A survey of top money laundering compliance officers, conducted by risk and compliance solutions provider Fortent, identifies Asia as the region that has experienced the greatest increase in money laundering risk and reveals that trade finance is the next major area of expected regulatory focus. Retail banking represents the area of most financial crime activity, according to the findings.
The survey, which polled senior compliance officers at financial institutions using Fortent AML compliance technology solutions, identifies key areas of concern among these executives, who are responsible for overseeing their institutions' compliance with Bank Secrecy Act/Anti-Money Laundering (BSA/AML) laws.
Key findings of the survey, whose results were released today, include:
-- Asia cited as region leading growth in money laundering risk - Among respondents at institutions with global operations, 30% identified Asia as the region experiencing the biggest increase in AML risk.
-- Trade finance and beneficial ownership identified as top areas of expected regulatory interest over next 5 years - Asia and the Middle East were cited as areas of particular concern for trade finance.
-- Private banking and electronic "cash" systems seen as increasingly "hot" areas to watch over the next 3 years - Smart cards, debit cards, and online value transfer systems are making a greater impact on the economy - and compliance concerns.
-- 71% of respondents cite retail banking as the line of business most sensitive to money laundering risk - As the largest business line in these financial institutions, retail banking still represents the greatest percentage of all money laundering compliance risk for an organization.
-- Nearly two-thirds of respondents expect attempts at criminal activity to increase over the next year - The trend was seen as related to the economic slowdown: "As the economy weakens, people get more willing to bend or break the rules," one respondent remarked. Also cited was an expectation of an increase in "mortgage-related suspicious activity."
-- 65% expect their institutions to commit more resources to monitoring and detection over the next two years - Only 15% of respondents believed that resources wouldn't be increased, confirming the glopondents believed that resources wouldn't be increased, confirming the global trend of rising costs, especially in staffing areas.
-- "Budgetary limitations" is the #1 obstacle to increasing financial crime-fighting efforts within institutions - More than half of the respondents named budgetary limits as the reason why efforts hadn't been increased.
"The information generated from a diverse group of global financial institutions clearly demonstrates that there are significant concerns - not the least of which is that more than 60% of respondents expect criminal activity to increase," said George Faux, Group Executive, Client Relationship Management, at Fortent. "This expectation, coupled with their observations about money laundering's growth in Asia, means that banks need to ensure that they have effective and efficient anti-money laundering programs in place - in all regions of their operations and across lines of business."
Wells Fargo's top BSA officer, who participated in the survey, agreed with Fortent's findings. "China and Southeast Asia is an area of tremendous economic expansion and increasing trade to, from, and through the countries in that region," observed Jim Richards, CAMS, EVP/BSA Officer at the US-based financial institution. "With the positive benefits of economic expansion and trade come the negative aspects of increased fraud and money laundering. We need to be inventive, determined, and proactive if we're going to identify and investigate suspicious activity tied to finance in these areas."
Senior executives from twenty-one global, national, and regional financial institutions participated in the survey, including banks based in the United States, as well as overseas, with asset size ranging from $25 billion to more than $1 trillion. Survey respondents represented the top levels of their institutions' compliance programs, with titles including SVP, Regulatory Risk Management; Senior Manager, AML Business Practices; AML Program Deputy Director; and Compliance Director.