FinTech and Money Laundering: The role of Financial Regulations and Financial Literacy

Usman, Nafisa; Griffiths, Marie; Alam, Md Ashraful

Abstract

Theoretical and empirical studies have documented the benefits of financial technology (FinTech) on the financial system. However, empirical findings on the risks of FinTech on financial system are at the infant stage, and studies that examined the effect of FinTech on money laundering, to the best of the researchers knowledge are lacking. This study fills this important knowledge gap by examining the influence and dynamics of FinTech on money laundering and how financial regulation and financial literacy play pivotal roles in moderating the impact of FinTech on money laundering. To achieve the above objectives, we employed the survey research design involving 248 respondents drawn randomly from regulators, financial institutions, and users of FinTech products. The results of the partial least squares structural equation Modelling (PLS-SEM) revealed that FinTech is a major driver of money laundering in Nigeria. Financial regulation moderated the positive relationship, while financial literacy had no moderating effect. This finding reveals that money laundering is a major risk to FinTech adoption. Based on the findings, we recommend that financial system regulators should be extremely vigilant in designing AML and compliance regime to ring-fence FinTech from becoming a conduit for money laundering.

• Journal Article Type: Review
• Acceptance Date: Jul 25, 2024
• Deposit Date: Jul 26, 2024
• Journal: Digital Policy, Regulation and Governance
• Electronic ISSN: 2398-5046
• Peer Reviewed: Peer Reviewed