Digital AML Governance in Transition: A Comparative Institutional Analysis of Malaysia and Indonesia

Abstract

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.