Business Behaviour in Regime Complexes: A Case Study of Business Influence in Global Anti-Money Laundering Regulation

The regulation of money laundering has had an explosion of regulatory activity and growth to the extent that it is now a key issue on the international agenda. The complexity of the Anti-Money Laundering (AML) regime complex led to an important role for business actors in the prevention pillar as a result of their position on the front-line of potential money laundering transactions, and unique access to client information. However, this complexity also creates challenges for business compliance as they often operate across borders and are thus subject to multiple standards and differing obligations. This study uses regime complexity theory to look specifically at how the ordering characteristics of the AML regime complex, hierarchy, task differentiation, and complexity management, shape how businesses behave within the regime complex. This study is based on a document analysis of legislation and public consultation documents, as well as expert and academic interviews. The results show that the AML regime complex has an informal hierarchy, with clusters of formal hierarchy. There is some task differentiation, predominantly facilitated through the risk-based approach, which provides authority to business actors to design their due diligence policies. The findings illustrate that business actors use the ordering characteristics to influence the standards and implementation of AML regulations. It identifies the use of forum-linking and forum-shifting strategies in response to clusters of formal hierarchy to diffuse or prevent standards being transposed to other regimes. Additionally, it demonstrates how businesses seek to maintain the existing task-differentiation, especially regarding KYC standards, to enable them to shape their own compliance obligations. These findings develop our understanding of how regime complexity can affect global governance and improve our awareness of how businesses use complexity to shape international regulation.