ISSN: 2226-6348
Open access
This paper examines the alignment between digital anti-money laundering (AML) tools and governance structures in Malaysia and Indonesia, two emerging ASEAN economies with divergent institutional capacities. Utilizing Institutional Theory and Innovation Diffusion Theory, the study analyzes regulatory strategies, digital infrastructure, and policy readiness through qualitative content analysis of national reports, FATF evaluations, and institutional documents. Findings reveal Malaysia’s centralized AML ecosystem, driven by Bank Negara Malaysia, supports higher adoption of RegTech innovations such as e-KYC and AI-based monitoring. In contrast, Indonesia’s decentralized financial landscape and regulatory fragmentation hinder uniform implementation, with persistent data siloes and skills gaps. Eight thematic areas are identified, including coercive policy alignment, inter-agency coordination, and regulatory sandbox utilization. The study concludes that institutional maturity and inter-agency coherence are critical enablers of successful digital AML transformation. Implications are drawn for ASEAN-wide regulatory harmonization, capacity building, and policy frameworks to support a resilient and technologically adaptive AML regime in the region.
Ahmed, R., Shah, A., & Akhtar, M. (2025). Data Silos and Digital Compliance. Journal of Financial Technology and Regulation, 12(1), 88–102.
Arner, D. W., Barberis, J. N., & Buckley, R. P. (2017). Fintech and Regtech: Impact on regulators and banks. Journal of Banking Regulation, 19(4), 10–25.
Bank Negara Malaysia. (2023). e-KYC Implementation Report.
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality. American Sociological Review, 48(2), 147–160.
FATF. (2021). Mutual Evaluation of Malaysia: 2nd Enhanced Follow-Up Report.
GLWE & Wagner, M. (2022). Indonesia’s Sandbox Evolution. ASEAN Financial Review, 15(3), 67–84.
Johnson, M. (2025). Talent Development in AML Enforcement. Asia-Pacific Journal of Compliance, 9(2), 122–136.
Kishore, V. (2024). Fintech Resistance and Organizational Culture. Financial Innovation Journal, 6(4), 49–66.
Maundu, S. M. (2022). Risk-Based RegTech in Kenya. African Journal of Banking and Compliance, 7(1), 112–129.
PPATK. (2023). STRANAS PPU-PPT 2023–2027.
Rowan, D., Green, M., & Lee, H. (2020). Public-private coordination during financial crises. Cambridge RegTech Review, 18(2), 77–101.
Rogers, E. M. (2003). Diffusion of Innovations (5th ed.). Free Press.
World Bank. (2023). Indonesia Economic Prospects: Institutional Capacity and Digital Readiness.
Ahmed, Z., Shah, M. A. R., & Akhtar, K. (2025). Strengthening Cybersecurity and Anti-Money Laundering Frameworks to Combat Financial Crimes in the Digital Banking Era. Journal of Business and Management Research, 4(2), 973-989.
Aidoo, S., & AML, I. D. (2025). Regulatory Frameworks for Combating Financial Crime in Emerging Markets.
Alex-Omiogbemi, A. A., Sule, A. K., Omowole, B. M., & Owoade, S. J. (2024). Conceptual framework for advancing regulatory compliance and risk management in emerging markets through digital innovation.
Arner, D. W., Animashaun, S., Charamba, K., & Cai, Y. (2022). MSME access to finance: The role of digital payments. United Nations, Economic and Social Commission for Asia and the Pacific, MSME Financing Series, (7).
Arner, D. W., Barberis, J., & Buckley, R. P. (2017). Fintech and regtech: Impact on regulators and banks. Journal of Banking Regulation, 19(4), 1-14.
Bakhos Douaihy, H., & Rowe, F. (2023). Institutional pressures and RegTech challenges for banking: the case of money laundering and terrorist financing in Lebanon. Journal of Information Technology, 38(3), 304-318.
Bank Negara Malaysia. (2023). e-KYC Implementation Status and Supervisory Updates. Retrieved from https://www.bnm.gov.my
Basel Institute on Governance. (2023). Basel AML Index 2023: 12th Public Edition. https://index.baselgovernance.org
Bhatnagr, P., Rajesh, A., & Misra, R. (2024). Neobank adoption: integrating the information systems effectiveness framework with the innovation resistance model. Management Decision, 62(10), 3315-3352.
Burdon, W. M., & Sorour, M. K. (2020). Institutional theory and evolution of ‘a legitimate’compliance culture: The case of the UK financial service sector. Journal of Business Ethics, 162(1), 47-80.
