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, a recent KPMG survey finds.
KPMG’s fourth Global Anti-Money Laundering Survey 2014 is based on a survey of 317 respondents across 48 countries and from a wide range of AML-related professionals in financial services.
The survey finds that 88 percent of all respondents indicated AML is a priority for senior management, up from 62 percent in 2011. In Asia Pacific, while 80 percent of respondents indicated that boards of directors take an active interest in AML (up from 50 percent in 2011), this is still short of the global average.
There is also scope for the ASPAC region to catch up in other areas; 51 percent of ASPAC respondents indicated AML issues are regularly discussed at the board level, compared to the global average of 66 percent. Meanwhile, only 47 percent of ASPAC financial institutions offer AML training to their board members, 15 percentage points lower than the global average.
Kyran McCarthy, Asia-Pacific Head of AML & Sanctions Services and a Partner at KPMG China, says: “ASPAC is home to a number of countries rated as high-risk or requiring AML compliance improvement by the Financial Action Task Force (FATF). Many of them have not made AML a priority in the past and are actively developing action plans with FATF to improve their AML regulations.”
Regulatory change remains a key driver of AML initiatives, with many ASPAC regulators introducing and enhancing requirements over the last few years; 82 percent of ASPAC respondents indicated the pace and impact of regulatory change is a top concern.
Respondents noted the top three areas that regulators focus on during site visits are customer due diligence (70 percent), ongoing monitoring (56 percent), and enterprise-wide AML risk assessments (54 percent). 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.
McCarthy adds: “Regulators in ASPAC are becoming much more vocal in their expectations with respect to 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.”
Similar to other regions, ASPAC financial institutions surveyed have highlighted a lack of qualified resources as one of their top concerns; 67.4 percent of ASPAC respondents have more than three years experience in AML, compared to 82.2 percent in Western Europe and 85 percent in North America. This challenge is also reflected in their AML budget allocations, where 45.8 percent of respondents ranked recruitment as one of the top three AML budget spending areas.
The top three areas where respondents note that AML budget has been invested are transaction monitoring systems, Know Your Customer (KYC) reviews, updates and maintenance and recruitment. An increase in AML investment is expected to continue, with around 77 percent of ASPAC 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 ASPAC region over 40 percent of respondents said incomplete customer due diligence records are top concerns for FATCA compliance, followed by process changes. Meanwhile, less than 50 percent of respondents believe they will be FATCA compliant by July 2014, despite the six month extension that was granted to give them additional time.
McCarthy concludes: “We believe regulators will continue with their reviews and increase the level of scrutiny over the next three years. In addition, it is likely their focus will broaden beyond the banking sector and include other institutions such as insurance, gaming, and money changers. However it remains to be seen whether the enforcement and penalties will increase and be reported more publicly, to a level comparable to that we see in Western Europe and North America today.”