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Abstract
Purpose – This study aims to examine the effect of the relationship between RegTech and Money Laundering Prevention (MLP). This study also examines the differences between RegTech in Islamic and conventional banks.
Methodology – The current study used explanatory research to test hypotheses using primary data obtained through a survey with a questionnaire conducted online with 100 respondents from bank employees, both conventional and Islamic in Indonesia. In addition, an independent t-test was used.
Findings – The results reveal that Transaction Monitoring (TM) and Cost and Time (CT) significantly affect MLP, while electronic Know Your Customer (eKYC) does not affect MLP. The comparative test of the differences in RegTech in Islamic and conventional banks confirm differences in transaction monitoring and cost efficiency between Islamic and conventional banks. At the same time, there is no difference in eKYC between Islamic and conventional banks.
Originality – Research related to RegTech in Islamic and conventional banks' money laundering prevention efforts is still very limited in Indonesia. This study will contribute to the existing literature on Islamic finance and the development of financial technology in Indonesia.Keywords
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Copyright (c) 2022 Alivia Meyrizka Utami, Mega Dwi Septivani
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References
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- Baltagi, B. H. (2011). Econometrics (Fifth Edit). Springer texts in business and economics. https://doi.org/10.1007/978-3-642-20059-5
- Bank for International Settlement. (2017). Basel committee on banking supervision consultative document sound practices for the management and supervision of operational risk (Issue June). https://www.bis.org/publ/bcbs183.pdf
- Basel Institute on Government. (2020). Ranking money laundering and terrorist financing risks around the world. Basel AML index: 9th public edition. https://baselgovernance.org/sites/default/files/2020-07/basel_aml_index_2020_web.pdf
- Baxter, L. G. (2016). Adaptive financial regulation and RegTech: A concept article on realistic protection for victims of bank failures. Duke Law Journal, 66(3), 567–604.
- Brody, M., Lev, O., Taft, J. P., Wilkes, G., Bisanz, M., Shinohara, T., & Tsai, J. (2017). Three financial regulators issue reports on product and service innovations. Journal of Investment Compliance, 18(1), 84–91. https://doi.org/10.1108/joic-02-2017-0005
- Butler, T., & Brooks, R. (2018). On the role of ontology-based RegTech for managing risk and compliance reporting in the age of regulation. Journal of Risk Management in Financial Institutions, 11(1), 19–33.
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- Kurum, E. (2020). RegTech solutions and AML compliance: What future for financial crime? Journal of Financial Crime. https://doi.org/10.1108/JFC-04-2020-0051
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- Neuman, W. L. (2013). Social Research Methods: Qualitative and Quantitative Approaches (Seventh Ed). Pearson Education Limited.
- Otoritas Jasa Keuangan. (2020). Roadmap pengembangan perbankan syariah 2020-2025. OJK. https://www.ojk.go.id/id/kanal/syariah/berita-dan-kegiatan/publikasi/Pages/Roadmap-Pengembangan-Perbankan-Syariah-Indonesia-2020-2025.aspx
- O’Reilly, M., & Khrisna, D. (2017). Regulatory productivity: Is there an answer?. RegTech position paper. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/regulatory/us-regulatory-future-of-regulatory-productivity-powered-by-regtech.pdf
- PriceWaterhouseCoopers. (2008). Millennials at work: Reshaping the workplace. Pricewaterhouse Coopers International Limited (PwCIL), 1–28. https://www.pwc.com/co/es/publicaciones/assets/millennials-at-work.pdf
- Pusat Pelaporan dan Analisis Transaksi Keuangan. (2020). Buletin statistik Anti Pencucian Uang dan Pencegahan Pendanaan Terorisme (APUPPT). Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK). https://www.ppatk.go.id/publikasi/read/103/buletin-statistik-apuppt-vol-119---januari-2020.html
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- Shanmugam, B., & Thanasegaran, H. (2008). Combating money laundering in Malaysia. Journal of Money Laundering Control, 11(4), 331–344. https://doi.org/10.1108/13685200810910402
