International Journal of Business and Economics Volume 12, No. 2 December, 2013

Modelling the Risk Profiles of Clients in the Fight Against Money Laundering and Terrorism Financing

Arnoldo R. Camacho

Department of Finance, INCAE Business School, Costa Rica

Abstract

Global standards require financial intermediaries (FIs) to develop risk profiles to fight money laundering and terrorism financing. International typologies and multivariate analysis techniques are used to define profiles and develop models to classify clients; indicators are proposed to assess the vulnerability and exposure of intermediaries and the quality and stability of the models. Statistical evidence proves significant to validate profiles, avoiding the use of subjective criteria, generalizations, or stereotypes; a time-, resource-, and cost-efficient process is designed for FIs to monitor transactions and clients; the models are shown to be useful to assist intermediaries and regulators to deter these types of crimes.

Keywords： emerging markets and developing economies, anti-money laundering and combat of  terrorism finance, financial and capital markets, profiling risky clients.

JEL Classifications：E44, G21, K42.

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