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An article relating to this blog post on Finextra:

Standard Chartered agrees $340m Iran settlement

Benjamin M. Lawsky, New York Superintendent of Financial Services, issued the following statement today.

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Anti-money laundering - the final solution

Money laundering continues to be a scourge on financial services. Recent cases of some of biggest and most respected banks clearly demonstrate that as time goes by the risk of money laundering keeps increasing. Despite decades of measures and huge expenditure on anti-money laundering systems the figures show we are losing the battle. Indeed the size of the problem is greater now than when laws were introduced decades ago. What’s going wrong and why is it that FIs find it almost impossible to produce a secure market where money laundering is impossible?

Much of the problem appears to me to be caused by gaps in the systems and databases of financial institutions. As we all know only too well, FIs have evolved into silo models and so despite the heavy investment in integration and message transformation software, the core problems that need to be overcome to produce a secure anti-money laundering system and network continue to fail. It’s obvious that all technology that has been developed to date and the various architectures, all suffer from the same weaknesses.

Numerous accounts within each FI and then across the industry, have created a complicated infrastructure, which has failed, despite many attempts, to create robust and workable solutions which provide an impenetrable barrier to money laundering. In part this has happened because the focus was in the wrong place. Imagine if all the industry operated using the same single client account, per client. All activities by a client would be visible and all FIs would have the same base data. Any unusual transactions would show up like a beacon and the industry could uniformly take any action necessary. The Money Laundering officer would immediately see if there was a problem. Indeed in my imaginary scenario the industry would only need one Money Laundering officer. A little pie in the sky I grant you but let’s explore the same scenario from a different point and a different solution to get the same effect.

Supposing all FIs had the same identifying code aligned to the particular client account number. In this way the whole of the financial services industry would be operating from the same identifier and in effect the same account and thereby you get to my imaginary scenario.

Until the financial markets close the gaps in data, operations and business silos, money laundering will continue to be an unsolvable problem with the likelihood of increased penalties for breaches and failures. LEIs have such a vitally important role to play in producing the final solution. We will be debating this and more at the next Post Trade Forum in London on the morning of the 25th September.


Comments: (2)

A Finextra member
A Finextra member 17 August, 2012, 13:33Be the first to give this comment the thumbs up 0 likes

While a unique customer identifier would in theory mean that a sanctions check would only need to be performed once, this idea would be extremely difficult to implement in practice. When it comes to managing data, many financial institutions are still struggling to achieve a holistic view of their own customers, let alone deal with information from banks across the world. It would also be a mammoth task to update the relevant sanctions lists in real-time and then share it with every financial institution in the world.

In addition, various countries have strong data protection laws which do not allow the sharing of customer data outside of national borders. This would render this AML model almost impossible to deploy on a global scale.

Using unique customer identifiers may be the AML ideal, but until that becomes a reality, banks must focus their efforts on efficient sanctions screening on all customer transactions, ensuring that they are using an intelligent tool that eliminates false positives and only flags up the true ‘bad guys’.

Gary Wright
Gary Wright 17 August, 2012, 13:53Be the first to give this comment the thumbs up 0 likes

The FSB has already included financial crime into its list of areas where LEI wil focus. So this is a start of a very long road. But it is a start. I understand about your description of current international markets but its my belief that this is a model that is going to be changed and LEI is the tool.

As you say in the mean time robust anti money laundering systems and practices must be the consideration. However these have been proved to fail regularly so not the long term answer

The legality within countries is the easiest to breakdown as anti money laundeing is a key requirement to attract internation business, investment and as we see with Standard Chartered can be costley

Gary Wright

Gary Wright


BISS Research

Member since

19 Sep 2007



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