Re-thinking de-risking: a systems theoretical approach

Tambe, Noemi; Demetis, Dionysios

Abstract

Purpose: This paper aims to explain the de-risking phenomenon through Luhmann’s risk/danger model and demonstrate that de-risking should be facilitated and encouraged. Design/methodology/approach: The paper applies Luhmann’s system theory and more specifically his risk/danger model to describe the de-risking phenomenon and identify recommendations to address its consequences. Findings: The paper finds that re-defining risk and the anti-money laundering (AML)’s community’s understanding of it can support key stakeholders’ understanding of money laundering (ML) risk and the way to better address consequences of AML decisions. Practical implications: The paper has implications for the banking and regulatory community in relation to the interpretation of de-risking. As systems aim to minimise their exposure to risk, they should not be prevented from de-risking. Originality/value: This paper aims to move away from a narrative description of AML phenomena and presents a theoretical foundation for the analysis of ML risk. The current response to de-risking which demonises it and aims to prevent it is deconstructed through this theoretical lens.

Citation

Tambe, N., & Demetis, D. (in press). Re-thinking de-risking: a systems theoretical approach. Journal of Money Laundering Control, https://doi.org/10.1108/JMLC-04-2021-0030

• Journal Article Type: Article
• Acceptance Date: Apr 9, 2021
• Online Publication Date: Jul 24, 2021
• Deposit Date: Apr 9, 2021
• Publicly Available Date: Jul 24, 2021
• Journal: Journal of Money Laundering Control
• Print ISSN: 1368-5201
• Publisher: Emerald
• Peer Reviewed: Peer Reviewed
• DOI: https://doi.org/10.1108/JMLC-04-2021-0030
• Keywords: Money laundering; Niklas Luhmann; Systems theory; Decision; Risk; Danger
• Public URL: https://hull-repository.worktribe.com/output/3749882