KPMG’s fourth Global AML Survey found that 88 percent of respondents indicated AML is a priority for boards and senior management, up from 62 percent in 2011. The 2014 survey tracked responses from 317 AML-related professionals in the financial services industry across 48 countries.
In Australia, while 80 percent of respondents indicated that boards of directors take an active interest in AML (up from 50 percent in 2011), this still falls short of the global average.
“With the Financial Action Task Force (FATF) Mutual Evaluation visit of Australia commencing in August this year, updates to the current rules, and the review of the AML/ Counter-Terrorism Financing (CTF) legislation announced by the Attorney General’s department, there has arguably never been more domestic and international attention in this regime. This corresponds with the global trends identified in this survey, essentially that not only is AML here to stay, it is also becoming more resource intensive and difficult to manage” says David Luijerink, KPMG Forensic’s AML Partner.
The challenge for the financial services industry in Australia is managing compliance within this transitional state whilst competing for the same skilled resources with other Asia-Pacific, North American and European financial service industries where current AML compliance issues are similarly demanding significant resourcing,” continues Luijerink.
There is also scope for Australia to catch up in other areas; 40 percent of Australian respondents indicated AML issues are regularly discussed at the board level, compared to the global average of 66 percent.
Regulatory change remains a key driver of AML initiatives globally. Within Australia, the Australian Transaction Reports and Analysis Centre (AUSTRAC) is looking to implement the new AML and Counter-Terrorism Financing (CTF) Rules by early March and with the significant impact it has on organisations it follows that 80 percent of Australian respondents list the pace and impact of regulatory change as a top concern.
Luijerink says: “I would expect organisations in Australia to be discussing AML at Board Level more regularly as extra resources are likely to be needed to implement the new rules, given the impending deadline.”
Respondents noted the top three areas that regulators focus on during site visits are customer due diligence (50 percent), ongoing monitoring (50 percent), and politically exposed persons. A significant number also mentioned correspondent banking and enterprise wide AML risk assessment as areas of interest for regulators, broadly in-line with other parts of the world.
Luijerink adds: “While the Rules are changing in Australia, the risk-based approach is still seen as key in deciding how to implement the legislation. While this allows organisations to tailor their systems and controls proportionate to the AML risks they face, it can also be problematic as organisations can struggle to define what a proportionate response is. In this context it may be helpful for AUSTRAC to provide a greater level of prescription or guidance in complex areas so that all organisations are aware of AUSTRAC’s expectations.”
He continues: “Given this complexity and the risk-based decisions that need to be made, regulators globally are becoming much more vocal in their expectations of the role of the board of directors in the management and oversight of their AML compliance programs. 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 programs are sufficiently resourced. As a result, we expect that board-level interest in AML will continue to increase.”
Lack of resources
Similar to other regions, Australian financial institutions surveyed have highlighted a lack of qualified resources as one of their top concerns with 100 percent of those surveyed saying it was one of their top 3 greatest concerns. This challenge is also reflected in their AML budget allocations, where 60 percent of Australian respondents ranked recruitment as one of the top three AML budget spending areas.
Investment in AML
The top three areas where respondents note that AML budget has been invested are transaction monitoring systems, provision of training and recruitment. An increase in AML investment is expected to continue, with 50 percent of Australian respondents expecting a rise over the next three years. Luijerink adds, “The 50 percent figure is actually low, considering the increased level of both domestic and international regulatory activity we are seeing. This is certainly lower than global expectations where 60 percent of respondents expect increased investment in AML over the next three years.”
Luijerink concludes: “We believe regulators will continue with their reviews and increase the level of scrutiny over the next three years. However it remains to be seen whether the enforcement and penalties will increase and be reported more publicly, to a level comparable to that seen in Western Europe and North America today.”
About the survey
The survey results are based on responses from 317 AML and compliance professionals in the top 1,000 global banks, according to the 2013 edition of The Banker Magazine, as well as to KPMG’s contacts in 48 countries. The questionnaire was distributed in November 2013.