FINTECH AND MONEY LAUNDERING IN NIGERIA MODERATING EFFECT OF FINANCIAL REGULATIONS AND FINANCIAL LITERACY IT IS SUBMITTED IN PARTIAL FULFILMENT OF THE DOCTOR OF PHILOSOPHY REQUIREMENT ii

Usman, Nafisa

Abstract

As FinTech (Financial Technology) continues to revolutionize the financial landscape, it also poses significant challenges in combating illicit financial flows, particularly in the context of money laundering. This study investigates the dynamics between FinTech and money laundering in Nigeria, offering valuable insights into the regulatory and policy measures necessary to effectively combat these illegal activities. While previous research has predominantly focused on the benefits of FinTech, this study shifts the focus to its potential role in facilitating money laundering—an area where existing understanding is largely anecdotal. Employing a mixed-methods approach, the study explores how financial regulation, and financial literacy may moderate the relationship between FinTech and money laundering. Data were gathered through surveys of 248 FinTech users and financial regulators in Nigeria, supplemented by structured interviews with regulators. The quantitative data were analyzed using Partial Least Square Structural Equation Modeling (PLS-SEM).
The findings reveal a significant positive correlation between the use of FinTech and money laundering activities in Nigeria, with financial regulation acting as a moderating factor. The study underscores the challenges faced by developing nations in aligning technology-based financial practices with Anti-Money Laundering (AML) laws and international standards, such as those established by the Basel Committee. Through thematic analysis and longitudinal data analysis, the study uncovers the complex interactions between FinTech and money laundering, highlighting the critical role of regulatory quality and financial literacy as moderating factors. These findings offer valuable guidelines for policymakers and practitioners on enhancing regulatory frameworks, safeguarding electronic fund transactions, and promoting digital financial literacy to stabilize the financial system. To validate the empirical findings, a robustness test was conducted using secondary data, including monetary proxies for FinTech, regulatory quality, corruption, trade openness, and other economic indicators. This data, covering 2008 to 2022, was sourced from the Ministry of Justice, the Central Bank of Nigeria, and the World Development Indicators. The analysis was conducted using the Autoregressive Distributed Lag (ARDL) model.
In response to these challenges, the study proposes a framework that emphasizes the necessity of a closely monitored and regulated interaction between FinTech companies and central banks to ensure secure, efficient, and compliant integration of FinTech into the broader financial system. A key recommendation is the establishment of dedicated units within central banks to oversee Financial Innovation such as FinTech and Central Bank Digital Currencies (CBDCs). These units are crucial for promoting robust digital currency regulations that safeguard financial stability and integrity. The framework advocates for a sustainable regulatory environment where continuous interaction and feedback between regulators and FinTech companies result in adaptive and effective regulations, fostering innovation while mitigating risks such as money laundering and financial fraud. Additionally, the framework highlights the importance of a dual approach to addressing FinTech misuse by integrating AML practices with advanced Regulatory Technology (RegTech) solutions. It is recommended that Nigeria establish a Nigeria Financial Conduct Authority (NFCA) through an Act of legislation, creating an independent agency specifically tasked with the regulation, oversight, and enforcement of laws governing FinTech services and emerging financial technologies. The NFCA would be responsible for ensuring consumer protection, maintaining market integrity, and fostering sustainable economic stability. By standardizing regulations across the sector and enforcing ethical conduct, the NFCA would help create a secure and transparent financial environment that can effectively address the challenges posed by new and disruptive financial technologies.
The study also makes significant theoretical contributions by applying Technological Determinism Theory to the field of FinTech, particularly in the context of money laundering. It suggests that future research could utilize this theory to explore similar relationships in both developing and developed countries. Furthermore, the study indicates that Technological Determinism Theory can be extended to various forms of FinTech, such as Blockchain and Biometric Authentication Technologies, and applied to examine connections between FinTech and terrorism financing, thus broadening the theory's application. Methodologically, the study employs a mixed-method approach, providing a blueprint for future research by demonstrating the value of using both primary and secondary data, as well as various analytical techniques, to ensure robust and reliable results. Despite its contributions, the study acknowledges limitations in theory, methodology, scope, and context, offering opportunities for future research, including cross-country analysis and examining the dual effects of FinTech on money laundering and terrorism financing.

Keywords: FinTech, money laundering, financial regulation, financial literacy, Nigeria

• Thesis Type: Thesis
• Deposit Date: Feb 1, 2025
• Publicly Available Date: Apr 28, 2025
• Award Date: Mar 27, 2025