Awareness of money laundering in Asia trails global average

13 February 2014   Category: News, Asia, Global   By Asia Asset Management

While anti-money laundering (AML) measures are an increasing priority for senior management across Asia, awareness and take-up still lags behind the global average.

This is one of the key findings from KPMG’s Global Anti-Money Laundering Survey 2014. In its fourth edition, this survey features responses from 317 AML-related professionals in financial services across 48 countries including Singapore.

Where the Asia-Pacific (APAC) region lags behind:

  • Senior management’s recognition of AML as a top priority: The survey finds that 88% of all respondents globally indicated that AML is a priority for senior management, up from 62% in 2011. While Asia Pacific shows an improvement with 80% of respondents – up from just 50% in 2011 – indicating that boards of directors take an active interest in AML, this is still short of the global average;
  • Regular discussion of AML issues at the board level: Fifty-one percent of APAC respondents indicated AML issues are regularly discussed at the board level, compared to the global average of 66%;
  • AML training for board members: Only 47% of APAC financial institutions offer AML training to their board members, 15 percentage points lower than the global average.

Lem Chin Kok, partner heading AML and sanction services, KPMG in Singapore, notes that regulators in the APAC region are becoming more vocal with regard to their expectations of the role the board of directors play in the oversight of AML compliance programmes.

“In particular, regulators are asking the board of directors to demonstrate active management of money laundering and terrorist financing risks, to develop a robust risk culture throughout their organisations, and to ensure that their AML compliance programmes are sufficiently resourced,” he says. “As a result, we expect that board-level interest in AML will continue to increase.”

Pace of regulatory change a top concern

Regulatory change remains a key driver of AML initiatives, with many APAC regulators introducing and enhancing requirements over the last few years.

Some 82% of APAC respondents indicated the pace and impact of regulatory change is a top concern.

Respondents in the APAC region noted the top three areas that regulators focus on during site visits are customer due diligence (70%), ongoing monitoring (56%), and enterprise-wide AML risk assessments (54%).

A significant number also mentioned politically exposed persons and sanctions compliance as areas of interest for regulators, broadly in line with other parts of the world.

Mr. Lem also notes that the expectations of regulators in APAC are rising and he believes that this trend will continue in the next few years. He has also observed heighten scepticism among regulators.

“For example,” he says, “the regulators may no longer be satisfied that a bank has a sanctions surveillance system. The regulators may want to know how the bank ensures that the system is functioning properly, that routines configured are working as intended, and that the system will continue to be effective.

“Similarly, the regulators may no longer be satisfied that a bank only performs checks for adverse news on its clients during periodic reviews. The regulators may question the duration between the checks or the scope of the checks.”

Other survey highlights

Similar to other regions, APAC respondents surveyed have highlighted a lack of qualified resources as one of their top concerns.

Some 67% of APAC respondents have more than three years experience in AML, compared to 82% in Western Europe and 85% in North America.

This challenge is also reflected in their AML budget allocations, where 46% of APAC respondents ranked recruitment as one of the top three AML budget spending areas.

The other top AML budget spending areas in the region are transaction monitoring systems, as well as Know Your Customer (KYC) reviews, updates and maintenance.

On the whole, an increase in AML investment is likely, with around 77% of APAC respondents expecting a rise over the next three years.

Separately, the report notes that US tax law FATCA, due to be implemented by July 2014, has the potential to become a significant driver of improvements in the KYC process.

In the APAC region, over 40% of respondents said incomplete customer due diligence records is the top concern for FATCA compliance, followed by process changes.

Meanwhile, less than 50% of APAC respondents believe they will be FATCA-compliant by July 2014, despite the six-month extension that was granted.

Mr. Lem concludes: “We believe that regulators in the region will increasingly enter into agreements to exchange information. Hence, financial institutions will likely face greater uncertainties and challenges in the near future.

“Their focus is also likely to broaden beyond the banking sector to include other sectors such as remittance agents, money-changers, internet-based stored value facility holders, corporate service providers, pawnbrokers and gaming operations.”