Survey highlights Asia money-laundering risk

Victoria Pennington

Fortent study reveals that Asia faces the highest risk of money laundering, and that trade finance is set for regulatory focus

NEW YORK –Asia has seen the greatest increase in money laundering risk in the world, according to a survey of senior money-laundering compliance officers from national, regional and global financial organisations. The survey, conducted by risk and compliance software provider Fortent, concludes that the retail banking industry represents the area of greatest activity in financial crime and predicts trade finance will be the next focus of regulatory activity.

At international firms, 30% of respondents identified Asia as the region with the greatest growth in money laundering risk. Respondents also anticipated trade finance and ownership will come under regulatory scrutiny over the next five years, again citing Asia – and the Middle East – as the regions of greatest concern.

“China and south-east Asia is an area of tremendous economic expansion and increasing trade to, from, and through the countries in that region,” says Jim Richards, Bank Secrecy Act officer at US firm Wells Fargo. “With the positive benefits of economic expansion and trade come the negative aspects of increased fraud and money laundering. We need to be inventive, determined, and proactive if we’re going to identify and investigate suspicious activity tied to finance in these areas.”

Retail banking was identified by 71% of participants as the sector most sensitive to money-laundering risk. For large financial institutions it represents the side of operations with the greatest percentage of all anti-money laundering compliance risk for an organization. Private banking and electronic cash systems were highlighted as especially dangerous, with debit cards, smart cards, and online value transfer systems all causing concern for the compliance industry.

An increase in criminal activity over the next year was anticipated by 60% of respondents, linking the trend to weakening economic performance. In the wake of the US subprime crisis, the credit crunch is also thought to include an increase in mortgage-related criminal activity. Some 65% said they anticipated their institutions would increase allocation of resources to monitoring and detecting criminal activities, leading to rising costs in systems and staff for firms. Budgetary concerns are also seen as the primary obstacle to effectively waging a war on financial crime – more than half of participants said cost was the reason security had not been stepped up.

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