Survey Finds Money Laundering Becoming a Top Priority for Management

Financial institutions are making significant adjustments in their approach to anti-money laundering (AML) compliance issues in the face of escalating global regulatory enforcement. According to KPMG’s 2014 AML Survey, 88% of respondents cite AML as a top priority for management, marking a sharp increase from 62% in the consulting firm's 2011 survey.

A majority of respondents (84%) consider exposure to AML violations a high-risk issue, while 100% of respondents in Central and South America judge money laundering a critical threat to their business. Boards of directors are also responding to regulatory pressure and the potential for individual prosecutions in some jurisdictions, with 98% discussing AML issues on a regular basis.

The challenge of keeping pace with new or changing AML regulations is reportedly the major issue for senior management. Many also find it difficult to accurately forecast AML expenditures, particularly with respect to transaction monitoring systems, Know Your Customer (KYC) reviews and maintenance and recruitment. Despite these difficulties, most respondents plan to invest more in AML compliance, with costs rising at an average of 53%, far more than the 40% increase predicted in 2011.

Other key findings from the report include —

  • More active involvement by senior management with respect to politically exposed persons (PEPs), with 82% engaged in the sign-off process for PEPs;
  • Increased focus on KYC, with 70% of respondents reporting a visit from regulators on the issue;
  • Difficulties identifying complex ownership structures present the biggest challenge for KYC compliance; and
  • A growing trend towards outsourcing and off-shoring of AML functions, although many expressed concern about their lack of control and oversight in compliance.

These findings reflect the growing pressure on senior management to prevent AML violations in an environment of evolving regulatory requirements and increasing enforcement efforts. KPMG notes several areas that need improving, including weak transaction monitoring systems — despite significant investments made in these systems — and maintaining current customer records.

Many companies also report difficulties finding and retaining staff, yet KPMG found there was an inconsistent approach to training non-AML staff. The survey found that 86% of front office staff — those who face the greatest exposure to money laundering — receive AML training. However, only 62% of board members receive such training, highlighting the need for more compliance training to enable companies to make well-informed decisions and increase AML awareness.

Creating an environment in which every level of an organization is aware of the seriousness of AML risk is crucial. Effective training is key to establishing and implementing an anti-money laundering policy.

Topics:  Anti-Money Laundering, Compliance, Financial Institution Liability, Risk Management

Published In: General Business Updates, Finance & Banking Updates, International Trade Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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