Psychology of Banking Compliance: Cognitive Mechanisms and Implications for Financial Crime Prevention

Abstract

Banking compliance is generally examined through regulatory requirements, internal control and monitoring technologies. This approach remains incomplete: the literature on the organization of the compliance function and the literature derived from behavioral finance have developed in parallel without being connected. The research question is the following: how do cognitive and psychosocial mechanisms influence the compliance behavior of banking actors, and how can their consideration strengthen the prevention of financial crime?

The article develops an integrative literature review conducted in Scopus, Web of Science, Google Scholar and IMIST, covering the period 1974-2026 and resulting in 28 main references. Combining behavioral economics, moral psychology, organizational criminology and compliance management, it identifies five families of mechanisms: rationalization and neutralization, moral disengagement, cognitive biases, performance pressure and perceived detection risk, together with the role of social norms. These findings are translated into seven research propositions (P1 to P7), distinguishing direct effects, moderating effects and a systemic proposition, and are integrated into a behavioral compliance model.

The theoretical contribution lies in connecting two separate bodies of literature and in shifting the analysis from the formal system alone toward the interaction between the organizational environment and individual decision-making. The notion of cosmetic compliance is moved beyond by focusing on behavioral effectiveness. From a managerial perspective, the model leads to levers concerning training, incentives, reporting, technology and compliance governance.

JEL Classification: G21; G28; D91; K42; M14.   

Paper type: Theoretical Research.