the specific research questions. Thus, from this current study, it has been found that money laundering as well as terrorist financing are the major concerns mainly in the EU countries as these have direct and adverse impacts on the economy. Apart from that, the numbers of these types of crimes are also increasing day by day. Taking these issues into consideration, the AML legislative framework has been established in the EU and these provisions are continuously modified to boost their effectiveness. In this particular context, it has been identified that the Sixth AML Directive is in force in the EU countries in the present time which deals with the criminal activities related to the money laundering and terrorist financing activities. After a number of modifications, this latest Directive of the AML laws aims to remove loopholes in the domestic legislation of member states by harmonising the definition of money laundering across the EU. Apart from that, the cyber crime activities are also handled under this legislative provision. On the contrary, it has also been recognised that in some countries in the EU are still applying the previous AML Directives and due to this reason they are also able to stop the cyber crime activities. From this point of view, it can be said that the current legislative framework of the AML in the UK and other EU countries are effective in reducing the number of terrorist financing and money laundering activities.

6.3 Recommendations

Recommendation 1: Implementing new technologies to improve transparency in the industrial operations

Table 1: Recommendation 1

(Source: Created by the Researcher)

Recommendation 2: Implementing AML policies to eliminate criminalisation in the EU countries 

Table 2: Recommendation 2

(Source: Created by the Researcher)

Recommendation 3: Organisations operating within and outside EU need to comply with 6 AML Directive

Table 3: Recommendation 3

(Source: Created by the Researcher)

6.4 Research Limitations

The key purpose of this study was to know the effectiveness of the AML as well as ATF legislative or regulatory framework in stopping these two types of crimes. In this particular context, this present study has specifically focused on the EU countries. Due to this reason, it has not been possible to get an idea regarding the AML legislations in other countries. Hence, it can be considered as a limitation of this study.  Apart from that, as a limited number of studies are available based on the AML, particularly on the EU; it has not been possible to incorporate a huge range of information. Therefore, the incorporation of limited information is another concerning loophole of this present study. However, limited information has been found about the methods and gaps in the methods of terrorism financing particularly from the context of the EU. Therefore, it is another concerning limitation of this secondary study. From these contexts, it has been understood that although based on the suitability, the research method has been selected, there are also certain limitations associated with this present study.

6.5 Future Research Scope

Taking the identified research limitations into consideration, it can also be said that this study has also explored a number of scopes for the future researchers. Further studies in this similar field can be conducted based on the effectiveness of AML legislation in other countries apart from the EU member states.  Aligning the findings of this present and recommended future study, further studies can also be conducted to compare and contrast the effectiveness of the AML legislation in different countries. In this way, based on the best or most effective framework, the other countries can also make decisions regarding the modifications in their existing AML regulatory frameworks. In this way, it can be possible to reduce the money laundering and terrorist financing activities in a fast manner. On the other hand, further studies can also be arranged based on the case study analysis. In this way, it can be possible to know whether the AML laws are effective to reduce such crimes in respect of a number of countries. Considering all of these aspects, it can be said that there are a number of scopes explored by this present study for conducting more relevant studies in the future.

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