Financial Action Task Force (FATF). (2021). Follow-up Report & Technical Compliance Re-Rating: Malaysia.
Giorgobiani, I., & Fridén, F. (2025). From Burden to Asset: Anti-Money Laundering Compliance in the Competitive Positioning of Crypto-Asset Service Providers.
Glawe, L., & Wagner, H. (2022). The rise of China. In The Economic Rise of East Asia: Development Paths of Japan, South Korea, and China (pp. 143-241). Cham: Springer International Publishing.
Idowu Lamid, L., Ali Ibrahim, I., Inuwa Abdullahi, K., & Gambo Abdullahi, U. (2021, October). A framework for digital government transformation performance assessment and toolkit for developing countries. In Proceedings of the 14th International Conference on Theory and Practice of Electronic Governance (pp. 203-215).
Ijeh, D., & Puji Rahayu, I. (2023). Investigating the Adoption of Blockchain Technology for Cross-Border Payments in the Swedish Financial Industry: A Diffusion Theory Approach through Expert Interviews.
Indonesian Financial Transaction Reports and Analysis Center (PPATK). (2022). Annual Report 2022.
Indonesian Financial Transaction Reports and Analysis Center (PPATK). (2023). STRANAS PPU-PPT 2023–2027.
Jameaba, M. S. (2022). Digitalization, Emerging Technologies, and Financial Stability: Challenges and Opportunities for the Indonesian Banking Industry and Beyond.
Jameaba, M. S. (2024). Digitalization, emerging technologies, and financial stability: challenges and opportunities for the Indonesian banking sector and beyond. Emerging Technologies, and Financial Stability: Challenges and Opportunities for the Indonesian Banking Sector and Beyond (April 26, 2024).
Jimu, T., & Chimwai, L. (2025). Using the Technology Acceptance Model in Assessing the Impact of Financial Intelligence Systems on Money Laundering Detection in Zimbabwean Financial Institutions. Kuveza neKuumba: The Zimbabwe Ezekiel Guti University Journal of Design, Innovative Thinking and Practice, 158-186.
John, B. (2025). Digital Compliance in the Global South: The Promise and Peril of AI-Blockchain AML Tools in Resource-Limited Environments.
Johnson, B. (2025). Cross-Border Data Sharing and AI in AML: Legal and Operational Implications.
Johnson, B. (2025). Towards a Unified Digital AML Ecosystem: Integrating AI, Blockchain, and Regulatory Innovations Across Jurisdictions.
Khan, A., Jillani, M. A. H. S., Ullah, M., & Khan, M. (2025). Regulatory strategies for combatting money laundering in the era of digital trade. Journal of Money Laundering Control, 28(2), 408-423.
Kishore, P. R. (2024). Exploring resistance factors in fintech adoption: An innovation resistance theory perspective. Multidisciplinary Reviews, 7(6), 2024110-2024110.
Kothandapani, H. P. (2024). Automating financial compliance with AI: A New Era in regulatory technology (RegTech). Int. J. Sci. Res. Arch, 11, 2646-2659.
Krell, K., Matook, S., & Rohde, F. (2016). The impact of legitimacy-based motives on IS adoption success: An institutional theory perspective. Information & Management, 53(6), 683-697.
Kumar, S., & Dhiman, P. (2025) Cross-Border Challenges in Digital AML Compliance: A Legal and Technological Perspective.
Kurum, E. (2023). RegTech solutions and AML compliance: what future for financial crime?. Journal of Financial Crime, 30(3), 776-794.
Lin, J. Y., & Fu, C. (2024). Demystifying the World Economic Development. Springer.
Lin, J. Y., & Fu, C. (2024). The Age of Drastic Changes. In Demystifying the World Economic Development (pp. 13-69). Singapore: Springer Nature Singapore.
Maheshwari, N., Mohan, G., & Mishra, D. (2024). Digital transformation in governance: Preconditions for achieving good governance. Public Policy and Administration, 09520767251355715.
Majid, M. A., & Pangestuti, I. R. D. (2024). Challenges in Regulatory Compliance and Risk Management in Emerging Markets. Business Strategy and Innovation: An International Journal, 3(1), 43-55.
Maundu, C. (2022). Measuring the Adoption of Risk and Compliance-based Fintechs in Commercial Banks in Kenya (Doctoral dissertation, University of Nairobi).
Menon, R. E. (2023). From crime prevention to norm compliance: anti-money laundering (AML) policy adoption in Singapore from 1989–2021. Journal of Money Laundering Control, 26(1), 69-92.