- Silverberg, K., Portilla, A., French, C., & Liebergen, B. van. (2016). RegTech in financial services: Technology solutions for compliance and reporting. Institute of International Finance (IIF), March, 1–25. https://www.iif.com/Publications/ID/1686/RegTech-in-Financial-Services-Solutions-for-Compliance-and-Reporting
- Turki, M., Hamdan, A., Cummings, R. T., Sarea, A., Karolak, M., & Anasweh, M. (2020). The regulatory technology “RegTech” and money laundering prevention in Islamic and conventional banking industry. Heliyon, 6(10). https://doi.org/10.1016/j.heliyon.2020.e04949
- Usman, H., Projo, N. W. K., Chairy, C., & Haque, M. G. (2021). The exploration role of Sharia compliance in technology acceptance model for e-banking (case: Islamic bank in Indonesia). Journal of Islamic Marketing. https://doi.org/10.1108/JIMA-08-2020-0230
- Vaithilingam, S., & Nair, M. (2007). Factors affecting money laundering: Lesson for developing countries. Journal of Money Laundering Control, 10(3), 352–366. https://doi.org/10.1108/13685200710763506
- Vaithilingam, S., Nair, M., & Thiyagarajan, T. (2015). Managing money laundering in a digital economy. Journal of Asia-Pacific Business, 16(1), 44–65. https://doi.org/10.1080/10599231.2015.997626
- Yang, Y.-P., & Tsang, C.-Y. (2018). RegTech and the new era of financial regulators: Envisaging more public-private-partnership models of financial regulators. Journal of Business Law, 21(2), 354–404. https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article
- Zabelina, o. A., Vasiliev, A. A., & Galushkin, S. V. (2018). Regulatory technologies in the AML/CFT. KnE Social Sciences, 3(2), 394. https://doi.org/10.18502/kss.v3i2.1569
References
Anagnostopoulos, I. (2018). FinTech and RegTech: Impact on regulators and banks. Journal of Economics and Business, 100, 7–25. https://doi.org/10.1016/j.jeconbus.2018.07.003
Arner, D. W., Barberis, J., & Buckley, R. P. (2017). RegTech: Building a better financial system. Handbook of Blockchain, Digital Finance, and Inclusion, Volume 1: Cryptocurrency, FinTech, InsurTech, and Regulation, 1, 359–373. https://doi.org/10.1016/B978-0-12-810441-5.00016-6
Baltagi, B. H. (2011). Econometrics (Fifth Edit). Springer texts in business and economics. https://doi.org/10.1007/978-3-642-20059-5
Bank for International Settlement. (2017). Basel committee on banking supervision consultative document sound practices for the management and supervision of operational risk (Issue June). https://www.bis.org/publ/bcbs183.pdf
Basel Institute on Government. (2020). Ranking money laundering and terrorist financing risks around the world. Basel AML index: 9th public edition. https://baselgovernance.org/sites/default/files/2020-07/basel_aml_index_2020_web.pdf
Baxter, L. G. (2016). Adaptive financial regulation and RegTech: A concept article on realistic protection for victims of bank failures. Duke Law Journal, 66(3), 567–604.
Brody, M., Lev, O., Taft, J. P., Wilkes, G., Bisanz, M., Shinohara, T., & Tsai, J. (2017). Three financial regulators issue reports on product and service innovations. Journal of Investment Compliance, 18(1), 84–91. https://doi.org/10.1108/joic-02-2017-0005
Butler, T., & Brooks, R. (2018). On the role of ontology-based RegTech for managing risk and compliance reporting in the age of regulation. Journal of Risk Management in Financial Institutions, 11(1), 19–33.
Chen, Z., Van Khoa, L. D., Teoh, E. N., Nazir, A., Karuppiah, E. K., & Lam, K. S. (2018). Machine learning techniques for anti-money laundering (AML) solutions in suspicious transaction detection: A review. Knowledge and Information Systems, 57(2), 245–285. https://doi.org/10.1007/s10115-017-1144-z
Cooper, D. R., & Schindler, P. S. (2013). Business Research Methods (Twelfth Ed). McGraw-Hill Companies.
Deloitte. (2019). Millennials in Industry 4.0: A Gift or a Threat to Indonesian Human Resources? September. Deloitte Indonesia Perspectives. https://www2.deloitte.com/content/dam/Deloitte/id/Documents/about-deloitte/id-about-dip-edition-1-chapter-2-en-sep2019.pdf
Duncan, P., Murphy, M., Man, M. S., Chaplin, K., Gaunt, D., & Salisbury, C. (2018). Development and validation of the multimorbidity treatment burden questionnaire (MTBQ). BMJ Open, 8(4). https://doi.org/10.1136/bmjopen-2017-019413
Hair, J. F., Black, W. C., Babin, B. J., & Anderson, R. E. (2014). Multivariate data analysis. Pearson Education Limited (Seventh Ed). British Library Cataloguing-in-Publication Data.
