Global Anti-Money Laundering Survey 2011. How banks are facing up to the challenge
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3 Octombrie 2011 |
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KPMG ROMÂNIA S.R.L. |
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DN 1 Bucureşti Ploieşti, Nr. 69-71
013685 Bucureşti, Sector 1
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+40-21-201.22.22
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+40-21-201.22.11
Website
www.kpmg.md
www.kpmg.ro
Headline findings
1 | Senior management focus squeezed by other priorities
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Our surveys have consistently shown an increase in AML costs, and there is no sign of respite for AML professionals.
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Money laundering remains both a significant risk and a significant cost, with failure to have adequate AML programs presenting a major threat. AML professionals will need to ensure AML remains on the top table so that they can deal with significant change in the pipeline.
Only 62 percent of respondents cited AML as a high profile issue, compared with 71 percent in 2007.
Given the variety and severity of the issues facing management boards in the financial services community over the past three years, the slight fall in the perceived priority of AML is disappointing but understandable.
There were significant discrepancies regionally. For example, 96 percent of respondents in the Central and South America and Caribbean region felt AML was a high profile issue at board level, whilst only 55 percent in Europe and 50 percent in Asia Pacific (ASPAC) agreed with this.
Over 80 percent of respondents reported an increase in the cost of AML compliance over the last three years.
As in the previous two surveys, respondents cited enhanced transaction monitoring as the main reason for the increase in AML expenditure. Our surveys have consistently shown an increase in AML costs, and there is no sign of respite for AML professionals with a mass of changes and new legislation on the horizon that will impact AML programs. AML will undoubtedly continue to be a high cost activity for the foreseeable future.
Furthermore, many AML professionals around the world significantly under-estimate the future cost of AML compliance work.
In 2007, less than one-fifth (17 percent) of respondents predicted a rise of 51 percent or more in the following three years. However, in our latest research, this balance had clearly shifted with almost one-third (31 percent) stating that their costs had actually risen by more than 51 percent since 2007.
This trend was repeated between our first and second AML surveys in 2004 and 2007, and is also evident in the average increase in AML expenditure. In 2004, those predicting a rise estimated an average of 43 percent, whereas the actual rise in our 2007 survey was 58 percent. In 2007, an average increase of 40 percent was expected, with our latest research reporting an actual average of 45 percent. However, the average prediction for the next three years has dropped to 28 percent.
With over three quarters of respondents predicting an increase of 50 percent or less over the next three years, and only eight percent expecting an increase of more than 51 percent, at an average increase of only 28 percent, it is likely that respondents have again under-estimated costs. As business cases are presented to boards, it is critical that AML teams provide realistic figures.
2 | The scrutiny intensifies around Politically Exposed Persons (PEPs)
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“Governments or states should provide a list of people that are politically exposed.”
KPMG Global AML Survey respondent
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The focus on PEPs has intensified with recent events in the Middle East and North Africa; financial institutions find themselves in a key role regarding international financial crime initiatives. First, momentum has been gathering in relation to global bribery and corruption programs, and secondly the Arab Spring uprisings have exacerbated this trend.
Of those financial institutions that have adopted a risk-based approach to Know Your Customer (KYC), 96 percent use PEP status as a risk factor (up from 81 percent in 2007). Across all respondents, irrespective of whether they have adopted a risk-based approach to KYC, 88 percent said they had specific procedures for identifying and monitoring PEPs on an ongoing basis. This represents a continuing upward trend, from approximately 71 percent in 2007 and only 45 percent in 2004.
Different geographical regions are at different stages of development. More than a quarter of ASPAC respondents do not identify and monitor PEPs, which is interesting given the risks associated – not only with PEPs, but bribery and corruption as a whole – although this is an improving situation compared to 2007. Conversely, there has been a substantial increase within Europe in the proportion of institutions applying specific procedures to identify and monitor PEPs, from 65 percent in 2007 to 94 percent in the latest research.
3 | Sanctions compliance remains a challenge
More than 70 percent of respondents find client screening and the handling of filter hits either challenging or very challenging.
As sanctions screening is undertaken in ‘real time’, with transactions held until potential ‘hits’ are investigated, financial institutions are confronted with a number of difficulties. The underlying issue lies with the quality of customer data maintained by institutions. Poor or incomplete data may result in more ‘hits’ being generated, as well as difficulties in eliminating false positives. Furthermore, customer data is often held on several systems, all of which may need to be screened.
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“It would be nice to align international sanctions as the EU is issuing sanctions as well as the UN which causes duplicate entries in the systems, therefore creating more work unnecessarily.”
KPMG Global AML Survey respondent
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