Predictors for compliance with anti-terrorist financing standards

Purpose – The purpose of this paper is to identify and test predictors for countries to comply with the Financial Action Task Force’s (FATF) anti-money laundering and terrorist financing recommendations.
Design/methodology/approach – The authors conduct a quantitative study to explore which factors predict compliance of countries. They include the compliance scores of 196 countries.
Findings – The results of a forward stepwise regression analysis show that a country’s wealth, measured as gross domestic product (GDP) per capita, is the most important predictor for compliance. This result supports earlier academic work about predictors for compliance (Simmons, 1998; Giraldo and Trinkunas, 2007; Whitaker, 2010). The other factors identified suffering from terrorist attacks, relative financial market dominance, tourism sector and the degree of democracy do not explain additional variance in compliance.
Practical implications – This research sheds light on compliance as a concept. For policymakers, accountants, companies and governments, it is important to understand why compliance occurs and why not.
Originality/value – The empirical results indicate that, in contrast to common belief, countries that suffer more from terrorism are not more compliant. Moreover, the rate of democracy, a relative dominant financial market and a strong tourism sector do not stimulate compliance with anti-terrorist financing standards.
Keywords - Compliance, Countering terrorist finance, Degree of compliance, Economic consequences theory, FATF, International regime theory