Anti-money laundering measures and financial sector development: Empirical evidence from Africa

The study’s main objective was to evaluate the link between anti-money laundering (AML) regulations and financial sector development (FSD) in Africa test nonlinearities AML regulations-FSD nexus. Panel data of 51 African countries from World Bank’s indicators, IMF, Basel Institute on Governance over period 2012 2019 were used. study employs two-step system GMM dynamic panel threshold regression estimating model. Hansen Arellano—Bond for AR (2) conducted check robustness model specification. employed STATA 15 analysing study. analysis shows that regulation positively influences development. However, found a significant positive coefficient below value at 1% level negative above threshold. This indicates laws favour threshold, but this disappears regimes with high requirements Africa. suggests excessive structures might discourage due cost associated AML. Financial institutions should invest technology solutions support crime compliance efforts combating criminal crimes involving digital payments, cryptocurrency, third parties trafficking proceeds other crime-related activities such as drug trafficking, corruption, terrorism, arms dealing, confiscation their illegal funds bribery.