Anti-Money Laundering Regulation and Operational Efficiency of Deposit Money Banks in Nigeria

Given the high cost of operation faced by banks in Nigeria despite years of enforcement by regulators, the need to ascertain whether anti-money laundering rules add to or alleviate the burden becomes very essential. On the basis of this, this study examined the effect of anti-money laundering (AML) regulations on the operational efficiency of Deposit Money Banks in Nigeria. An ex-post facto research design was employed with a comprehensive secondary data gotten from the CBN Statistical Bulletin, NDIC Annual Reports, and Basel Institute on Governance Reports for 2012–2024. The Seemingly Unrelated Regression (SUR) technique was used to capture the multidimensional nature of the dependent variables: cost-to-income ratio (CIR), operating expense ratio (OER), asset turnover ratio (ATR), and return on assets (ROA). Preliminary analyses, descriptive statistics, as well as Augmented Dickey-Fuller unit root tests, and normality tests, were carried out using E-Views 10. The results showed no significant effect of AML regulations on CIR, OER, and ROA, but a significant positive relationship was found with ATR. While the research concluded that compliance with AML regulations is important, banks should further enhance digital banking adoption, investment strategies, and revenue-generating initiatives to achieve sustainable operational efficiency improvements.