Role of Due Diligence in Combating Money Laundering in Lens of ESG: A Concept

Abstract

This study focuses on the implementation of Customer Due Diligence (CDD) requirements under Section 16 of the Anti-Money Laundering Act (AMLA) in Reporting Institutions (RIs). While RIs have established policies and procedures to comply with AMLA and mitigate risks associated with money laundering, there needs to be more emphasis on gathering information to address Environmental, Social, and Governance (ESG) Factors. ESG concerns have become increasingly important in the financial sector, but many institutions need help integrating ESG considerations into their due diligence processes. This study explores the incorporation of ESG due diligence within CDD practices, as it is crucial for long-term value creation, investor returns, and mitigating ESG risks that might be exposed to money laundering. This research aims to identify and propose practical strategies for integrating ESG factors into the customer evaluation process of RIs OR investigate factors that influence the role of due diligence in combating money laundering through the lens of ESG. This paper examines factors that influence the function of due diligence in tackling money laundering through the lens of ESG.