KPMG’s 2011 Global Anti-Money Laundering Survey summarises how 197 of the world’s biggest banks are currently responding to anti-money laundering (AML) legislation and related issues.
Perhaps the survey’s most notable finding is that 62 percent of the banks surveyed regard AML as a priority. This is not a poor response, but it is down from the 71 percent that treated AML as a priority in our 2007 survey. It appears to be a statistically significant difference.
The survey contains several other important findings.
- Know Your Customer data is not being regularly refreshed. That failure may expose banks to regulatory scrutiny and enforcement action. Conversely, ongoing remediation activity may prove insufficient once the US Foreign Account Tax Compliance Act (FATCA) regulations are released. (Incidentally, introduction of FATCA has been delayed 12 months because of the potential compliance nightmare it presents bankers and investors around the world.)
- Transaction monitoring continues to be the largest AML cost for banks. However, many banks are dissatisfied with the results of such monitoring. Less than a third of respondents in our latest study are able to monitor a single customer’s transactions and account status across several countries.
- Respondents in our 2004 and 2007 studies underestimated their future spend on AML activities. In our latest study, respondents expect their AML costs to rise by an average 28 percent over the next 3 years. Have they underestimated these costs yet again, especially when FATCA is taken into account?
An obvious point to make is that since our 2007 study was published, bank boards and senior executives have had a lot of other things on their minds. Moreover it is clear that most banks and financial institutions are continuing to commit significant resources to AML matters.
Nevertheless our survey results and the actions already taken by some regulators signal that banks still have some way to go in optimising their AML performance. Typically the investment has been made, senior management has been engaged, but something is still missing. KPMG feels that it is in the more challenging area of embedding cultural change and delivering ongoing effective monitoring arrangements where further effort is most required, and where it will be best rewarded.
Here there have been some worthwhile gains, but banks still feel more collaboration is needed. The greatest challenge lies in delivering effective AML compliance in the context of other pressures being faced, including sanctions compliance and FATCA.
We may not have yet reached the point of regulatory overload, but the compliance burden continues to get more onerous. We should not lose sight of the overall objective, which is not compliance for the sake of compliance, but to enhance our abilities to frustrate those seeking to use the global financial system for their own illicit ends.