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Anti-money laundering survey

Bank boardroom focus on money laundering is at an all time high, according to an audit firm.

Nine out of ten of senior financial executives (88 percent) questioned for a KPMG survey said that money laundering issues are back at the top of the agenda in their organisation. The majority suggest that the issue is no longer being squeezed by competing priorities, as has been the case in recent years (only 62 percent focused on the issue in 2011). A majority of respondents (84 percent) also admitted that money laundering is now considered a major concern within their business risk assessment, further emphasising how seriously management teams are taking failures to meet regulatory requirements.

Brian Dilley, Global Head of the Anti-Money Laundering Practice at KPMG, said: “Anti-money laundering has never been higher on senior management’s agenda, with regulatory fines now running into billions, regulatory action becoming genuinely license threatening, and criminal prosecutions of firms and individuals becoming a reality.”

Bill Michael, EMA Head of Financial Services at KPMG, added: “Financial institutions are making significant changes in response to increasingly far-reaching global anti-money laundering regulations: anti-money laundering is shifting from a standalone function under compliance, to an increasingly complex and overarching function cutting across legal, risk, operations and tax.”

Cost of compliance

Worryingly, satisfaction with transaction monitoring systems is poor, as one in three senior executives (35 percent) say their system is neither efficient, nor effective. Worse still, only just over half said their systems are able to provide the complete picture by monitoring transactions across businesses and jurisdictions.

According to the report, accurate cost forecasting is vital for informed decision making, but remains a key area of weakness due in part to the number of regulatory change announcements and the speed in which new regulations are expected to be implemented. The suggestion emerging from the data is that senior management is likely to continue to underestimate anti-money laundering expenditure, unless lessons are learnt from past mistakes.

Regulatory approach

A consistent regulatory approach was cited by senior executives as the top anti-money laundering concern, with 84 percent of respondents indicating that the pace and impact of regulatory changes are significant challenges to their operations.

Dilley said: “Despite annual expenditure that is estimated to reach billions over the next couple of years, institutions continue to risk falling foul of regulatory expectations, which seem to change more regularly than in the past. Trying to get away with doing ‘the minimum’ is not good enough – the only way to stay out of trouble is to meet the highest standards possible.”

The report also shows that outsourcing and off-shoring are growing trends. To date, 31 percent of respondents had outsourced and 46 percent had off-shored some of their anti-money laundering functions. This is despite senior management concerns regarding a perceived lack of control and oversight, data confidentiality concerns or a lack of cost savings.

Dilley added: “Despite some positive steps and evident strides in coming to grips with the 21st century challenges posed by money laundering threats, the risk of lagging behind today’s globally connected money launderers remains very real. It is essential that regulators implement a consistent regulatory approach, but also foster a closer working relationship with industry professionals in order to leverage each other’s resources, aligning mutual interests in order to ensure that money laundering doesn’t pay off.”


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