MALTA: Cost of fighting money laundering rises dramatically

By MaltaMedia News
Oct 26, 2007 - 6:47:11 PM

The task of fighting money laundering is becoming more difficult for banks due to the increasing complexity of the financial markets in which they operate. As a result the cost of fighting money laundering has risen dramatically across the world as banks have become increasingly engaged in the struggle against criminality.

These are some of the findings of the Global AML survey conducted by KPMG among 224 leading banks from 55 countries, which included 25% of the top 250 banks.

The Survey is an update on the first survey which was first issued in 2004 and finds that banks’ spending on anti-money laundering (AML) has increased by an average of 58% over the last three years.

KPMG also reports that senior management is getting increasingly involved in AML, with 71% of banks saying that directors at the highest level are participating in the implementation of its policies. An impressive 85 % of banks have a global AML policy, however there is a growing element of concern amongst banks that governmental and international regulation needs to be more effectively targeted, better focused and substantiated in order to better combat money laundering.

Despite state-of –the-art monitoring technology, an overwhelming 97% of banks admit their dependence on the vigilance of staff to monitor and identify suspicious activity, and a third of the banks surveyed stated their lack of satisfaction with the effectiveness of their current transactions monitoring systems.

On a more positive note, greater spending and training has led to an increase in the number of suspicious activity reports (SARs) being generated within over 70% of the banks. Banks are also making a greater effort in identifying Politically Exposed Persons (PEPs), who could be the conduits of money laundering. Over seven out of ten banks carry out due diligence procedures on PEPs, a substantial increase from the worrying 45% in the 2004 survey.

Karen Briggs Global Head of Anti-Money Laundering at KPMG who was a speaker at the KPMG Malta Financial Services Conference last May, said “Banks are clearly continuing to make increased efforts to tackle the money laundering threat effectively. These efforts are considerable, but nevertheless many banks are struggling to design and implement an effective anti-money laundering strategy. Significant numbers say that the regulatory environment is not helping them as well as it should do – this is clearly a matter of concern, as effective coordination between parties is one of the keys to defeating money launderers.

“With international banks bolstering their presence in emerging market economies, and with a low interest rate environment driving growth in alternative assets including hedge funds, private equity and commodity investments, the need for more stringent anti-money laundering processes has only grown. Banks will need to work extremely hard from here if they are to maintain any advantage in the war against money laundering and terrorist financing.”

The KPMG Report also highlights the incremental risks brought about by EU enlargement. The Report states that most of the ten plus two countries recently joining the EU did not historically have strict AML processes in place, and hence are not up to date with the rigorous standards required by the Third Money Laundering Directive.

Juanita Bencini, Partner, Regulatory and Compliance Advisory Services at KPMG Malta, states that “Locally, we are expecting regulatory pressure to have proper AML procedures in place to increase over the next few years There is much that is relevant to local banks in this Survey, since it covers a host of issues all of which need to be addressed once the EU Third Money Laundering Directive is transposed into our legislation. It also serves as a benchmark for local banks to assess where they are with their AML procedures vis-à-vis their peers in other jurisdictions.”

The Survey was launched in Malta at the recent session of the KPMG AML Roundtable, an AML forum for senior management and MLROs which was held on Thursday. Copies of the publication can be obtained by contacting Katia Mifsud Bons at katiamifsudbons@kpmg.com.mt.


© Copyright 2007 by MaltaMedia.com
http://www.maltamedia.com/artman2/publish/financial/article_3884.shtml