Enhancing Suspicious Transaction Reporting Quality through Individual Risk Assessment: Evidence from Anti-Money Laundering Programs

P Irawan, Sulaeman Rahman Nidar, Mokhamad Anwar, Erman Sumirat

Abstract

This study examines how the effectiveness of Anti-Money Laundering (AML) programs affects the quality of suspicious transaction reporting, with a specific emphasis on the mediating impact of Individual Risk Assessment (IRA). While existing AML frameworks frequently use reporting volume as a metric of effectiveness, new evidence reveals that such measurements may not accurately reflect enforcement outcomes. This study uses Partial Least Squares Structural Equation Modelling (PLS-SEM) to analyze survey data from 338 banking professionals across three lines of defense. The findings suggest that the success of the AML program considerably increases reporting quality, both directly and indirectly via IRA. The mediation study reveals that IRA serves as a critical channel for linking organizational capabilities to reporting outcomes. These findings show the necessity of transitioning from volume-based metrics to quality-oriented evaluation and emphasize the impact of risk-based approaches in improving AML effectiveness.

Keywords

Anti-Money Laundering; Risk-based Approach; Individual Risk Assessment; Reporting Quality; PLS-SEM

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DOI: https://doi.org/10.20961/yustisia.v15i2.118400

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