Financial Crime Landscape - IBF Connect... · AML compliance officers to task: May 2012: FSA awarded a fine of GBP17,500 to the Money Laundering Reporting Officer of Habib Bank AG

Financial Crime Landscape

What can be done better?

November 2015

Introduction

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Regulatory Landscape

Regulators are taking a tougher stance on non-compliance.

In the US and the UK, the number of enforcement actions has generally decreased in the past five years:

But the quantum of fines/ settlements made has increased significantly:

Regulator 2008 2009 2010 2011 2012 2013 2014 2105 OFAC 99 27 24 21 16 27 23 8

FCA 51 42 80 59 53 46 40 24

Regulator 2008 2009 2010 2011 2012 2013 2014 2015

OFAC (USD millions)

4 772 201 92 1,139 137 1,209 268

FCA (GBP millions)

23 35 89 66 312 474 1,471 819

* The above statistics are compiled from the U.S. Treasury and Financial Conduct Authority websites as at 3 August 2015


In addition to imposing fines on financial institutions, regulators are increasingly taking AML compliance officers to task:

May 2012: FSA awarded a fine of GBP17,500 to the Money Laundering Reporting Officer of Habib Bank AG Zurich.

May 2013: Financial Industry Regulatory Authority fined AML officers of Atlas One Financial Group and World Trade Financial Corporation USD25,000 and USD40,000 respectively.

July 2013: FX Direct Dealer’s Chief Compliance Officer fined USD75,000.

July 2013: AML officer of Avalon Partners Inc. fined USD20,000.

December 2014: Financial Crimes Enforcement Network imposed a USD1 million fine on Thomas E. Haider, former Chief Compliance Officer of MoneyGram International Inc., who was deemed to have willfully violated the requirement to implement and maintain an effective anti-money laundering program; and willfully violated the requirement to report suspicious activity. Financial Crimes Enforcement Network may impose a USD5 million fine on former Compliance Officer of MoneyGram.

Regulatory Landscape

KPMG Global AML Survey 2014


317 respondents in 48 countries from a wide range of AML-related professional backgrounds across the Financial Services industry participated in this year’s survey.

The survey was distributed to AML and compliance professionals in the top 1,000 global banks as well as to KPMG’s AML contacts in over 40 countries.

Methodology & Respondent Profile


AML issues are moving back up the agenda for senior management with 88% (Aspac: 82%) of respondents saying AML is a priority for senior management.

34%

48%

12% 5% 1%

Aspac

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

39%

49%

9% 3%

Global

Strongly agree

Agree

Neutral

Disagree

Strongly disagree

Detailed Survey Findings


How much has total investment in AML activity has increased compared to three years ago?

1% 21%

11%

24%

16%

15%

12%

Global

Decrease

No change in real terms Less than 10%

10% to 25%

25% to 50%

50% to 100%

Over 100%

2% 14%

13%

21% 13%

21%

19%

Aspac

Decrease

No change in real terms

Less than 10%

10% to 25%

25% to 50%

50% to 100%

Over 100%



Areas of AML budget investment


10%

13%

8%

19%

15%

33%

33%

46%

48%

69%

8%

11%

12%

23%

25%

35%

35%

42%

59%

60%

Transaction look-back reviews

Anti-bribery and corruption activities

Increasing internal reporting requirements

Maintaining sanction lists

Procedural updates

Provision of training

Implementation of FATCA

Recruitment

Reviewing, updating, and maintaining KYC

Enhancing transaction monitoring systems

Asia Pacific Global


Transaction monitoring costs continue to soar as satisfaction declines • Despite increased investment in transaction monitoring

systems, satisfaction has declined with respondents ranking satisfaction an average of 3.42 out of 5 (similar in Aspac), compared to 3.6 in 2011.

• Although transaction monitoring systems continue to represent the greatest area of AML spending, it appears that regulatory requirements are still outpacing system improvements.

• 60% (Aspac: 69%) of respondents reported transaction monitoring as the largest investment in anti-money laundering controls.



Global Aspac Lack of data consistency False alerts

Sizeable costs of installation and upkeep

Sizeable costs of installation and upkeep

False alerts Lack of data consistency

Know Your Customer continues to be the focus of regulators

• KYC continues to be an area of concern with 70% (similar in Aspac) of respondents stating that they had been subject to a regulatory visit focusing on this area.

• Regulatory visits continue to focus on KYC, directly affecting investment decisions as respondents ranked KYC the second largest AML investment.

• 68% (Aspac: 62%)of respondents stated that full identification is obtained for intermediate owners and entities.

• The top three concerns regarding KYC technology:



Politically Exposed Persons (PEPs) continue to leave organizations exposed • PEPs remain an area of focus, gaining increased attention from

senior management, with 82% (Aspac: 87%) of respondents stating that senior management is involved in the sign off process.

• 80% (Aspac: 64%) of respondents stated that PEP customers are required to provide documents to evidence their source of wealth and/or income. 77% (Aspac: 74%) stated that this is required for all high risk clients.

• The top 3 methods of identifying PEPs (both Global & Aspac):

1. Commercial lists 2. Information provided by customer 3. Information in news searches



Sanctions compliance shows signs of improvement, but still a sore spot

• More than 70% (Aspac: 66%) of respondents find sanction

screening systems effective in their organization, however, 42% (similar in Aspac) of respondents only test their screening systems for effectiveness at the implementation stage.

• Almost 75% (Aspac: 72%) of respondents reported using the MT202COV SWIFT message for cross border wire transfers, a significant increase from 50% in 2011.

• While there has been a noticeable compliance push to meet the sanctions requirements, there is still room for improvement, particularly when it comes to validating screening systems and rejecting funds.

• Sanctions compliance remains difficult as respondents rank customer screening the most difficult challenge.



Regulatory approach is fragmented and inconsistent

• 65% (Aspac: 55%) of respondents stated that regulatory visits

are AML personnel’s primary concern and 80% (Aspac: 79%) stated reaction to regulator demands is a primary reason for investment in a particular area of AML.

• Regulatory approach was ranked as the top AML concern, with 84% (Aspac: 82%) of respondents stating pace and impact of regulatory changes as significant challenges to their operations.

• 63% (similar in Aspac) of respondents said that regulators should provide additional guidance. Globally, 43% indicated that a stronger relationship with regulators would be a welcomed changed in approach.

• In Aspac, 46% of respondents would like to see wider publication of typologies and thematic reviews and increasing international cooperation to facilitate consistency of approach.


Trade-Based Money Laundering Featuring Manisha Khanna

© 2015 KPMG Services Pte. Ltd. (Registration No: 200003956G), a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.

Lem Chin Kok Partner, Head Forensic Contact: +65 62132495 Email: [email protected]

© 2015 KPMG Services Pte. Ltd. (Registration No: 200003956G), a Singapore incorporated company and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

Documents

Financial Crime Landscape - IBF Connect... · AML compliance officers to task: May 2012: FSA awarded a fine of GBP17,500 to the Money Laundering Reporting Officer of Habib Bank AG