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Funny money

Turning down money from a potential customer who fails a test, is expensive. Building profiles of all of your customers is costly in both cash and resources. 

In fact, until HSBC and Standard Chartered cumulatively paid US$2.2 billion to US authorities in 2012 it seemed that failing to adhere to the anti-money laundering / know your customer (AML/KYC) rules could be the least expensive option. New research from KPMG’ global tri-annual survey suggests that the recent fines have woken up senior management, however concern doesn’t necessarily translate into action.


Q: So how have banks been dealing with anti-money laundering regulation up until now?

A: In 2011 the UK’s Financial Services Authority (then the market regulator) reported that, “Some banks appeared unwilling to turn away, or exit, very profitable business relationships when there appeared to be an unacceptable risk of handling the proceeds of crime. Around a third of banks, including the private banking arms of some major banking groups, appeared willing to accept very high levels of money-laundering risk if the immediate reputational and regulatory risk was acceptable.”


Q: That does not sound like clever banking…

A: …Because the regulator noticed?


Q: Quite. With several banks having been hit by big fines, are the banks thinking twice about such heartless profiteering?

A: Well, 88% of the KPMG’s survey respondents said that AML issues are a priority for senior management, up from 62% in 2011, while 98% said it was properly discussed at Board level. Most said that this was being done on a quarterly basis or when needed. However, the effect that this discussion is having is not clear.


Q: Has much else changed?

A: Cost has gone up 53% over the last three years but that is not too far from the figures reported in the last four surveys (61% in 2004, 58% in 2007, 45% in 2011). Only 32% of the majority of respondents could deliver a consistent global approach for their anti-money laundering policies. In 2004, only 50% of the respondents said that they implemented policies locally, so that appears to be a backward step.

Q: Is there any positive news?

A: Not really; where in 2011 50% of those questioned were using the new MT202COV SWIFT message that allows banks to request data on the customer, some 75% of respondents are now using it. However with 52% of those respondents allowing a MT202COV message to pass, even when it lacked some of the information that it should contain, one has to ask whether it is in the nature of banking to be suspicious about m



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