Money laundering in APAC is a continued problem, largely as a result of organised criminal activity, such as drug manufacturing, prostitution and trafficking. Until recently, controls and legal provision have been lacking. But now, regulators are increasingly
focusing their attention on this region. Currently most APAC-based banks aren’t scanning payments for matches to sanctioned entities routinely and in some cases not at all. This regulatory ramp-up therefore means a multitude of demands and big fines.
These AML regulatory requirements are being enforced on local, regional and global levels. However, the regulator with the sharpest teeth and broadest geographical reach is undoubtedly the
U.S. Treasury’s Office of Foreign Asset Control (OFAC). OFAC has the right to act wherever there is U.S. involvement, so even non-U.S. banks fall into its jurisdiction. In fact, it has successfully
pressured many local regulators in APAC to tighten up their AML regimes. In many cases, however, OFAC’s dominance in the region over-rides the domestic authorities, with many firms choosing to prioritise its requirements over local ones. Subsequently, this
hasn’t helped the fragmented approach to AML across the region, nor has it presented a clearer regulatory direction.
Rising payments volumes – largely as a result of rising remittances – and language differences pose another challenge. Most sanctions lists are in English, so names in local languages must be translated into English and then scanned. This means more names
to scan and more possible matches to sanctioned entities are identified. Banks will therefore have to follow up more payments for further investigation – costing them time and money.
Further impacting these issues is the new payments landscape and the boom in mobile, contactless and person-to-person payments in APAC.
Gartner has predicted that the mobile payments industry will steadily grow to reach more than 190 million users by 2012. While new payment channels like this present favourable business opportunities
for APAC banks, they come with wave of implications – not least the lack in AML governance.
These sanctions screening challenges place an immense burden on existing processes and infrastructure. When filtering payments, banks in APAC are inundated with false positive alerts and as a result, their choices are to scan less or lower the scanning sensitivity
– heightening risk. To avoid this risk they need to improve false positive prevention without impacting filtering diligence and accuracy. Finding this balance in sanctions screening would bring about much-needed efficiency and costs savings.