Morris, K., Nami, M., Bolanos, J. F., Lobo, M. A., Sadri-Naini, M., Fiallos, J., ... & Kateb, B. (2021). Neuroscience20 (BRAIN20, SPINE20, and MENTAL20) health initiative: A global consortium addressing the human and economic burden of brain, spine, and mental disorders through neurotech innovations and policies. Journal of Alzheimer’s Disease, 83(4), 1563-1601.
Nijs, L. (2020). Shadow Banking in Asia. In The Handbook of Global Shadow Banking, Volume II: The Future of Economic and Regulatory Dynamics (pp. 341-426). Cham: Springer International Publishing.
Oluwaferanmi, A. (2025). Cross-Border Data Sharing and AI in AML: Legal and Operational Implications.
Oluwaferanmi, A. (2025). Cryptocurrency, AI, and Blockchain: A Triad Approach to Modernizing AML Compliance in Emerging Financial Markets.
Oluwaferanmi, A. (2025). Digital Compliance in the Global South: The Promise and Peril of AI-Blockchain AML Tools in Resource-Limited Environments.
Oluwaferanmi, A. (2025). Towards a Unified Digital AML Ecosystem: Integrating AI, Blockchain, and Regulatory Innovations Across Jurisdictions.
Parra-Sánchez, D. T., Talero-Sarmiento, L. H., & Guerrero, C. D. (2021). Assessment of ICT policies for digital transformation in Colombia: technology readiness for IoT adoption in SMEs in the trading sector. Digital Policy, Regulation and Governance, 23(4), 412-431.
Rowan, P., Miller, M., Zhang, B. Z., Appaya, S., Ombija, S., Markova, D., & Papiasse, D. (2020). 2020 Global COVID-19 FinTech Regulatory Rapid Assessment Study. World Bank and CCAF (2020). The Global Covid-19 FinTech Regulatory Rapid Assessment Report, World Bank Group and the University of Cambridge.
Syed, Z., Okegbola, O., & Akiotu, C. A. (2025). Utilising Artificial Intelligence and Machine Learning for Regulatory Compliance in Financial Institutions. In Perspectives on Digital Transformation in Contemporary Business (pp. 269-296). IGI Global Scientific Publishing.
United Nations Office on Drugs and Crime (UNODC). (2023). Money Laundering and Globalization.
Vasista, K. (2021). Regulatory compliance and supervision of artificial intelligence, machine learning and also possible effects on financial institutions. Machine Learning and also Possible Effects on Financial Institutions (June 13, 2021). International Journal of Innovative Research in Computer and Communication Engineering| e-ISSN, 2320-9801.
Wijaya, T. (2023). Regulatory sandboxing in Indonesia's fintech industry (No. 60). Policy Paper.
Wijaya, T. (2023). Unpacking The Fintech Regulatory Sandbox Framework in Indonesia: Risks Management and The Data Privacy Imperative.
World Bank. (2023). Indonesia Economic Prospects – Navigating Global Challenges.
Bank Negara Malaysia. (2021). National Anti-Money Laundering and Counter Financing of Terrorism (AML/CFT) Strategic Plan 2021–2023.
Bank Negara Malaysia. (2023). e-KYC policy document implementation updates.
Basel Institute on Governance. (2023). Basel AML Index 12th Public Edition.
DiMaggio, P. J., & Powell, W. W. (1983). The iron cage revisited: Institutional isomorphism and collective rationality in organizational fields. American Sociological Review, 48(2), 147–160.
Financial Action Task Force (FATF). (2018). Mutual Evaluation Report: Republic of Indonesia.
Financial Action Task Force (FATF). (2021). Follow-up Report & Technical Compliance Re-Rating: Malaysia.
PPATK (Pusat Pelaporan dan Analisis Transaksi Keuangan). (2023). STRANAS PPU-PPT 2023–2027: Strategi Nasional Pencegahan dan Pemberantasan Tindak Pidana Pencucian Uang dan Pendanaan Terorisme.
Rogers, E. M. (2003). Diffusion of innovations (5th ed.). Free Press
Shafie, N. A. B., Zolkaflil, S. B., Isa, Y. B. M., & Onasis, D. (2025). Digital AML Governance in Transition: A Comparative Institutional Analysis of Malaysia and Indonesia. International Journal of Academic Research in Progressive Education and Development, 14(3), 2251-2270.
Copyright: © 2025 The Author(s)
Published by HRMARS (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode