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BANKS' AML COSTS ROCKET
Bank spending on anti-money-laundering systems has rocketed, partly as a result of the fight against terrorism, according to new research by KPMG.
The professional services firm included 209 financial institutions in the study and found 83 per cent had on average invested 61 per cent more money during the last three years combating money-laundering. The cost to banks is expected to rise by a further 40 per cent over the next three years.
The two biggest factors behind the rise have been the development of automated monitoring software and the training of staff in the specific anti-money-laundering (AML) rules and procedures.
Adam Bates, global chairman of KPMG Forensic, said: 'Increased regulation and fears over financing of terrorist groups has undoubtedly boosted investment in AML measures and the banks have rightly identified transaction monitoring and training as key areas for investment. Get both of these right and you build yourself a corporate radar system highly attuned to money-laundering risk.'
One of the big findings of the research was a problem of global banks implementing their systems at a local level, resulting in disparate standards of application. The report states: 'Criminal customers can end up being taken on in a jurisdiction where standards are less robust than elsewhere, thereby gaining access to a global bank "by the back door".'
Offshore locations have been seen in the past as weak links in the struggle with terrorists and financial criminals. However, the Isle of Man Financial Services Commission and banks based here have been extremely proactive in maintaining the quality of the Island's AML procedures.
David McGarry, Island head of Regulatory and Compliance Services at KPMG, said: 'The levels of AML training and monitoring over here are generally acceptable and the FSC requirements are very close to those of the FSA in the UK. We are thinking about carrying out a similar survey across the offshore islands and we think we will get very similar results as places such as the Isle of Man will have to adapt requirements closer to the European AML directives that will affect the UK.'
A spokesman for HSBC said: 'We have our own internal procedures but there are strict guidelines imposed by the FSC that we have to follow. I don't think one is necessarily stronger than the other. It does make life more difficult since recent world events gave this a higher profile and the extra work means AML costs have gone up. However, we do have outside resources which we can use and do use if required.'
Lloyds TSB said that the policy of its offshore organisations was always to meet UK regulatory expectations as well as those set by jurisdictions such as the Isle of Man.
'Lloyds TSB's policy is to adopt an approach, both in the UK and abroad, which is fully in accordance with all UK legislative and regulatory expectations. Any difference in approach from one location or sector to another will be to reflect any particular differences it may perceive in the risks faced.'
One of the criticisms of the research was a shortfall in law enforcement resources to cope with the extra work generated by increased suspicious activity reporting (SAR).
Mr McGarry added: 'One of the themes of the survey is that banks feel they don't get enough feedback on SARs. Their staff work very diligently but get little response on their efforts. It would have a positive effect on behaviour if people could see the results of their good work in the fight against money-laundering.'
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Thursday 09 February 2012
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