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Money laundering shooting up agenda but banks raise concerns over systems

29 January 2014  |  8816 views  |  0 Risk on chalkboard

Bank boardroom focus on money laundering is at an all-time high, yet a third of executives think that their transaction monitoring systems are neither efficient nor effective, according to a survey from KPMG.

Last year, in the most high-profile of several money laundering-related cases, HSBC was forced to strike a massive $1.9 billion settlement with US authorities.

With such large sums at stake and the prospect of criminal prosecutions hanging in the air, 88% of 317 AML and compliance professionals across 48 countries quizzed by KPMG say that money laundering is now back at the top of their firms' agenda, up from 62% in 2011.

Brian Dilley, global head, AML practice, KPMG, says: "Anti-money laundering has never been higher on senior management's agenda, with regulatory fines now running into billions, regulatory action becoming genuinely license threatening, and criminal prosecutions of firms and individuals becoming a reality."

Yet satisfaction with transaction monitoring systems is poor, as one in three respondents say their tech is neither efficient nor effective. Worse still, only just over half say their systems are able to provide the complete picture by monitoring transactions across businesses and jurisdictions.

Despite concerns about oversight, control and data confidentiality, outsourcing and offshoring are becoming more common. To date, 31% of respondents have outsourced and 46% have off-shored some of their anti-money laundering functions.

Meanwhile, KPMG says that accurate cost forecasting is vital for informed decision making, but remains a key area of weakness due in part to the number of regulatory change announcements and the speed in which they are expected to be implemented.

The suggestion emerging from the data is that senior management is likely to continue to underestimate anti-money laundering expenditure, unless lessons are learnt from past mistakes.

And more than three quarters of respondents think that the pace and impact of regulatory changes are significant challenges to their operations.

Dilley adds: "Despite annual expenditure that is estimated to reach billions over the next couple of years, institutions continue to risk falling foul of regulatory expectations, which seem to change more regularly than in the past. Trying to get away with doing 'the minimum' is not good enough - the only way to stay out of trouble is to meet the highest standards possible."

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