Jabbar, S. F. A. (2020). Islamic financial institutions: conduits for money laundering? Journal of Money Laundering Control, 23(2), 285–295. https://doi.org/10.1108/JMLC-09-2019-0074
Kurum, E. (2020). RegTech solutions and AML compliance: What future for financial crime? Journal of Financial Crime. https://doi.org/10.1108/JFC-04-2020-0051
Lootsma, Y. (2017). From FinTech to RegTech: The possible use of blockchain for Kyc. FinTech To RegTech Using Block Chain, 2–10. https://static1.squarespace.com/static/567bb0614bf118911ff0bedb/t/5915784ef7e0abd89c297f3d/1494579283238/From_FinTech_to_RegTech.pdf
Machkour, B., & Abriane, A. (2020). Industry 4.0 and its implications for the financial sector. Procedia Computer Science, 177, 496–502. https://doi.org/10.1016/j.procs.2020.10.068
Miller, R. S., & Rosen, L. W. (2017). Anti - Money Laundering : An Overview for Congress. Congresional Research Service. https://sgp.fas.org/crs/misc/R44776.pdf
Ministry of National Development Planning. (2020). Bappenas dorong akselerasi transformasi digital pelayanan publik di masa pandemi. Bappenas. https://old.bappenas.go.id/id/berita-dan-siaran-pers/bappenas-dorong-akselerasi-transformasi-digital-pelayanan-publik-di-masa-pandemi/
Mohamed Sanusi, M. (2008). Money laundering with particular reference to the banking deposit transactions. Journal of Money Laundering Control, 11(3), 251–260. https://doi.org/10.1108/13685200810889399
Mugarura, N. (2015). The Jeopardy of the bank in enforcement of normative anti-money laundering and countering financing of terrorism regimes. Journal of Money Laundering Control, 18(3), 352–370. https://doi.org/10.1108/JMLC-01-2014-0007
Neal, R. W. (2021). How RegTech is changing compliance at financial firms. https://www.investmentnews.com/how-RegTech-is-changing-compliance-at-financial-firms-169698 1/2
Neuman, W. L. (2013). Social Research Methods: Qualitative and Quantitative Approaches (Seventh Ed). Pearson Education Limited.
Otoritas Jasa Keuangan. (2020). Roadmap pengembangan perbankan syariah 2020-2025. OJK. https://www.ojk.go.id/id/kanal/syariah/berita-dan-kegiatan/publikasi/Pages/Roadmap-Pengembangan-Perbankan-Syariah-Indonesia-2020-2025.aspx
O’Reilly, M., & Khrisna, D. (2017). Regulatory productivity: Is there an answer?. RegTech position paper. https://www2.deloitte.com/content/dam/Deloitte/us/Documents/regulatory/us-regulatory-future-of-regulatory-productivity-powered-by-regtech.pdf
PriceWaterhouseCoopers. (2008). Millennials at work: Reshaping the workplace. Pricewaterhouse Coopers International Limited (PwCIL), 1–28. https://www.pwc.com/co/es/publicaciones/assets/millennials-at-work.pdf
Pusat Pelaporan dan Analisis Transaksi Keuangan. (2020). Buletin statistik Anti Pencucian Uang dan Pencegahan Pendanaan Terorisme (APUPPT). Pusat Pelaporan dan Analisis Transaksi Keuangan (PPATK). https://www.ppatk.go.id/publikasi/read/103/buletin-statistik-apuppt-vol-119---januari-2020.html
Said, J., Erlane K. Ghani, Omar, N., & Yusuf, S. N. S. (2013). Money laundering prevention measures among commercial banks in Malaysia Jamaliah Said. International Journal of Business and Social Science, 4(5), 227–235. https://ijbssnet.com/journals/Vol_4_No_5_May_2013/26.pdf
Shanmugam, B., & Thanasegaran, H. (2008). Combating money laundering in Malaysia. Journal of Money Laundering Control, 11(4), 331–344. https://doi.org/10.1108/13685200810910402
Silverberg, K., Portilla, A., French, C., & Liebergen, B. van. (2016). RegTech in financial services: Technology solutions for compliance and reporting. Institute of International Finance (IIF), March, 1–25. https://www.iif.com/Publications/ID/1686/RegTech-in-Financial-Services-Solutions-for-Compliance-and-Reporting
Turki, M., Hamdan, A., Cummings, R. T., Sarea, A., Karolak, M., & Anasweh, M. (2020). The regulatory technology “RegTech” and money laundering prevention in Islamic and conventional banking industry. Heliyon, 6(10). https://doi.org/10.1016/j.heliyon.2020.e04949
Usman, H., Projo, N. W. K., Chairy, C., & Haque, M. G. (2021). The exploration role of Sharia compliance in technology acceptance model for e-banking (case: Islamic bank in Indonesia). Journal of Islamic Marketing. https://doi.org/10.1108/JIMA-08-2020-0230
Vaithilingam, S., & Nair, M. (2007). Factors affecting money laundering: Lesson for developing countries. Journal of Money Laundering Control, 10(3), 352–366. https://doi.org/10.1108/13685200710763506
Vaithilingam, S., Nair, M., & Thiyagarajan, T. (2015). Managing money laundering in a digital economy. Journal of Asia-Pacific Business, 16(1), 44–65. https://doi.org/10.1080/10599231.2015.997626
Yang, Y.-P., & Tsang, C.-Y. (2018). RegTech and the new era of financial regulators: Envisaging more public-private-partnership models of financial regulators. Journal of Business Law, 21(2), 354–404. https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article
Zabelina, o. A., Vasiliev, A. A., & Galushkin, S. V. (2018). Regulatory technologies in the AML/CFT. KnE Social Sciences, 3(2), 394. https://doi.org/10.18502/kss.v3i2.1569