Anti-Money Laundering and Counter-Terrorism Financing Law: Evidence from Fugaz Banks in Nigeria

The increasing incidence of money laundering, terrorism financing, and other financial crimes poses significant challenges to the integrity, operational efficiency, and financial stability of the Nigerian banking sector. Although regulatory frameworks have strengthened Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) compliance, concerns remain regarding their implications for banking performance and sustainability. This study examined the effect of AML/CTF compliance on deposit mobilization, operational performance, and financial stability among First-Generation Universal Banks (FUGAZ) in Nigeria. A descriptive cross-sectional survey research design was adopted. The population comprised 2,183 Compliance Officers, Risk Management Officers, Internal Control Officers, and Internal Auditors across Access Bank Plc, First Bank of Nigeria Limited, United Bank for Africa Plc, Zenith Bank Plc, and Guaranty Trust Bank Plc. Using Taro Yamane’s formula, a sample size of 372 respondents was determined, while purposive sampling was employed for respondent selection. Data were collected through a structured questionnaire, and 355 valid responses, representing a 95.4% response rate, were analysed using descriptive statistics, Spearman correlation, diagnostic tests, and robust regression analysis with STATA. The findings revealed a high level of AML/CTF compliance among the selected banks, particularly in Customer Due Diligence, Know Your Customer procedures, suspicious transaction reporting, and compliance training. Regression results indicated that AML/CTF compliance had a significant positive effect on deposit mobilization (β = 0.2610, p < 0.05) and financial stability (β = 0.2266, p < 0.05), but a significant negative effect on operational performance (β = -0.3201, p < 0.05). The overall regression model was statistically significant (F = 12.52, p = 0.0000). The study concluded that AML/CTF compliance strengthens deposit mobilization and financial stability, although its implementation may impose operational burdens on banks. It recommended sustained investment in compliance technologies, continuous staff training, streamlined compliance procedures, and stronger regulatory supervision to enhance banking efficiency, institutional integrity, and financial sustainability.